The European Commission has cleared the way for Denmark’s planned Kriegers Flak offshore wind farm, declaring that state support for the scheme does not breach EU aid rules.
After it examined the 600-MW project, which will be located in the Danish Baltic Sea, the Commission concluded that its contribution to increasing the share of renewable energy, and in reducing CO2 emissions in line with EU energy and climate goals, outweighed any potential distortions of competition caused by the government subsidies.
The support measure began in 2016 with a competitive bidding process for the design, construction, operation and decommissioning for Kriegers Flak, and will be granted as a premium on top of the electricity price in the Nord-Pool market. Vattenfall’s winning bid was 0.372 Danish kroner per kWh (US$0.0538 per kWh), which will be paid across a total of 30 TWh – the estimated production at the wind farm for 12 years. Electricity produced will have to meet standard obligations to ensure the grid remains balanced between supply and demand, and no grants will be paid when prices are negative.
When it comes online, anticipated to happen at the end of 2021, Kriegers Flak will become Denmark’s largest offshore wind farm. However, Danish wind power production can already exceed local demand on windy days, and there is often nowhere to send the surplus. A new interconnector will be established to link the Danish island of Zealand to Germany, via both Kriegers Flak and the Baltic 1 and Baltic 2 offshore wind farms in German waters. This will, on paper at least, facilitate an increased international exchange of electricity.
Germany is the biggest potential market for Danish wind, but it has a domestic bottleneck that is threatening the industry elsewhere. Its own transition towards renewable electricity, the Energiewende, has put a strain on national grids, with some areas struggling to manage domestic production, and leaving grid operators reluctant to exacerbate the situation with imports. A planned expansion of the grid will resolve this, but this is not expected to be ready before 2025.
Moreover, according to recent Bloomberg reports, ongoing talks between Danish and German energy ministers to boost the international flow of renewable energy via interconnectors remain unresolved after five years. In a recent New Energy Finance blog, the agency said that the long-running disagreement had cut the amount of electricity Nordic producers can export to Germany to its lowest level since exports began in 2000, costing the producers millions of euros in lost revenue.
The situation is proof that capacity building and technical improvements are little match for co-ordinated international co-operation.