Friday, October 16, 2009

Wind Energy, The Case of Denmark: A Review

The Danish Center for Political Studies, last month published a wide ranging critical study on the Danish wind generation power, titled Wind Energy: The Case of Denmark. The Danish Center for Political Studies would appear to be either conservative or Libertarian in orientation. Most of the Study was written by Hugh Sharman whose background and professional training as a Civil Engineer, as well as his business role as would seem to qualify him for the task.

The remainder of the Report, Wind Energy's Effects on Employment in Denmark, was written by a Danish Economist, Henrik Meyer, who is on leave from his position as Deputy Director at Copenhagen Consensus Center. The Copenhagen Consensus Center appears to be a think tank run by Bjørn Lomborg. I will not prejudge the professionalism of Meyer's work, but I will note that this section appears to have been written with intent to draw conclusions from the Damish Wind experience about Obama administration energy policies. This would be a valid purpose, and indeed the studies conclusions would parallel my own conclusions based on my case studies of the American Wind Industry. Meyers concludes,
Based on the Danish experiences with wind power, subsidies to wind need to be significant or corresponding taxes on carbon-based electricity need to be increased substantially. The Danish experience also suggests that a strong US wind expansion would not benefit the overall economy. It would entail substantial costs to the consumer and industry, and only to a lesser degree benefit a small part of the economy, namely wind turbine owners, wind shareholders and those employed in the sector.
This will not make the windmill cheerleaders happy, but that does not in itself suggest an ideological bias. There is no indication of funding sources for the report, but it is written in English, and the reference to Obama administration policies, indicates an interest in directing American energy policies.

Since the report does carries no copy restriction, I will simply quote the executive summery, which will allow it to speak for itself.
Denmark generates the equivalent of about 19% of its electricity demand with wind turbines, but wind power contributes far less than 19% of the Nation’s electricity demand.

The claim that Denmark derives about 20% of its electricity from wind overstates matters. Being highly intermittent, wind power has recently (2006) met as little as 5% of Denmark’s annual electricity consumption with an average over the last five years of 9.7%.

In the absence of large-scale electricity storage, any modern electricity system must continuously balance electricity supply and demand, because even small variations in system voltage and frequency can cause damage to modern electronic equipment and other electrical equipment.

Wind power is stochastic,especially in the very short term (e.g., over any given hour, 30 minute, or 15 minute period). This has created a completely new challenge that transmission system operators (TSOs) all over the World are only now learning how to handle. Some draw from Denmark’s experience. But Denmark’s special circumstances make its experience of limited transferability elsewhere.

Denmark manages to keep the electricity systems balanced due to having the benefit of its particular neighbors and their electricity mix. Norway and Sweden provide Denmark, Germany and Netherlands access to significant amounts of fast, short term balancing reserve, via interconnectors. They effectively act as Denmark’s “electricity storage batteries”. Norwegian and Swedish hydropower can be rapidly turned up and down, and Norway’s lakes effectively “store” some portion of Danish wind power.

Over the last eight years West Denmark has exported (couldn’t use), on average, 57% of the wind power it generated and East Denmark an average of 45%.The correlation between high wind output and net outflows makes the case that there is a large component of wind energy in the outflow indisputable.

The exported wind power, paid for by Danish householders, brings material benefits in the form of cheap electricity and delayed investment in new generation equipment for consumers in Sweden and Norway but nothing for Danish consumers. Taxes and charges on electricity for Danish household consumers make their electricity by far the most expensive in the European Union (EU). The total probable value of exported subsidies between 2001 and 2008 was DKK 6.8 billion (€916 million) during this period. A similar amount was probably exported prior to 2012 and larger quantities will be exported following the commissioning of 800 MW of new offshore wind capacity in 2013.

The wind power that is exported from Denmark saves neither fossil fuel consumption nor CO2 emissions in Denmark, where it is all paid for. By necessity, wind power exported to Norway and Sweden supplants largely carbon neutral electricity in the Nordic countries. No coal is used nor are there power-related CO2 emissions in Sweden and Norway.

