White papers for a green transition

WIND ENERGY MOVING AHEAD

How wind energy has changed the Danish energy system

INSIDE THIS WHITE PAPER

Setting the standard for tender processes Negotiating procedures is part of the Danish offshore tender model

The Danish grid is a European grid Integration of wind energy through an international electricity market

Testing the turbines of tomorrow Test and demonstration facilities in Denmark ensure world leading innovation

Pushing the bar for wind energy New innovations and large ambitions take wind energy to the next level 2 3

EXECUTIVE SUMMARY

WIND ENERGY MOVING AHEAD As the first country in the world, Denmark has decided to lead the transition and become How wind energy has changed the Danish energy system entirely independent of fossil fuels by 2050. One element in reaching this target is to Version 3.1 expand the share of renewable energy harnessed from wind, and this encompasses Printed in July 2017 driving the development of an intelligent energy system capable of managing the fluctu- ations of renewable energy. Front page photo Cover photo showing Anholt Offshore Wind Farm. Photo: DONG Energy Denmark was the first country to install a commercial offshore wind farm 30 years ago and has been first mover in the wind industry for decades. In 2016, onshore and offshore Editor in Chief wind turbines provided around 40% of Denmark’s electricity consumption and we plan State of Green to go further with over 50% of electricity consumption to be generated by wind energy by 2021. Technical Editors Confederation of Danish Industries Hans Peter Slente, [email protected] Global hub for wind energy innovation Danish Wind Industry Association Peter Alexandersen, [email protected] Denmark is a global hub for wind energy innovation and development and the Danish Danish Energy Agency Benoît Bizet, [email protected] wind industry employs more than 31,000 people. The availability of a highly skilled work- Danish Energy Association Torsten Hasforth, [email protected] force, superb facilities for testing prototypes and a comprehensive network of compa- nies, research institutions and government research programs make up an innovative Contributors R&D environment like nowhere else in the world. In Denmark, you can test all parts of a 3F - United Federation of Danish Workers Jesper Lund Larsen, [email protected] wind turbine from nacelles and blades to full-scale, almost market-ready, turbines, which Aluwind Ole S. Eriksen, [email protected] is why companies from all over the world have located central parts of their R&D opera- APQP4Wind Kim Nedergaard Jacobsen, [email protected] tions in Denmark. Bladt Industries Lars Kristensen, [email protected] Copenhagen Infrastructure Partners Christina Grumstrup Sørensen, [email protected] Securing a stable and cost-effective supply DONG Energy Tom Lehn-Christiansen, [email protected] Approximately 4,750 turbines supply more than 5 GW of electricity to Denmark. The 5 GW Energinet.dk Jesper Nørskov Rasmussen, [email protected] constitute more than a third of the overall Danish production capacity. The large-scale HOFOR Kim Pind, [email protected] wind energy integration is made possible by a well-developed transmission infrastruc- Jysk Energi Per S. Kristensen, [email protected] ture, capable of handling the fluctuating wind energy resource. The Danish grid is LM Wind Power Lene Mi Ran Kristiansen, [email protected] connected to the neighbouring countries, enabling the import and export of energy LORC - Lindoe Offshore Renewables Center Christina Vridstoft, [email protected] during peak periods. Megavind Edit Lulu Nielsen, [email protected] MHI Vestas Offshore Wind Michael Morris, [email protected] Setting the framework for a green transition Nissum Bredning Jens Jørgen Birch, [email protected] The cost of transitioning to renewable sources is declining and the latest tenders for off- PensionDanmark Tage Otkjær, [email protected] shore wind farms in Denmark have the lowest Levelised Cost of Electricity (LCOE). This Prøvestenens Vindmøllelaug Steen Thaning, [email protected] means that that no other offshore wind farms in the world can provide power at a lower RAH Service Per Nielsen, [email protected] price, all expenses over the lifetime of the farm taken into consideration. An element in Siemens Wind Power Henning Thomsen, [email protected] the success of low costs is the Danish tendering model, which includes both prequalifica- Technical University of Denmark Betina B. L. Winther, [email protected] tion and a preliminary technical dialogue with potential tenderers and investors. Despite Vattenfall Vindkraft Arne Rahbek, [email protected] the declining costs, the projects still have to be financed and Denmark is leading the way Peter Wesslau, [email protected] with both wind turbine cooperatives for private citizens and large-scale public-private Vestas Wind Systems Maria Alina Wedø, [email protected] financing models, for instance through blended finance. WindEurope Benjamin Wilhelm, [email protected] About this white paper Download this white paper This white paper takes you through all the elements of the success story of wind energy Download this white paper and other related publications at www.stateofgreen.com/publications in Denmark. From the starting point and what we now consider small-scale wind turbines to the projects and technologies that push the bar and the ambitions for wind energy as For more information a source of renewable energy. We hope you will be inspired. To order copies of this white paper or receive information about other related publications, please contact State of Green at [email protected]

Copyright State of Green 2017 4 Foreword 5

WIND ENERGY – FUELLING THE INDEX

EUROPEAN ENERGY UNION 1. Denmark – a frontrunner in wind energy...... 6 How historical developments made Denmark a leader in wind energy Wind energy plays a key role in Europe’s transition to clean energy. Having led global climate action in recent years, Europe is now showing example by creating the conditions for sustainable jobs, growth and investments. The European Energy 2. The Danish electricity grid is a European grid...... 8 Union will modernise the EU economy and boost clean energy, equipping all European citizens and businesses with the Large wind energy share and high security of supply means to make the most of it. By Maroš Šefcovic, Vice President of the European Commission, in charge of Energy Union 3. Local grids – key to an efficient energy system...... 10 Wind turbines are iconic symbols of the skilled and unskilled manufacturing Regulation of local grids must encourage the integration of renewables green transition, gaining momentum around labour as well as local installation and the world. Yet, here in Europe, their role is service jobs. Employment in wind energy 4. Bringing down costs together...... 12 far beyond symbolic; wind energy accounts has increased fivefold in the EU from 2005 Close cooperation is essential to reduce the cost of wind energy for over 15% of the European electricity to 2013, with total associated employment supply, exceeding even 40% in some numbers of about 320,000 in 2014. Apart member states, such as Denmark. from jobs, these investments work simulta- Do you speak wind turbine?...... 18 neously to diminish European dependency But a lot more still needs to be done. The on imported fossil fuels. Denmark from above...... 19 Energy Union is one of the top priorities of the European Commission with a simple The Energy Union is putting Europe on track 5. Testing the turbines of tomorrow...... 20 overarching objective: ensuring that every to benefit from yet higher shares of wind European citizen has access to secure, energy and other renewable energy sources. Test and demonstration facilities in Denmark ensure world-leading innovation sustain­able, and competitive energy. We Important instruments in this regard are have set the EU on a path towards at least improved physical infrastructure for power 6. Building a green future...... 24 40% reductions in CO -emissions, at least transmission within countries and across 2 Wind energy means jobs, growth and exports 27% renewable energy and 30% increase borders; smarter grids and improved market in energy efficiency by 2030. These are mechanisms enable the integration of ambitious but realistic targets for Europe fluctuating renewable energy sources 7. Setting the standard for tender processes...... 26 – as long as we all work together. across larger markets; and smarter Negotiating procedures is part of the Danish offshore tender model energy systems enable more flexibility in Wind energy has a tremendous potential demand-response, storage and consump- 8. Blended finance can mobilise private capital and value in realising the Energy Union. It tion. We are harmonising rules on renew­ flows to emerging and frontier markets...... 28 delivers environmental benefits and reduces ables and their promotion across countries. Investing in renewable energy in high-risk markets is possible through both air pollution and CO2-emissions. It therefore has a direct positive impact on To conclude, wind energy is a strong driver in public-private financing models – e.g. blended finance citizens’ wellbeing. Meanwhile, investments the European Energy Union. It will definitely are becoming increasingly competitive benefit from our cross-border infrastructure 9. Pushing the bar for wind energy...... 30 and the cost of wind energy has reduced and the growing markets to accommodate New innovations and large ambitions take wind energy to the next level significantly across Europe. This is a trend it, creating a more unified and green energy we expect will continue. system. We must harness wind as an impor- tant energy source, which creates a triple Wind energy also creates jobs, both in benefit for people, businesses and the advanced research and in development, environment – in Europe and beyond! 6 7

