12 Jan An efficient system is a green system
Thomas Egebo, CEO, Energinet, details the reasons Denmark is a frontrunner in sustainable energy and lessons the country and company has learned in making the green energy transition a reality.
Why is Denmark a shining example of a successful energy transition?
Denmark has come quite far in integrating fluctuating energy sources. Around 50 percent of our electricity consumption is matched on average by fluctuating production of electricity from wind and solar. Our penetration rate is the highest in the world. There are hours throughout the year where it is more than 100 percent. This makes Denmark a frontrunner in how to cope with enormous amounts of fluctuating renewable energy and still maintain high security of supply. Denmark is among the top performers in Europe in terms of security of supply. Our wholesale market prices for electricity are also quite competitive. Of course, high prices are present, but that goes for the whole of Europe. Our experience is valuable because this is the direction everyone is moving in. Eventually, we will have Europe running to a substantial extent on fluctuating renewables, which makes our learning curve of interest to other countries. Another characteristic of the Danish electricity system is that we are well integrated with neighboring countries. Our electricity system is directly linked to Norway, Sweden, Germany and the Netherlands, and we are currently building a new interconnector to the U.K. Interconnection is an integral part of the global energy solution. According to the European Network of Transmission System Operators, infrastructure built out between countries is crucial; we can only have a stable energy system that is more or less 100 percent green through integration. We have a great deal of experience in this.
Another interesting aspect of the Danish energy industry is the expansion of renewables production. We have very competitive offshore wind production sites and have the capacity to produce more energy than we use ourselves. We are trying to develop energy islands to scale up the utilization of offshore wind for other countries. Belgium is relevant because although it is not a neighboring country, it is a major stakeholder in this space. In the long run, Denmark is going to be a net exporter of green electricity whereas Belgium will be a net importer of green electricity. There is a symbiotic interest for Belgium to connect to our Danish energy island in the North Sea. The island would not be developed if we were forced to use all its production ourselves. Energinet is developing the concept of energy islands to integrate regional energy systems together with partners in the Netherlands and Germany.
Denmark has also demonstrated that onshore and offshore wind is a competitive market. We have enjoyed broad political support for the green transition. Political agreements on energy policy tend to rally political backing in parliament. This creates stability for investors because they can count on decisions being made. They know which way society is moving and can invest and develop because ultimately everyone wants to go green. As a small country we also have excellent cooperation between the public sector, private sector and academia. Stakeholders tend to be able to work together well on things they want to achieve in common.
What major challenges has the energy transition presented to us and how can we overcome them?
In the past we had what you might call a planning culture. We made ten- or twenty-year projections in a relatively stable and foreseeable environment. However, things currently move much faster and involve uncertainties and complications. We need to be able to operate deftly in this environment, which involves becoming faster in our decision making, becoming less risk averse and more open to changing our perspectives. One example of this is adapting the grid to absorb new sources of renewable energy production. We see a lot of developments in solar where production facilities can be set up very fast. This is a challenge if grid capacity in the area is already fully utilized. It requires time to expand the grid. For development to be successful, we must work with transparency. Energinet produces maps and material to tell developers the state of our grid, where we have strong grids, where it is easier to connect, where the grid may be weaker and what areas we would need to reinforce. We have also begun working with our tariff structure to improve incentives. Rather than making firm plans, we need to make scenarios and explore ways of maneuvering. We must now focus outward and intensify dialogues with the sector around us. This is a challenge everyone is facing as the energy transition accelerates.
What must societies do to meet the sustainability targets underlined in the Paris Agreement?
The 2021 United Nations Climate Change Conference has kept the 1.5-degree-Celsius target alive. To achieve this, we need to build our renewable energy capacity and quickly. The most relevant renewable sources in Denmark are wind and solar, which are the highest sources available to most countries. We need to massively electrify our society. We need to use more electricity in transportation, heating and industry. This will involve direct electrification and indirect electrification through hydropower. Wind and solar are not evenly distributed across countries. Furthermore, wind and solar energy production fluctuates with the weather. We need to balance the energy system and ensure both its flexibility and stability.
What is Energinet’s role and how is it supporting the green transition?