Wind energy has replaced some thermal generation in Denmark. It has saved an average emission of about 2.4 million t per year CO2 at a total subsidy cost of 12.3 billion DKK or an average cost of 647 DKK (€ 87 or $124) per ton CO2. Wind power has proven to be an expensive way to save CO2 emissions

The cost of Denmark’s wind capacity to Danish consumers is exacerbated by its inability to use so much surplus electricity. The surplus will increase in 2013 when 800 MW of new offshore capacity is commissioned, increasing Denmark’s wind production by 2.7 TWh per year. Nearly all the additional wind power will be exported and this will further depress prices; nearly all the subsidies paid by Danish consumers will also be exported without achieving any significant fossil fuel use nor any CO2 reduction. Achieving own-consumption of all its wind power is technically impossible in the short term and will remain entirely hypothetical until electricity consumption rises and new technical and demand-side solutions have been developed and implemented. In most cases, these have yet even to be invented, let alone proven and costed.

Notwithstanding its many disadvantages wind power’s one striking advantage is that, like nuclear, its marginal costs of operation are very small once the capital has been paid. However, unlike nuclear, many ten to fifteen year-old turbines are past their useful life. By contrast, most conventional rotating power plant can enjoy a working life of 40 to 60 years, as evidenced by most power plants in Europe today. This puts into question the strategic, economic and environmental benefits of a power plant that may have to be scrapped, replaced and re- subsidized every ten to fifteen years.
The executive summery of the second half states:
Denmark has been a first-mover in the wind power industry for over ten years, and its leading wind turbine manufacturers have been able to maintain a very strong global position. This has been a consequence of a concerted policy to increase the share of wind power in Danish electricity generation. The policy has only been made possible through substantial subsidies supporting the wind turbine owners. This indirect subsidy has in turn generated the demand for wind turbines from the manufactures. Exactly how the subsidies have been shared between land, wind turbine owners, labor, capital and shareholders is opaque, but it is fair to assess that no Danish wind industry to speak of would exist if it had to compete on market terms. This paper documents the experiences gained in Denmark with regard to the employment effect of subsidizing the wind industry.

Substantial subsidies have been directed to the Danish wind mill industry over years. From 2001-2005 the yearly subsidy has been 1.7-2.6 billion DKK.

The Danish Wind industry counts 28,400 employees. This does not, however, constitute the net employment effect of the wind mill subsidy. In the long run, creating additional employment in one sector through subsidies will detract labor from other sectors, resulting in no increase in net employment but only in a shift from the non-subsidized sectors to the subsidized sector. Allowing for the theoretical possibility of wind employment alleviating possible regional pockets of high unemployment, a very optimistic ballpark estimate of net real job creation is 10% of total employment in the sector. In this case the subsidy per job created is 600,000- 900,000 DKK per year ($90,000-140,000). This subsidy constitutes around 175-250% of the average pay per worker in the Danish manufacturing industry.

In terms of value added per employee, the energy technology sector over the period 1999-2006 underperformed by as much as 13% compared with the industrial average.

This implies that the effect of the government subsidy has been to shift employment from more productive employment in other sectors to less productive employment in the wind industry. As a consequence, Danish GDP is approximately 1.8 billion DKK ($270 million) lower than it would have been if the wind sector work force was employed elsewhere.
This study and its conclusions should be carefully read by anyone who would be interested in applying the Danish Wind Industry model to the American Wind Economy, and indeed in a more general way applied to the application of the Renewable paradigm tto the American Energy economy. The conclusion of this study might be profitably tested by a comparison to the California Energy Economy and the overall state economy.

The report focuses on something that is seldome noted about the Danish electrical system,
Denmark has effectively become the World’s leader of distributed power.
Denmark's 16 central generations stations combine heat and power generation.
600, village-scale, heating-only or small combined heat and power plants having an aggregate power capacity of roughly 1,600 MW, all built during the last fifteen years. These have widened the access of district heat to even quite small villages, saving heating oil, while delivering electricity into the grid, mostly from gas engines. Straw or wood chips fuel many of the heat only stations.
The ownership scheme for Denmark's 5500 windmills is based on the distributive concept.

Because the Danish grid has been based on Amory Lovins distributive power concept, there is an interesting chance to test Lovens overall theory by comparing the overall performance of the distributive system of Denmark, with the nuclear dominated sysyem of France. In 2008 the emissions from Nuclear powered France ran about 6.2 tons per person. in contrast Danish CO2 emissions equaled 9.9 tons per person, over 50% more than France. Next door Sweeden which gets 50% of its electricity from reactors ran an even lower 5.6 tons of CO2 per person. So much for the value of Lovins' crack pot theories adding in the fight against anthropogenic global warming.