1. DENMARK – A FRONTRUNNER IN WIND ENERGY How historical developments made Denmark a leader in wind energy

The history of wind energy traces back to Denmark in 1891, where the first electricity generating wind turbine powered a single school. Today, onshore wind is one of the cheapest sources of energy for electricity production in Denmark, and the next generation of wind turbines will be able to power up to 10,000 households.

By Finn Mortensen, Executive Director, State of Green

Windmills were initially used in the agricul- A regained interest in wind turnover was EUR 11.8 billion (DKK 87.7 tural sector for grinding grains and pumping The first oil crisis in 1973-74 changed this billion) in 2015. According to a study by the Photo: Vattenfall Vindkraft water but in 1891, the Danish physi- perception. Highly dependent on imported Danish Energy Agency, onshore wind energy cist Poul la Cour started experimenting with energy, the crises of the early 1970s lead has become one of the cheapest energy wind energy as a source of electricity. Sup- to increasing electricity costs in Denmark sources for new electricity generation in Repowering wind turbines doubled the electricity production. With an annual production of ported by funds from the Danish state, he and as a result, wind energy as well as other Denmark, undercutting coal and natural gas. In 2015, Vattenfall decommissioned 35 old wind turbines to install approx. 120 million kWh, the farm at Nørrekær Enge supplies elec- created a turbine, which supplied the school alternative energy sources re-emerged. The 22 new 3.2 MW Siemens Wind Power turbines in the Klim project tricity for approx. 30,000 households and several decommissioned he was working at with direct current and wind industry that arose in the late 1970s In a search for even more efficiency and in Northern Jutland. To date, Klim wind farm is one of the largest wind turbines at Nørrekær Enge have been sold off for new projects he even experimented with wind energy was a result of a large public engagement lower costs of energy, the size of the tur- onshore wind farms in terms of production. With an accumulated in Cuba. storage. and political goodwill towards the develop- bines has grown steadily over the years and capacity of 70+ MW and an annual production of 256,000 MWh, Klim These two large-scale repowering projects have had a positive ment and expansion of wind energy. while most turbines in the early 1990s had wind farm provides electricity for 64,000 households corresponding impact on the surrounding area of the wind farm sites, and the Danish engineers continued to improve the sizes of up to 225 kW, the newest genera­ to a production triple that of the former 35 wind turbines. replacing of older wind turbines has improved the project efficiency. wind turbine technology during World War By the early 1980s, around 20 manufac- tions of wind turbines now reach 9 MW. The At Nørrekær Enge wind farm nearby Løgstør, Vattenfall decommis- I and World War II in order to maintain the turers of wind turbines were active in the larger turbines make it economically fea- sioned 77 wind turbines and replaced them with 13 Siemens Wind Vattenfall Vindkraft electricity supply during energy shortages. Danish wind industry, and after a phase of sible to harness wind offshore, where the Power 2.3 MW wind turbines. Here, the new project has more than By the end of World War I, 3% of Danish consolidation of the industry in the 1990s, higher wind speeds make up for the larger electricity consumption was covered by the wind industry became dominated by costs. The upcoming Danish offshore wind wind energy. However, while ingenious, the large, partly internationally owned and farms, Horns Rev 3 and Kriegers Flak, will The world’s first offshore wind farm has retired Creating the world’s first offshore wind farm has helped DONG Energy technological development almost came to listed companies. reach sizes of 400-600 MW. In 1991, the world’s first offshore wind farm was built close to shore and the industry gain experience with scaling up the technology and a standstill with the justification that wind in the shallow waters off Vindeby in Denmark. After more than 25 reducing costs, which has reached a level that makes offshore wind turbines would not be able to compete with Harnessing the future of wind energy years of service, the 11 turbines in DONG Energy’s Vindeby offshore attractive to countries facing replacement of end-of-life coal-fired traditional power plants due to the low fossil Today, the Danish wind industry employs wind farm were recently decommissioned. Although Vindeby’s tur- power plants. Today, offshore wind farms have reached utility-scale, fuel prices. more than 31,000 people and the industry’s bines of 0.45 MW are small compared to current standards, they have and a single one of the largest turbines currently commissioned pro- been of vital importance for the industry. Vindeby was the cradle of duces more power than the entire Vindeby offshore wind farm. the offshore wind industry. DONG Energy

