The tenders for wind offshore are going really well. In 2016, Denmark had the worlds most competitive price on a Kriegers Flak wind park, which will be established in the Baltic Sea. Just recently, in December of 2018, Denmark had another successful technology neutral tender for wind and solar that achieved even lower prices, all wind projects awarded were off-shore. This puts a lot of pressure on the development of onshore plants, because decision-makers expect onshore wind to be even more competitive and expect a significant price reduction in the years to come. The price gap between offshore and onshore wind is closing.

What constitutes a big problem is that the energy price level is very low and so the needed for support is high. This leads to less political support to continue the green transition in the country. The supply of green power has been steadily going up, but the demand has not been following, because the use of green power in the heating and transport sector (RES-H; RES-T) is still lacking. However, the support is still strong among the general public. Since the technology neutral tenders for renewable energy sources (RES) have been successful in achieving low prices, the future support is likely to continue in this form. However, in the Energy Agreement from 2018 it was agreed that the total number of onshore wind turbines would be significantly reduced in order to prioritise offshore development. This development increases the uncertainty of future onshore developments, and although it still continues, it is under pressure.

In December 2018, the revised renewable energy directive (RED II) 28/2001/EU entered into force. The directive set a new target for RES share of 32% by 2030. The Member States (MS) are obligated to elaborate their National Energy and Climate Plans (NECPs), that cover how the MS are going to achieve the targets. The lack of binding targets for MS is seen as a key barrier in Denmark. This may put the Danish ambitions for RES development under pressure and it might also affect the Danish RES industry. If other MS stop developing their renewable energy capacities, Danish companies producing and exporting wind energy technologies might face a decline in export opportunities for wind technology. The governance scheme and the trajectories put for RES in the draft for individual MS will still be very important. It is not clear though if that would be a sufficiently strong instrument. The negotiation on the energy package is ongoing. Ministers will discuss what the targets will be for RED. If they are not ambitious enough, there will be lack of investment and this will impact the Danish supply chain.

A moderate problem, which will have an impact on electricity system in Denmark is the large amount of fluctuation wind power, reaching over 50% of Danish electricity consumption. A very important challenge will be to establish an adequate technical and regulatory framework for integration of wind power in the energy system. One of the proposed solutions is to use wind electricity in the district heating sector through introduction of Power-to-Heat technology.

The barriers in Denmark have been quite high because of taxes and lack of electrification of the transport sector. Heat from biomass is an exception to the taxation, therefore, the electrification of the heating sector has been slow. Moreover, the Iincentives have focused on biofules instead of heat pumps. In order to increase the utilisation of electricity, the Energy Agreement from June 2018 established that the tax on electricity would be reduced in yearly increments until 2025, to aid in the electrification of society.

Near-shore wind energy plants are offshore wind energy plants erected within a distance of at least 4 15 km from the coastline, according to the Danish Energy Agency (DEA). There has been only one tender for near-shore wind until May 2019. However, since on some planned locations the wind parks will be visible from the coast line, there is some insecurity among investors in near-shore wind energy on how the agreement between the wind park operator and people living on coastline will work. Neighbours of such turbines are, just like these of the on-shore turbines, entitled to receive compensation from the investor and to a local ownership scheme. This scheme means that at least 20% ownership shares are to be offered for sale to local citizens. Local citizens can thereby have a share in the revenue created by the wind farms. However, there is some insecurity concerning the possible impact this will have on the risk premium for the near shore tenders. Furthermore, near-shore wind installations are dependent on the the approval from municipalities rather than the Government. Therefore, there is an inconsistency in the way municipalities approach such projects. There is a big political instability concerning near-shore and how it should be handeled.

There is an oversupply of allowances in the system, which causes a very low price of carbon credits on the European market. Without an appropriate reform, the EU Emissions Trading System (EU ETS) is failing to be the driver for a green transition in the EU. It might also affect the Danish RES industry. If other Member States stop developing renewable energy, Danish companies producing and exporting wind energy technologies might face a decline in export opportunities for wind technology.

