Lessons From The Danish Energy Model

By Niels Malskaer

Despite its size, one small Scandinavian country is doing big things in regard to its energy policy. Denmark is on track to covering its electricity and heat supply solely with renewable energy by 2035. At the same time, its economic environment is proving itself highly competitive in attracting high-profile investors and multinational corporations like Apple, who are seeking to capitalize on the nation’s business-friendly energy policies. While it may be easy to dismiss Denmark’s remarkable renewable energy market as a fringe example, taking a look at their fruitful national strategy for renewables reveals many lessons that are applicable to the U.S. market—especially for states looking to revise their respective energy policies.

Placing Focus on Wind Energy

After the oil crisis of 1973, the Danish government decided on national energy standards, similar to the Renewable Portfolio Standard (RPS), with a strong emphasis on making wind power a significant part of the energy mix. The focus on wind energy came from the scarcity of usable hydro resources, and stiff opposition to nuclear power—two energy sources that were embraced by neighboring Norway and Sweden. There is no doubt that the governments’ readiness to concentrate on wind energy was a key reason why Denmark became a world-wide leader in terms of on- and off-shore wind energy and home to several large wind energy companies.

Smart Investments

The initial investments, in terms of tax credits and subsidies, were focused on making sure the jobs created by these initiatives were kept in Denmark, and that any money spent had obvious good value in terms of return on investment for the state. The result? Markedly lower energy price for consumers. Consistent, determined and long-term political objectives formed the foundation for a close public-private cooperation that ensured that companies had the stable policy environment that is required for making the kind of far-sighted investments that allow a sector like wind energy to take root. It is evident that the boom-bust policy cycle for the U.S. wind market, could be alleviated by taking a page from the Danish playbook. Because of this transparent and predictable playing field, energy businesses in Denmark have become so big that they now employ over 58,000 workers, and not only that, 1 out of 5 dollars made in Denmark on exports comes from the energy sector.

Furthermore, the result of this targeted investment and the creation of a clear and stable policy framework for renewables has gone a long way towards uncoupling CO2 intensity from productivity. This has allowed the economy to ‘grow green’, improving cost competitiveness in the Danish manufacturing sector by 9% over other EU companies, due to lower energy usage.

Lessons We Can Learn from the Danes

The lessons learned by Denmark’s decade long move towards a modern renewable energy portfolio has many lessons that are applicable to the U.S. With the next five to ten years being of paramount importance in shaping the future of the U.S. energy market, the Danish example makes it clear that a stable policy framework that focuses on competitiveness and a bold vision for the future is all it takes to prepare any state for the future of energy.

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