Photo: Erik Grove-Nielsen

The development of the Danish wind energy technology is remarkable. The first commercial turbines had an output of 22 kW and the blades in the photo, dated 1980, are 7.5 metres long and made for 55 kW turbines. The blades of the newest offshore turbines are almost 90 metres long. Photo: DONG Energy Cumulated installed wind energy capacity in kWh per 1000 inhabitants (by December 2016) 8 9 Denmark 915.9 Sweden 661.8 Germany 608.7 Portugal 514.1 Spain 496.8 Austria 302.9 EU28 301.3 Finland 280.5 2. THE DANISH ELECTRICITY Netherlands 254.9 Estonia 235.6 UK 222.4 Greece 220.1 Belgium 210.9 GRID IS A EUROPEAN GRID Cyprus 186.3 France 180.7 Lithuania 170.7 Large wind energy share and high security of supply Romania 153.2 Italy 152.6 Poland 152.3 Croatia 100.7 Experience from Energinet shows that a strong electricity grid, an international electricity market and a flexible electricity Luxembourg 100.7 system are essential to ensure efficient integration of large renewable energy volumes. Bulgaria 96.6 Ireland 59.9 Hungary 33.5 By Peter Jørgensen, Vice President Associated Activities, Energinet.dk Latvia 32.0 Czech Republic 26.6 Slovenia 1.5 We were once afraid of what would happen It is not an easy task to balance an electricity 3. Denmark is part of a well-functioning Slovakia 0.6 when wind energy generation reached 5% supply system with large volumes of varying Nordic and European electricity market. Malta 0 of the total consumption. We then worried energy while maintaining one of the highest Danish producers sell electricity to con- about approaching 10% – would the system levels of security of supply in Europe. For sumers in neighbouring countries when Source: WindEurope, Eurostat be able to cope? Some years later, we said one hour in 2016, the wind energy share in they can generate electricity at favour- that 20% had to be the absolute limit! the Danish electricity system reached 139% able prices – often in windy conditions. However, in 2016, Danish wind turbines and for a full day, the wind energy share And we import Norwegian hydroelectric The North Sea offshore grid Netherlands, Norway, Sweden and United Kingdom signed the dec- produced more than the total electricity reached 103%. Conversely, 2016 also had power, German wind and solar energy, The European Union has set the laudable goal to complete the inter- laration, which aims to reduce the costs, accelerate the deployment consumption for 317 hours of the year, and days with low wind energy production and Swedish nuclear power etc. during hours nal energy market in order to integrate renewables better, reduce of wind energy at sea and develop interconnection. we barely give this any thought. on one day, the wind turbines only contri­ in which producers in our neighbouring CO2 and provide affordable electricity to consumers. Although The agreement came right after 11 energy companies had signed a buted 1% to the electricity consumption. countries have the best prices. building interconnections can take decades, ten governments have declaration saying offshore wind can reduce costs to EUR 80/MWh We are reminded of the extraordinary now agreed to jointly explore the rollout of an offshore grid as part of by 2025 if governments commit to a strong pipeline of projects. Clear success of Danish wind energy generation Balancing the grid The day-to-day electricity markets and the North Seas declaration on energy cooperation. and long-term plans for deployment of offshore wind will unlock new when, year after year, we ascertain that Both days are success stories. Danes did not state-of-the-art system operation ensure This top-down political commitment should lead to bottom-up investments, reduce the cost of capital and allow the industry to it has increased to 33, 39 or 42% of total wonder about whether there was any supply the balance in the electricity system and action that propels offshore wind to the next level. The ministers meet the cost-reduction target. Danish electricity consumption. This makes in their sockets on either of those days. This efficient integration of renewable energy. of Belgium, Denmark, France, Germany, Ireland, Luxembourg, the WindEurope the world sit up and take notice. success is based on three prerequisites: Energinet’s task is to ensure the secure and cost-efficient supply of electricity, so Wind as a source of energy 1. Denmark has an efficient electricity consumers continue to have a high level New Danish-Dutch connection through the North Sea and a more integrated European electricity The success is based on the share of wind system in which flexible power stations, of security of supply at affordable prices. In 2019, electricity will be transmitted directly between Denmark grid, but also the EU’s wish to promote the single market for energy. energy and its efficient integration with local CHP plants, wind turbines and solar This requires a continued development of and the Netherlands. The 320 kilometre COBRA cable will run from The COBRA cable is a joint project between Dutch TenneT and Danish other energy sources. Energinet is the Trans- energy interact to form a holistic power the cross-border network cooperation and the Danish west coast to the Port of Eemshaven in the Netherlands. Energinet and it is supported with EUR 86.5 million by EU’s European mission System Operator responsible for the supply. trading as well as regional and pan-Europe- The interconnection will have a capacity of 700 MW, supplying up to Energy Programme for Recovery. system, but we cannot take all the credit for an solutions. 700,000 consumers with electricity. This will not only improve secu- The picture shows how the pipe, in which the cable will run, is drilled Denmark having come so far. We are a part of 2. Denmark has a well-developed electri­ rity of supply, but also support the green transition, as the interna- several hundred metres below dunes on the Danish Wadden Sea the success, but Danish wind energy history city grid, which can handle large fluctua- tional electricity market will be strengthened. island of Fanø. is a result of a well-functioning interaction tions. We can import or export electricity COBRA is an acronym for ‘Copenhagen, Brussels, Amsterdam’, and between industry, regulators, the energy corresponding to approx. 80% of our the name underlines both a wish for a strong interconnection Energinet.dk sector, citizens and others. maximum electricity consumption.

Photo: Energinet.dk Photo: Robert Attermann, Red Star Foto Danmark 10 11

3. LOCAL GRIDS – KEY TO AN EFFICIENT ENERGY SYSTEM Regulation of local grids must encourage the integration of renewables

Thanks to the decentralisation of electricity production from wind turbines and solar cells, the electricity grid in Europe is about to be turned upside down. Over half of the Danish electricity production is now fed directly into the distribution grid.

By Anders Stouge, Deputy Director General, Danish Energy Association

Distribution grids are rarely the centre market and weather conditions operate as the benefit of customers. As the DSOs are of heated public debate. However, they both producers and consumers. natural monopolies, they develop innovative have a crucial role in facilitating a transi- concepts within a regulatory framework. tion towards cleaner and more distributed Danish DSOs have acted as the flexible back- energy sources. bone of the electricity system. This has been Regulated companies must be run efficiently, Photo: Jysk Energi achieved through necessary investments but regulation must allow scope for devel- Over half of the Danish electricity produc- in innovation, maintenance and expansion opment. If the DSOs are only encouraged to tion is now delivered at lower grid levels of the distribution grids, allowing DSOs to make short-term cost reductions they will 1,000% wind energy windy weekends, the distributor sends off more than ten times directly into the distribution grid from wind handle a different production profile from come to a standstill, and society will pass a A strong wind blows across the north-western part of the Jutland the local consumption to other parts of the country. At NOE turbines, CHP plants and solar cells. And the renewable energy. This conversion needs to large bill onto the next generation. Short- peninsula, and many wind turbines, solar cells and local CHP plants Net, wind turbines, CHP plants and solar cells cover more than volumes are increasing year on year. Danish adapt to an even higher extent than today term efficiency now must not be sought at cover the equivalent of several hundred per cent of the annual elec- 1,000% of the local electricity consumption over shorter periods. distribution system operators (DSOs) have with a continuously rising share of fluctua­ the expense of optimal solutions for an elec- tricity consumption. Wind turbine capacity alone is close to 400 MW, and with 7-8 enabled the smooth integration of this rising ting electricity sources. tricity grid supporting an extensive produc- Jysk Energi operates the distribution company NOE Net and is large wind turbine and solar cell projects in 2017 and 2018 level of decentralised production. tion of renewable energy. co-owner of the supply network company Vestjyske Net 60 kV. – including Vesterhav Nord at 170 MW in the North Sea – capacity All electricity systems transitioning away Together, they supply approx. 430 GWh of electricity to their will increase to 700 MW. “If we don’t do something and just from fossil fuels will experience tremendous customers. Local electricity production is around 935 GWh. During Jysk Energi treat innovation like any other cost upheaval and to handle it, the DSOs must From 100% coal to 56% for operators of distribution grids, participate in innovation projects with their green production regulation will undermine an efficient expertise in grid operation and with new Denmark is currently home to 4,750 Energy park harvests energy from wind and sun anyone”, says technical manager Per Nielsen of RAH, who is respon- green transition.” technical installations. Grid companies are wind turbines, covering around 40% In Nørhede-Hjortmose, close to the North Sea, 22 3.3 MW Vestas tur- sible for the combined network and connection of the solar cells to Anders Stouge, the only ones who can test new ideas such of the electricity consumption. Add bines and 69,000 solar cell panels produce plenty of electricity for the 10 kV grid. Deputy Director General as flexible electricity consumption close to to this the several hundred smaller the grid. Private investors have installed the 72 MW of wind energy The consumption of electricity in RAH’s supply area is almost Danish Energy Association the customers, which is essential in bring- CHP plants and almost 100,000 solar and 15.2 MW of solar cells, contributing to the local municipality’s 60,000 MWh per year. Local production of electricity from wind tur- ing research results out of the laboratory cells. In all, 56% of the Danish elec- goal to become 100% self-sufficient in green heating and electricity bines, solar cells and CHP plants amounts to approx. 90,000 MWh It has required an important balancing act and into real application. In this context, tricity consumption was covered by by 2020. Thanks in part to the wind turbines and solar cells, the resi­ per year and thus since 2014, the RAH area has been an exporter of and a change of role for Danish DSOs. The Danish DSOs are at the cutting edge of this green electricity in 2016. dents and businesses of the municipality have already reached an green energy. system has moved from a one-way flow from transition. estimated coverage of 60%.“Yes, it is a truly spectacular park. The RAH Service large, central electricity producers down the solar cells are installed between the wind turbines and do not bother grid to consumers over to a system with ever DSOs play a key role in the introduction of changing flows of power between many new innovative ideas that can improve the small units, of which some dependent on grid and develop a smart energy system for