In the Energy Agreement from 2018, Denmark has set out the goal of building at least three large 800 MW offshore wind farms by 2030. The uncertainty of future costs relates to the political ambition to include the costs of the undersea cables to the mainland in projects. Where the project developers will bear the costs of the connection to the mainland, previous projects have commonly received the support of the Danish TSO energinet for the establishment of a grid connection. The decision to build the first out of the three windfarms "Thor" was made in February 2019, and the tendering is expected to open in 2020. The introduction of costs in the form compensation to the TSO for the construction of mainland cables may result in investors' uncertainty or a need for higher support.

The most severe barrier for renewable energy sources used for heating purposes (RES-H) is lack of consistent policy. There are very ambitious targets, however, the taxation policy and single regulations are inconsistent with this policy. For example, there is a need for development of the policies focussing on support for heat pumps. In order to address this issue, the Danish Government has increased the incentives for heat pumps for heating in the Energy Agreement from June 2018.

There is a conflict between the energy and climate policy on one side and the tax policy on the other side. In Denmark, there are a lot of so-called green taxes, which are levied on electricity, heating and transport from fossil fuels. The conflict is caused by the politicians’ expectation on high revenues from these taxes and the environmental targets they want to follow. The more renewable energy sources (RES) in energy generation are used and the more effective the energy efficiency measures are, the lower the tax revenues are. There is still some obligations for CHP and heating plants to use coal and natural gas to ensure revenue streams for the Government. However, many of these obligations are being removed. This conflict causes insecurity for developers on how high the taxes on fuels might be in the future.

The sustainability problem concerning biomass (wood chips, pellets and straw) used for heating purposes constituted a problem. The Energy Agreement from March 2012, established a framework for climate and energy policy between the Danish Government and most of opposition parties, that overhauled the transition from fossil fuels towards biomass in big combined heat and power (CHP) plants. In case of larger plants with higher demand for these sources, it was believed that they would have to be imported. It remains crucial to ensure the sustainability of such solutions, for example, through sustainability certificates. The challenge that is to enable a transition for the energy sector that incorporates biomass. This issue has been aknowledged in the energy agreement form 2018, the fact that the Energy agreement was agreed upon unanimously cross all parties show the intent to reach a sustainable green transition. However, it remains a fact that much biomass is still imported and the question of sustainable biomass has been raised.

A barrier regarding the grid infrastructure would be the support for energy storage solutions. The rapid development of RES in Denmark and the electrification of the Danish society has resulted in the need of electricity storage solution. This need is due to the large share of wind power that cause large fluctuations in production of electricity. For Denmark to be able to utilise the full potential of ideal conditions for wind power that the country has. It would be necessary to include and develop storage solutions for the electrical grid. Some examples of such technologies could be hydrogen production, pumping stations, thermal storages as well as batteries. However, there is no support scheme targeting storage solutions at the moment.

The competitiveness of renewable energy sources in heating and cooling sector (RES-H&C) is an important issue. Technologies such as geothermal and solar thermal are expensive and the support for these is currently lacking. In Denmark, there is large potential for geothermal utilisation. In a few municipalities, there are investigations of the potential for large scale geothermal energy utilisation, however, the costs of exploration are still uncertain. Furthermore, the investment costs solar thermal are to high due to land values and the land required for larger applications.

Introduce investment aid for large scale geothermal and small scale solarthermal.

The European Commission (EC) should change its standard from E10 to at least E20 in order to allow use of advanced biofuels of a higher standard (like E20). The fuel mix standards E10 and E20 are gasoline and ethanol blends where the ethanol is 10% and 20% respectively. This change would have to be adopted by the car producers, which might take many years. The EC has been working on new emission standards for vehicles that could incentivise the wider adaptation of E10 and E20.

There is no sufficient support scheme for biofuels in Denmark. There is a tax allowance scheme in place and a biofuel quota obligation. These schemes, however, do not distinguish between the first and second generation of biofuels and are in this way not sufficient for supporting the development of advanced biofuels.

The European Commission (EC) reached an agreement on biofuels regulations in summer 2015, but the target for advanced biofuels is set at 0.5% in 2021 and 3.5% by 2030, which is considered very low. This constitutes a severe barrier for the development of advanced biofuels.