French electrical costs are 6 cents per kWh. Again in contrast Danish electrical costs ran to 9.6 cents per kWh 160% of the cost of French power. In other words both in terms of emissions and in terms of cost Amory Lovins' anti-nuclear distributive generation system has proven to be a disaster.


Anonymous said...

In the concluding notes it very much seemed like a warning towards Obama (and I would hope all North American) energy plans, that Wind isn't the answer so many have hoped it would be.
Unfortunately most wind advocate won't listen to this and will claim that the CEPOS is a radical right wind think tank or something along those lines.

Charles Barton said...

I vet reports in order to identify ideological issues and questions of competence. In the case of Hugh Sharman, it would appear that he has an ax to grind, he grinds it by telling the truth, not hiding it. Meyer does noiort seem to be hiding stuff either. so we seem to have an honest report by two people who seem to know the issues.

Al fin said...

Sounds about right to me.

Mr. Obama seems set to follow the Danish model, rather than the French or Swedish.

Good luck changing his mind.

David Walters said...

Charles, where did you get the costs for French nuclear at 6 cents? This actually seems rather high if compared to US costs at 1.7 cents. At any rate, any sources on this one?

Great diary!!!!

Charles Barton said...

Dear David, are yoou trying to tell me that Google lied about the cost of French power? I would be shattered to believe that such a thing is possible. It is more likely that that the French government is charging rate payers too much. Still it is less than what people in California pay.

uvdiv said...

Perhaps another useful source is the IEA report. Appendix 9 is a case study on the Danish wind power - particularly its integration with Scandinavian hydropower. They have nice graphs.

Regarding the costs - in France, the cost of electricity is 6 c/kWh to industry, 17 c/kWh to residential users. In Denmark the cost is 40 c/kWh to residential users, and figures for industry are missing. These are end-user costs, and not production costs for power plants.

David - 1.7c is I believe just operating costs, excluding the amortized costs of the actual infrastructure (reactor etc.) That's the number from that NEI graph isn't it? I don't think it's meaningful.

Nathan2go said...

Ok Charles, clearly wind advocates have greatly oversold and misrepresented the Danish wind industry, but the paper you described errs just as badly in the opposite direction.

For example, this claim:
"The wind power that is exported from Denmark saves neither fossil fuel consumption nor CO2 emissions in Denmark, where it is all paid for. By necessity, wind power exported to Norway and Sweden supplants largely carbon neutral electricity in the Nordic countries. "

is phony because Denmark has almost no net exports. They buy back about 90% of their wind exports later, and use it to reduce use of their coal plants which generated 47% of their electricity in 2007. Using hydro in Norway for energy storage is a perfectly valid way to use wind power.

The attempt to draw parallels with the US wind system is even more ludicrous, as capacity factors from US (particularly the central US, aka the Saudia Arabia of wind) wind turbines are over twice as high as in Denmark. This proportionately reduces the cost not only of production, but also of transmission.

This link has a more informative critique of Danish wind:

I think the real lessons to be learned here are:
- when wind systems are costed out, storage (or equivalent export/re-import balancing) and transmission must be included.
- renewable system can have broad public support, even when they are expensive and of limited bennefit.

p.s. I liked your comment about Danish combined heat and power being a test case for Lovin's failed theories.

Charles Barton said...

Nathan, The Danish electrical export situation varies from year to year depending on a numberb of condiitions. In some years insufficient rains bring water shortages to Norway and Sweeden. In such years Denmark is a net exporter of electricity, much of it from coal fired power plants to countries which have a shortfall in hydro generating power due to the water shortages.

uvdiv said...

The attempt to draw parallels with the US wind system is even more ludicrous, as capacity factors from US (particularly the central US, aka the Saudia Arabia of wind) wind turbines are over twice as high as in Denmark.

I highly doubt this (but you can give us a source, of course?) Danish wind is offshore turbines in the best locations of the North Sea - very constant strong wind, with the highest capacity factors I've heard of (even 45%). I would think US Midwest wind is half of this, although I have not found specific numbers (though I've been looking for them). Unlike nuclear reactors (IAEA PRIS database), there is no convenient repository for wind farm performance, and most simply don't report anything publicly.


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