Electricity production is increasingly linked directly to the distribution grid The share of electricity production which is connected directly to the distribution grid

100 90 80 Transmission grid 70 60 50 40 30 Distribution grid 20 10 5 year increments 1 year increments 0 1980 1990 2000 2005 2010 2011 2012 2013 2014 2015

Over half of Danish electricity production is now delivered into the distribution grids from wind turbines, CHP plants and solar cells. The volumes are increasing year on year. Source: Danish Energy Agency, Energinet.dk Photo: RAH Service 12 13

4. BRINGING DOWN COSTS TOGETHER Close cooperation is essential to reduce the cost of wind energy

In less than 40 years, wind energy has developed into a mature, reliable and cost-effective technology. Despite already being one of the cheapest and cleanest technologies, wind energy will continue to decrease in price when new innovative ideas are applied. By Jan Hylleberg, CEO, Danish Wind Industry Association

Through the years, cost reductions with hundreds of companies within a short standardisation in the wind industry has have been a guiding principle for the distance. In the Central Denmark Region, taken a big leap forward in Denmark and players in the wind industry. Creating 1 in 25 private sector employees are em- companies and business organisations smarter, stronger and more innovative ployed in the wind industry, emphasising the are coming together to form standards products and solutions have increased the scope of the industry. that are designed specifically for applica- effectiveness of the wind turbine, thus low- tion within the wind industry alone. By ad- ering the price of electricity produced from From single items to systems hering to common standards, suppliers need wind energy. Denmark is home to some Less is more when it comes to suppliers and fewer manufacturing and quality con- of the world’s leading wind turbine manu- in reaction to this relatively new tenden- trolling processes, leading to fewer product facturers and suppliers. In total, some 500 cy, Danish suppliers are teaming up to pool failures. Standardisation can be expanded companies working in all areas of the wind services and products into actual systems. to numerous areas within the wind industry industry are based in Denmark, making up By delivering a complete technical system and the development and deployment of a globally unique supply chain and close- or packaged solutions to end consumers standards is expected to increase in the knit network of competences and services. such as wind turbine manufacturers or coming years. In this process, the strong tra- However, what makes the wind industry in wind farm owners, collaborating companies dition for cooperation in Denmark will be Denmark stand out is not only the ability to can strengthen their own strategic posi- very relevant. Having a well-functioning innovate and bring down costs, it is also the tion. This entails an even closer coopera- supply chain is of paramount importance industry’s unique ability to do this by coop- tion between Danish wind turbine manu- when it comes to making wind energy even erating with each other across the supply facturers and the clustered sub-suppliers, more competitive in the race to be first with chain. Throughout the years, companies in enhancing manoeuvrability in technological the newest, best and most competitive the wind industry have developed a strong innovations and the ability to bring down products. tradition of collaborating on various aspects, costs. which will help lower the price of wind energy even further. Introducing standards The wind sector has adopted many Collaborators galore stand­­ards and best practices from other Across Denmark and especially on the penin- sectors. In recent years, the matter of sula of Jutland, the concentration of compa- nies focusing on wind energy is impressive,

Photo: Danish Wind Industry Association 14 15

Photo: Bladt Industries Photo: Danish Wind Industry Association

Collaboration secures cost reductions In another project, Cejacket, a number of leading companies in the on offshore jacket foundations wind industry have set a goal of cost reductions of 6-8% by making A standard for the wind industry by the wind industry and a manual, allowing participants to incorporate the APQP4Wind A considerable part of the cost associated with installing wind tur- the large jacket foundations in smaller modules that are assembled Two of the world’s leading wind turbine manufacturers, Siemens Wind standard into their own production process. Both the manual and bines offshore is the price of the foundations that are put on the closer to the site of use. The project will also focus on the atomisa- Power and Vestas Wind Systems, have united with leading suppliers the training concept will be developed further before being fully seabed. Danish steel processing company Bladt Industries is involved tion of welding as a means to increasing the quality and decreasing KK Wind Solutions and LM Wind Power in a first-of-its-kind project. deployed across the Danish value chain. Over time, the ambition is to in a number of projects to lower the price of the offshore jacket the amount of work hours used on each jacket foundation. The project, called APQP4Wind, will ensure that manufacturers and make it a global standard for the wind industry, starting in Denmark. foundations. Established by Bladt, 60 international companies have suppliers­ communicate in the same technical language when working APQP4Wind is facilitated by the Danish Wind Industry Association formed a task force on jacket foundations in a new, first-of-its-kind, Bladt Industries with quality assurance. Having such a common framework helps mini­ and supported by the Danish Industry Foundation. APQP4Wind is push to lower costs. The task force meets to address obvious ways mise the risk of expensive production errors and thereby reduces the a registered trademark of the Danish Wind Industry Association in in which manufacturing processes and working procedures can be cost of energy, which is of benefit to the entire value chain. Denmark. improved across the supply chain. The project launched in early 2017 with a set of training courses APQP4Wind.org

System suppliers creating an efficient Aluwind typically receives parts from 50-100 suppliers and combines Joint, strategic recommendations from Megavind for new incentives that foster better testing, demonstration and re- and competitive supply chain them with parts from their own production, ultimately assembling all To ensure the competitiveness of the Danish wind industry, the stra- search strategies. Handling the thousands of parts that go into each wind turbine is parts into large kits (systems) that are loaded into standard shipping tegic partnership Megavind formulates recommendations that serve In 2015, the Megavind partnership developed a model to calculate a massive undertaking. In response to the challenge, the Danish containers. The preassembled kits are then transported to and in- as key indicators for both the industry and the government in regards the costs of offshore wind. The calculator is free for all to use and company Aluwind acts as a system supplier, functioning as a link stalled in the wind turbines. Each kit can easily be adjusted to fit indi- to creating the right conditions for a competitive Danish wind indu­ ensures a common way of calculating the Levelised Cost of Energy between the wind turbine manufacturers and smaller suppliers. vidual projects around the world, thereby in turn make sourcing more stry. The strategies and recommendations are formulated in close (LCOE) that everyone agrees upon. Today, the calculator is widely The system supplier handles all aspects of sourcing and contracting, strategic and easier, which helps lower the price of a wind turbine. collaboration between industry players and universities and have used to track the cost reductions made in offshore wind. thereby reducing the number of suppliers that send their individual resulted in several important advances for the wind industry, for parts directly to the wind turbine manufacturer. Aluwind instance new test centres. The partnership functions as a catalyst Megavind

