A case study of how an energy utility can transition from fossil fuels to renewable energy and the enabling regulatory framework that made it possible.
Across the globe, policy makers and commercial entities are grappling with the challenge of how to transition from a power system based on fossil fuels to a renewable based one. In doing so, regulators and policymakers have to tackle numerous issues along the way, such as how can ambitious targets be met in an economical way and secure sufficient job creation? How can markets attract investment in new technologies, without triggering high risk premiums? How can support schemes incentivise competition in new technologies, without placing heavy economic burdens upon the state?
For energy companies willing to make the transition to clean energy, the challenges in a radical reorientation of their business are equally many and complex. How does a new technology challenge the workforce? How can the companies adapt to changes in their risk profile brought about by the adoption of new assets? How should they account for existing assets? This report aims to tackle both these sets of challenges, by describing in detail the green transition underway in Denmark, and including lessons learned along the way – both positive and negative.
Despite having no nuclear or hydroelectric energy, Denmark consistently ranks in the top 3 of the World Energy Council’s Energy Trilemma Index, which assesses countries based on their performance in three key dimensions: energy equity, environmental sustainability and energy security (Wyman, 2020). It is also ranked as the country most advanced in terms of system integration of variable renewable energy by the IEA, and is leading the world in terms of the share of variable renewable energy in the grid, with the equivalent of 50 per cent of the gross electricity consumption supplied by wind and solar in 2020. The transition in Denmark has so far led to not only cleaner energy, but also fostered a focus on renewable energy as a growth sector.