Energinet and its partners aim to build an affordable future energy system based on renewables with a high level of secured supply. We call this the energy trilemma, which is balancing green energy sources while being both secure and affordable. In Denmark we want to create an integrated energy system. In most markets we currently tend to have separate systems for electricity, heating and gas. However, the future energy mix will be more complex. Energinet is the transmission system operator for both electricity and gas, which is quite unique. To optimize the connection between electricity and the gas sector, we decided to merge our subsidiaries involved in systems development and operations. The idea behind merging our electricity and gas segments is to foster sector integration, collaborate on planning functions and work on market developments together. Although done recently, we can already see that bringing these entities together is making a significant difference. As a transmission system operator, we are important in terms of supply and how we integrate renewables into our system to build a well-functioning market. We are also important to consumers in the delivery of high-value green energy systems. We are at the nexus, which makes our tasks important for the green transition. While we need to fulfill our basic role, which is building out infrastructure, we also assist sector coupling, supply the whole energy sector with data and work to optimize the tariff structure. We need to foster the agility and flexibility we will need in the future.
How significant are global collaborations in Energinet’s operations?
As a government-owned transmission system operator, we basically follow what is stated in the law. We have a legally mandated task to own and operate the grid and balance and develop the market, especially for ancillary services. However, in solving this task we automatically become more and more internationally oriented because of the importance of our partners in other countries. We are directly connected to our neighbors. We are also working with international partners from Germany and Belgium on our Bornholm and North Sea energy islands. We also cooperate with system operators and other participants in a group called Global Power System Transformation Consortium. Our partners represent areas of the world with the most fluctuating energy systems. We cooperate with National Grid in the U.K., EirGrid in Ireland, Electric Reliability Council of Texas, California Independent System Operator and Australian Energy Market Operator. The global collaboration is trying to identify the most pressing challenges in adopting our system operations to fluctuating energy. Together with research institutions, we try to raise funds and direct research towards identified challenges. We are all embarking on the same journey towards renewables, be it in Indonesia, India or countries in Africa. We are a Danish company, and our jurisdiction is Denmark, but in fulfilling our tasks we have increased international collaborations. Partnerships can accelerate the green transformation by generating and sharing knowledge. Participating is a part of Energinet’s vision of a better world through green energy.
Why are new digital technologies crucial in the evolution of our energy industries?
There are three broad reasons for taking an interest in data and digitalization. The first is the sheer complexity of our future systems and one’s ability to operate them. Those sitting in the control room will have to make decisions very quickly in a far more complex environment, which will not be possible without artificial intelligence and automation. Another area that will require a digital element is sector coupling to ensure sustainable flexibility from many small, decentralized sources. We need new business models based on data and digital solutions. The third area involves maximizing value. Electricity consumption is going up, which traditionally requires more infrastructure. However, if electricity consumption goes up by a factor of three, it will require infrastructure everywhere and be extremely expensive. A better solution is to make the best possible use of our infrastructure by using digital tools to push efficiencies.
Progress is being made in all three areas. We are doing many experiments with new partners on flexible consumption. We are exploring new technologies, such as power-to-x and how it can play a role in our markets for systems products. We have something we call Open Door Lab where we invite people to do small experiments to see if there is a business case for using data. We have also done work in dynamic line rating, which is taking a wire and seeing how much current can be pushed through it based on the wire’s conditions. We normally use standard assumptions but under different weather conditions we can run possibly 20 percent more electricity through wires. We use weather data to see how much electricity we can push through because it is weather dependent. Dynamic line rating uses tons of weather data to optimize our capacity. We are also seeing innovative solutions for control rooms to support those working there. While progress is being made, a lot more work needs to be done. As a company and industry, we tend to underestimate how much data we produce and how much can be used by ourselves and other convergent entities.
What must be done to ensure we meet our goals of having a green energy industry?
Within the next 10 years or so we must achieve an electricity system that is—for the most part—100 percent green and go a very long way in terms of greening the gas sector. We also need to electrify transport as much as possible and increase the use of green electricity in heating and industry. We also need to concentrate on indirect electrification through hydrogen. Energinet is actively focusing on these issues. Claims made ten to fifteen years ago that we could upgrade an electricity system based on 50 percent fluctuating renewables from solar and wind sources would have been proclaimed as impossible. Showing that we are not only able to do so but can develop solutions as we go is an invaluable lesson. We now have sophisticated forecasting systems for control rooms and well-functioning markets to make it possible. A fast green transition is doable. It will not be easy, but it is possible. However, we need to cooperate not just across borders, but between all participants, be it energy systems, the digital world or industry.