Photo: Aluwind Photo: State of Green 16 17

A STRONG SUPPLIER HUB Selected examples of Danish Anholt: 400 MW Denmark 2013 footprints in offshore wind Danish deliveries: Developer and operator Wind turbines Wind turbine installation Substation installation Substation design Substation manufacturer Export cables Export cable installation Substructure main constructor Substructure design Monopiles and transition piece Monopiles and transition piece installation Export cable manufacturing Export cable installation Grouting Logistics Horns Rev 2: 209 MW Geophysical investigations Denmark 2009 Environmental Impact Assessment Danish deliveries: Project finance Developer Accommodation platform Wind turbines Wind turbine installation Foundations Foundation installation Foundation design Operator Substation Substation installation Project finance

Gode Wind 1-2: 582 MW London Array: 630 MW Germany 2016 United Kingdom 2013 Danish deliveries: Danish deliveries: Developer and operator Developer and operator Wind turbines Wind turbines Wind turbine installation Wind turbine installation Array cables installation Substructure installation Substation design Substructure main constructor Substation MV/HV equipment Substructure design Monopiles and transition piece Design of substation foundation Logistics Monopiles and transition piece Geophysical investigations Grouting Project certification Logistics Project finance Monitoring of wind, waves and currents Project finance

Photo: Danish Wind Industry Association, Bent Nielsen Norway 18 19

DO YOU SPEAK WIND TURBINE? DENMARK FROM ABOVE

As a rule of thumb, every MW installed offshore Import capacity 1,632 MW can generate the annual electricity consumption Export capacity 1,632 MW of roughly 1,000 Danish households. Blade

The share of wind in the Danish electricity Frederikshavn consumption has increased steadily during the 7 MW last years: 18% in 2004, 33% in 2013, 42% in 2015 and 37.6% in 2016. By 2021, it is expected Nacelle Sweden that wind energy will cover over 50%. Hub Import capacity 680 MW Export capacity 740 MW In 2016, the average capacity of a new onshore wind turbine installed in Denmark was 3 MW. Gear box Klim Fjordholme 70.4 MW Blaest Blade Test Centre Østerild 2015 National Test Centre By the end of 2016, 915 kW of wind energy was for Large Wind Turbines installed per 1,000 Danish citizens. Vesterhav North Rønland 180 MW 17 MW 2021 2003 Generator Anholt In 2016, an average kWh in Denmark consisted of 51% Høvsøre National Test Centre 400 MW wind, hydro and solar power, 24% coal, 14% waste, for Large Wind Turbines 2013 biomass and biogas, 8% natural gas, 2% nuclear Nørhede-Hjortmose power and 0% oil. 72.6 MW Hogager 2014 46.2 MW 2017 United Kingdom Global Lightning Tunø Knob Import capacity 1,300 MW Every now and then, the Danish wind turbines produce Protection Services 5 MW Export capacity 1,700 MW more than what the Danish market can consume. On 17 Lem Kær 1995 April 2016, the wind share in the Danish electricity grid Tower Vesterhav 34 MW South 2012 was 103.6% and the surplus was exported to Sweden, 170 MW DELTA 2021 DHI Norway and Germany through the interconnected grid Horns Rev 3 Samsø Middelgrunden 400 MW House of Green between the countries. 23 MW 40 MW 2019 Force Technology 2003 2000 Danish Technological In its lifespan of 25 years, a wind turbine can produce Horns Sprogø Avedøre Holme Rev 1 LORC 21 MW Institute 11 MW up to 40 times the amount of energy that went into Horns 160 MW Lindoe Offshore 2009 2009/2010 constructing it. Rev 2 2002 Renewables 209 MW Center 2009 Import capacity 600 MW Export capacity 600 MW Security of supply is very high in Denmark and the Danes have electricity in the socket 99.997% of the time. Smålandsfarvandet Netherlands 200 MW Import capacity 700 MW Export capacity 700 MW Kriegers Flak 600 MW 2021 Nysted Rødsand II Import capacity 1,635 MW 165 MW 207 MW Export capacity 1,915 MW 2003 2010 Landing platform Transition Import capacity 400 MW piece Export capacity 400 MW Germany Import capacity 600 MW Export capacity 600 MW Different types of foundations:

Selected onshore Wind penetration Name of wind farm Cable connections (Current) Test facility wind farm by municipality Capacity in MW Year of commissioning Offshore wind farm 0 - 9.9 MW (Commissioned) Cable connections (Proposed) Place of Interest Foundation 10 - 49.9 MW Under construction Under construction 50 - 99.9 MW 100 - 199.9 MW 200 - 600 MW

Monopile Tripod Jacket Gravity Suction Jacket Onshore bucket suction The total Danish capacity onshore equals 3,978 MW The total Danish capacity offshore equals 1,266 MW bucket 20 21

5. TESTING THE TURBINES OF TOMORROW Test and demonstration facilities in Denmark ensure world-leading innovation

Test facilities are key to maintaining a strong wind industry. In Denmark, companies have access to a range of world-class test facilities, securing a unique setup which allows the industry to set new international standards and push the limits for the modern wind turbine. By Jan Hylleberg, CEO, Danish Wind Industry Association

The pursuit for new innovations is a never- are installed. Østerild is currently the only present at Østerild along with GE-Alstom ending quest across the Danish wind place in the world where measurements on and alongside the Danish manufacturers industry. To test the feasibility of ideas and turbines of up to 250 metres in height can Siemens Wind Power, Vestas Wind Systems the durability of new solutions, companies be made. Further south, on the island of and MHI Vestas Offshore Wind. go through exhaustive testing. The aim is Funen, wind turbine manufacturers can test to come up with a solution, which is better nacelles simulating a full lifetime of operat- Research institutions contribute than the previous, while at the same time ing in shifting and rough conditions at LORC Danish technical universities have a longer lowering the production costs and ensuring (Lindoe Offshore Renewables Center). track record of working in wind energy re- consumers a competitive price on electri­ search than those of most other countries. city produced from wind turbines whether In the late 1970s, when an emerging indus- they are installed onshore or offshore. By try started producing, a test facility for wind LCOE is defined as the testing each component in the wind turbine turbines was established at Risoe National production cost of each unit of vigorously and by testing prototype wind Laboratory (now DTU Wind Energy). electricity generated over the turbines in part and in full scale, potential lifetime of a wind farm, taking design or production errors can be identified The Danish government assigned Risoe to into account a wind farm’s and corrected before the final product is approve turbine prototypes designs before development costs, capital delivered to the customer. they could be sold to the Danish market. This investments, financial costs, was an early example of close cooperation and lifetime running costs. Identifying and eliminating design and between the universities and the industry production errors in the early testing phases on testing and improving designs and re- is much cheaper than having to correct search programs. The universities and the them after the turbines have been Test facilities and knowledge industry continue to cooperate today, each mass-produced and installed in markets attracts international players benefitting from the other’s competences across the world. Thus, having access to the The extensive knowledge about wind and resources. The Danish research environ- right test facilities help reduce the levelised energy has attracted a number of influential ment has expanded in parallel with the wind cost of energy (LCOE) for wind. players from the international wind indu­ industry. Although strong research environ- stry to Denmark. Among them are Chinese ments are developing in other countries, A visual testament to the Danish wind indu­ manufacturers such as Envision Energy and Danish research institutions remain among stry’s abilities can be found in the rural area Goldwind who have both opened R&D di- the best in the world. of Østerild where seven large test turbines visions in Denmark. Envision Energy is also

FIVE IMPORTANT ELEMENTS IN A STRONG TESTING ENVIRONMENT • State-of-the-art test facilities, both privately and publicly funded • World-leading wind energy research institutions • Access to highly educated wind energy personnel • A large group of experienced R&D professionals in the industry • Short distance between test sites and companies’ R&D divisions

Photo: MHI Vestas Offshore Wind 22 23

Photo: Siemens Wind Power Photo: LORC

Test scheme in Nissum Bredning and financial capacity to ensure a potential for development and the The global wind market players continuously seek opportunities to commercial perspective of the test elements, the aid was granted to Exposed to the extremes of nature when exposed to the extremes of nature in a controlled test environ- develop offshore test projects which potentially reduce production I/S Nissum Bredning Vind for their 28 MW test project in February The employees at LORC are experts in matching broad knowledge ment. Equipped with a 13 MW direct drive motor providing in excess costs of electricity from offshore wind farms and keep offshore wind 2016. The project’s main test elements are a Siemens Wind Power 7 of offshore wind with deep knowledge of how to get the most out of 12 MNm of torque allows testing of nacelles in the 10 MW regime energy cost competitive. In July 2015, the Danish Energy Agency MW wind turbine, a new Siemens Wind Power designed concept of of LORC’s full-scale test facilities at Lindø. At LORC, the customers on the Function Test Facility at LORC. Additionally, other full-scale published a call for applications for tests of new technologies to gravity jacket foundation and concrete transition piece, a slender are the experts on their own assets. Partners and outside experts test facilities can perform Highly Accelerated Life-Time Test (HALT) establish and operate wind energy production offshore. Turbines in tower concept, 66 kV cables and a switchgear solution. are brought in with different focus areas to supplement the test or Climatic Testing, where the harsh environment offshore can be the test scheme receive a Contract For Differences of approx. EUR scenario. simulated by means of temperature, humidity and salt spray. 0.09/kWh (DKK 0.7/kWh) for approx. 11 years and then market price Nissum Bredning Vind I/S, Jysk Energi A.m.b.a., The Function Test Facility is used to verify the performance and ro- until decommissioning. Based on minimum criteria, such as technical Siemens Wind Power A/S bustness of the nacelles’ electrical systems as well as grid compliance LORC

Østerild – where the sky is the limit with the wind turbine manufacturers, the Technical University of Giant wind turbine blade captures more energy from the wind and roughest seas. One wind turbine with 88.4 metres blades can The largest turbines are designed for a life offshore. However, testing Denmark (DTU) is leading the research at Østerild. At the same time, Offshore wind energy is envisioned to play a significant role in the generate enough electricity to power 10,000 European homes. of offshore turbines often has to take place onshore, and there is no DTU shares the story of wind energy with the 50,000 visitors that delivery of clean, renewable energy in the future and the cost is better place to do this than somewhere with relentless and rough make their way to the impressive test centre each year. In the coming constantly reduced. Offshore wind projects coming online today Facts winds. The world’s largest test centre for large wind turbines is years, the test centre will be expanded in order to be able to test are already delivering power at almost half the price of those fin- • Length: 88.4 metres located in Østerild, Denmark. The test centre has room for seven tur- even taller wind turbines before they are installed offshore. ished in 2012 due to increased competition and larger turbines and • Weight: 34 tons bines with a maximum height of 250 metres and a capacity of 16 MW. components. A good example of that is the 88.4 metre blade for • Tip speed: 300 km/h Today, the rural area is home to prototype wind turbines from wind Technical University of Denmark - DTU offshore application, introduced by LM Wind Power in June 2016. • Manufactured by LM Wind Power in Lunderskov, turbine manufacturers from around the world. In close collaboration The giant blade is based on a newly developed carbon-glass hybrid Denmark in June 2016 technology and has been designed, manufactured and tested to last for 25 years of life offshore, in the harshest weather conditions LM Wind Power

Photo: Technical University of Denmark - DTU Photo: LM Wind Power 24 25

are enery eny n a an er 6. BUILDING A GREEN FUTURE Wind energy means jobs, growth and exports

The green agenda is a growth agenda. It provides jobs, growth and exports in the wind industry, local jobs in installation, service and maintenance, and it provides a clean and modern energy supply for a competitive economy.

By Troels Ranis, Director, Danish Energy Industries Federation

Wind power is clean energy from an abun- employment of the country. The wind indu­ vision shared by government and the energy dant natural resource. The benefits of wind stry provides jobs at all levels of qualification industry is to double Danish export of energy from an environmental and climate and most jobs are located outside the capital energy technologies to EUR 19 billion (DKK point of view are well documented. area. In fact, 80% of the wind industry’s jobs 140 billion) by 2030. are placed in the western, predominantly Furthermore, as the technology matures rural, part of Denmark. “Wind energy creates jobs and growth O and is scaled up, and the energy systems and in the wind industry and local jobs in markets integrate still more wind energy, Installation of wind energy creates jobs in building, operation and maintenance the price of wind energy is coming down and the installation phase as well as long-term of wind parks. Further, wind energy Note: Export figures excluding oil rigs Source: Danish Energy Technology Exports 2016 by Danish Energy Industries Federation, Danish Energy Association and the Danish Energy Agency it delivers a valuable contribution to a secure jobs within operation and maintenance. The is part of a modern, diversified and and stable energy system. installation of 100 MW offshore wind ca- resilient energy system utilising pacity creates 1,800 jobs in the installation local, renewable energy resources Green technology as driver for exports export value of green technology has grown by 44% since 2010. Thereby, wind energy is an integrated part phase. and contributing to growth and In 2016, Denmark’s exports of energy technology amounted to over Wind technology constitutes an important part of this figure and of a competitive business environment, at- competitiveness in society at large.” EUR 10 billion (DKK 74.3 billion), corresponding to 11.8% of the this testifies that Denmark is indeed highly specialised in exports of tracting investment and engagement from It’s green and it’s good business country’s total exports of goods. This is the highest share of energy modern and green energy technology and that the green transition global companies in search of reliable, green In 2015, exports of wind technology Troels Ranis, Director, technology exports among EU15 countries where the average share is indeed a growth agenda for Denmark. energy at competitive prices. accounted for more than EUR 4.4 billion Danish Energy Industries Federation of energy technology in total exports of goods is 7.1%. (DKK 33 billion), equivalent to 5% of total Analysing Danish export figures further shows that green techno­ Confederation of Danish Industries Wind as a source of employment Danish exports of goods. Overall, the expansion of wind energy leads logies accounted for 57% of energy exports in 2016 and that the As wind energy has grown big in Denmark, to job creation in the industry and related Europe and beyond, so has the wind indu­ According to the Danish Energy Industries sectors. The installation of wind projects stry. Today, the wind industry is a strong Federation, total energy technology exports leads to significant local employment in contributor to jobs, growth, exports and in 2016 accounted for 11.8% of total Danish the installation phase as well as jobs in Wind farms create many local jobs Djurs Wind Power (DWP) was established to underpin this local an- wealth. According to WindEurope, the Euro- exports of goods. This is the highest share operation and maintenance in the whole life Experience from the numerous wind farms built over the years shows chorage in Grenaa and it is currently affiliated with 32 companies pean industry employs over 300,000 people among EU countries and it proves that span of the project. Many such jobs exist in that they create many local jobs, even if the turbines themselves are employing a total of 1,200 people. These companies are system and accounts for a EUR 72 billion (DKK 535 Denmark is highly competent and special- Denmark due to the large wind industry and produced elsewhere. suppliers that offer an all-encompassing array of services ranging billion) annual turnover. ised in exports of energy solutions including vast installation of wind generation capacity The 400 MW Anholt Offshore Wind Farm created 8,000 temporary from know-how, in the areas of planning, production, assembly and wind technology. throughout the country. International expe- jobs, of which 1,400 were for skilled/unskilled workers. Many of installation, to operations and maintenance. DWP has set up a point According to the Danish Wind Industry rience shows that wind projects lead to local these jobs were linked with the town of Grenaa, from which mate­ of contact for the 32 companies, which offer a variety of solutions Association, the wind industry employs Danish export of energy technologies has job creation and growth – both in the instal- rials for foundations, for example, were shipped. Many of the workers and services, thus strengthening the local network and creating more than 31,000 in Denmark today, cor- grown at a strong pace in recent years with lation phase and permanently. involved in erecting the turbines lived in or near Grenaa. Following more jobs. responding to 2% of the private sector wind technology as an important driver. The completion, the wind farm created 70-100 permanent jobs for operational and maintenance workers. 3F - United Federation of Danish Workers

Construction of the Burbo Bank Extension offshore wind farm

Photo: MHI Vestas Offshore Wind Photo: DONG Energy 26 27

Winning bids for Danish o shore wind energy projects

140 Anholt: 400 MW (2010) 120 7. SETTING THE STANDARD 100 80 Horns Rev 3: 400 MW (2015) FOR TENDER PROCESSES 60 EUR / MWh 40 Negotiating procedures is part of the Danish offshore tender model Kriegers Flak: 600 MW (2016) 20 0 As part of the Danish Energy Agreement from 2012, two large-scale offshore wind farms will be commissioned before the Anholt (2010) Horns Rev 3 (2015) Kriegers Flak (2016) end of 2021. The 400 MW Horns Rev 3 and the 600 MW Kriegers Flak projects will therefore become part of the Danish transition to a green energy supply. O shore project (year of contract awarding) By Martin Hansen, Deputy General Director, Danish Energy Agency Danish o shore wind tender prices The Danish tender process for the extraction of raw materials and the about the market challenges faced by inves- offshore wind farms fishery and marine archaeology. The dia- tors. This means that potential mistakes can In Denmark, the tendering model for off- logue reduces the risk of any conflicts of be corrected in the initial phase of a tender- shore wind farms is a negotiated procedure, interest for the selected areas. ing process and before the publication of a which includes both prequalification and a contract notice and contract documents. All Source: Danish Energy Agency preliminary technical dialogue with poten- The upfront dialogue with the comments and suggestions for changes to tial tenderers and investors. The tendering potential tenderers and investors the process are published anonymously in procedures for the offshore wind farm pro- The establishment of an offshore wind farm order to help establish and determine the Historically low bid for offshore wind farm contributed to the success of the low-priced winning bid. The last jects Horns Rev 3 and Kriegers Flak were is a complex investment project. Ongoing framework conditions, which are included in In November 2016, Vattenfall won the tender to build Kriegers Flak, years have seen a seen a significant cost decrease in the offshore initiated simultaneously, but the procedures technical developments and changes in the final contract documents. which at 600 MW will become Denmark’s largest offshore wind farm. wind energy technologies and this has drastically lowered the tender were finalised in Spring 2015 and Fall 2016, the economy puts great demands on the The tender price of EUR 49.9/MWh (DKK 372/MWh) also makes prices from EUR 141/MWh (DKK 1,048/MWh) in the Anholt tender in respectively. In both cases, the Danish design of the framework conditions in the The awarding criteria Kriegers Flak the cheapest offshore wind project to date. The low 2010 to Kriegers Flak EUR 49.9/MWh (DKK 372/MWh) in 2016. By Energy Agency (DEA) was the contracting tender documents. In order to ensure that The Danish Energy Agency coordinates price reflects a more mature market for offshore wind energy, with 2021, Kriegers Flak will generate electricity corresponding to the authority. potential tenderers can offer their views on and grants all the necessary permits and an increasing number of players entering the market, enhancing annual consumption of more than 600,000 households – equivalent these framework conditions and contribute licenses needed in the commissioning of competition. Furthermore, flexibility and a simple, proven process to 23% of all households in Denmark. Screening of potential wind farm sites to make these attractive and flexible for the offshore wind farms. This coordination in the tender procedure handled by the Danish Energy Agency Vattenfall Vindkraft In the selection of suitable areas for wind the market, the DEA conducts a technical from one single authority is the so-called farms as well in the preparation of tender dialogue. This means that the DEA asks the one-stop-shop concept. The only awarding documents, the DEA is in continuous dia­ market specific questions based on selected criteria in the tendering of a Danish offshore Government-to-government agreements and deployment, energy efficiency interventions and climate change logue with other relevant authorities re- themes, and simultaneously, that the DEA wind farm project is the price (DKK/kWh) The Danish Energy Agency (DEA) cooperates with the governments mitigation. DEA actively promotes public-private cooperation based garding subjects of common interest sur- invites potential tenderers to volunteer for the first 50,000 full-load hours, which of several emerging countries in order to contribute to their reduction upon experiences in the development of the Danish energy model rounding any project. These include the grid their supplementary ideas and suggestions. roughly corresponds to a subsidy period of of carbon emissions and to assist in their energy transition towards in close corporation with the private sector. A tangible example of connection, the national defence aspect, 11-12 years. For the rest of the estimated low-carbon economies. These partnership programmes include, DEA bilateral cooperation is the close cooperation with key Chinese the navy and commercial shipping traffic, In order to further reduce the risk for all 25-year lifetime of an offshore wind farm, among others, China, Mexico, South Africa and India. The potential stakeholders to improve the integration of large amounts of wind- the protection of the natural environment, parties involved, the DEA seeks information electricity is sold at market price. impact of a green energy transition is as large as 3 billion energy con- generated electricity to the grid. sumers, encompassing more than 50% of the global greenhouse gas emissions. National Energy Administration (NEA), The cooperation is primarily focused on policy improvements in long- China National Renewable Energy Centre (CNREC), ONE-STOP-SHOP CONSENT PROCEDURE term energy planning and modelling, renewable energy integration Energinet.dk, Ea Energy Analyses

Political decision Construction consent with conditions

Technical dialogue One-stop-shop with developers for permits

Submission of bids + Pre-quali cation selection of winner

Environmental Impact Assessment Source: Danish Energy Agency

The Danish Energy Agency as a one-stop-shop concept works as a single point of access on issues related to main Offshore wind farms require thorough and well-considered planning, permits, where the DEA will grant the required permits and coordi- which takes into account a multitude of interests related to e.g. the nate with relevant authorities. This way, the one-stop-shop concept natural environment, safety at sea, offshore resource extraction, handles the largest administrative issues and interests related to visual interests and grid transmission conditions. In Denmark, a the construction of offshore wind farms. The concept thus ensures number of different permits are required to establish an offshore a smooth process for project developers, and the DEA can contribute wind farm, and these permits are granted by several different autho­ to a better understanding of these projects at the offices of other rities. To make it easier and faster for project developers who have authorities. been awarded contracts to establish offshore wind farms, the Danish Danish Energy Agency Energy Agency (DEA) has developed a one-stop-shop concept. The

Source: Danish Energy Agency 28 29

8. BLENDED FINANCE CAN MOBILISE PRIVATE CAPITAL FLOWS TO EMERGING AND FRONTIER MARKETS Investing in renewable energy in high-risk markets is possible through public-private financing models – e.g. blended finance

Photo: Prøvestenen Vindmøllelaug

Investing in 365 wind turbines in Kenya to contribute to reduce the country’s dependence on import of fossil fuels could seem too ambitious and too high-risk for a Danish institutional investor like PensionDanmark. The investment is only Wind turbine cooperatives – citizens as co-owners farms to local citizens. The ownership is usually offered as shares of possible through blended finance models. With the commissioning of a new onshore wind project in Copen­ approx. 1,000 kWh in annual production. The purpose of this provi- By Torben Möger Pedersen, CEO, PensionDanmark hagen in 2014, the wind turbine cooperative Prøvestenens Vind­ sion is to promote local acceptance from neighbours to wind farms møllelaug was formed. The project consists of three 2 MW turbines of through co-ownership and in the case of Prøvestenens Vindmølle- Pure private investments would be com- Export Credit Agency, has simultaneously economies bankable. The con­cept has three which one is owned by private citizens through the cooperative and laug, the cooperative consists of 4,055 shares owned by 516 share- pletely unfeasible due to high risk and lack provided approx. EUR 135 million (DKK 1 key characteristics: two are owned by the Danish utility company HOFOR. holders. Each year, the board of the cooperative is elected at the of country-specific knowledge. However, billion) in loan guarantees. EKF’s guarantee HOFOR developed and initially financed the project and then offered annual general meeting and the cooperative idea is that one share blended finance models have made these relieves the funding providers of risk, • Leverage: Use of development finance 33% the shares to locals in a preferential option to purchase. Wind equals one vote. investments possible through the Danish thus enabling the institutional investors’ and philanthropic funds to turbine cooperatives have existed in Denmark for decades. Accord- Climate Investment Fund (KIF). KIF offers participation. attract private capital into deals ing to the Danish Act on Renewable Energy it is mandatory to offer HOFOR, Prøvestenens Vindmøllelaug risk capital and advice for climate invest- • Impact: Investments that drive social, at least 20% of the ownership in new onshore and near shore wind ments in developing countries and emerg- The fund is managed by IFU, which, since its environmental and economic progress ing markets in Asia, Africa, Latin America inception 50 years ago, has participated in • Returns: Financial returns for private and parts of Europe. KIF has made its first 1,200 investments in more than 100 coun- investors in line with the market rate, Making offshore wind attractive to investors wind project Beatrice is a good example of how and why the industri- big investment of EUR 11.6 million (DKK tries in cooperation with Danish trade and based on real and perceived risks For institutional investors, investment in offshore wind is attractive al approach works. The two stakeholders of Beatrice, the UK energy 87 million) in a wind farm at Lake Turkana, industry. Therefore, KIF and IFU can offer because of long investment periods, stable returns and a strong cash company SSE and the Chinese investor SDIC, developed the project Kenya. The wind power project will be the strong financial experience, substantial Blended finance can foster private finan­ flow. Offshore wind can serve as a substitute to certain bond types. from 2009 and CIP entered the project with a 35% share at the last largest wind park in Sub-Saharan Africa, and knowledge about local business conditions cing for environmentally friendly projects However, the institutional investors’ lack of experience with these stage of the development. This was late enough for the development the 310 MW wind farm will produce around and a broad international network. enabling the diffusion of climate-friendly projects has given ground to the formation of specialised infrastruc- risks to be significantly reduced, yet early enough to allow CIP to par- 20% of Kenya’s current installed electricity technology throughout the economy. At ture funds such as Copenhagen Infrastructure Partners (CIP), who, ticipate in the optimisation of risk allocation. generating capacity at a very cost-efficient Investments through the Danish Climate the same time, blended finance can initiate unlike most other infrastructure funds, have a long investment price and will replace fuel imports of approx. Investment Fund, where public and capital projects, which under normal circumstances period (20 years). The CIP investment in the 588 MW UK offshore Copenhagen Infrastructure Partners EUR 120 million (DKK 900 million) annually. works together, promises to deliver attrac- would involve too high a degree of risk for tive returns to the institutional investors private investors, and make them bankable Fund managed by IFU and benefits Danish companies by placing and financially sustainable. Especially the The commitments to KIF are split between orders in Denmark. The Danish company ability to reduce political and regulatory the Danish government, IFU - Denmark’s Vestas is supplying the 365 wind turbines at risks through the use of blended finance Investment Fund for Developing Countries Lake Turkana. models is central to what makes the model – and the institutional investors PKA, PBU relevant. KIF is expected to ensure induced and PensionDanmark. PensionDanmark has Blended finance investments of approx. EUR 1-1.2 billion committed EUR 27 million (DKK 200 million) In short, blended finance can make this type (DKK 7-9 billion) due to the fund investing to investments through KIF. EKF, Denmark’s of investments in emerging and frontier with local investors in the projects.

Blended Finance:

OECD defines blended finance as the strategic use of development finance and philanthropic funds to mobilise private capital flows to emerging and frontier markets. Blended finance deliberately channels private investment to sectors of high-development impact while at the same time delivering attractive risk-adjusted returns. The Danish Climate Investment Fund is one example. Others include The IFC-Canada Climate Change Program, Global Environment Facility and The Danish Agribusiness Fund.

Photo: Copenhagen Infrastructure Partners 30 31

9. PUSHING THE BAR FOR WIND ENERGY New innovations and large ambitions take wind energy to the next level

Since the 1970s, the wind energy sector has transformed itself from an infant industry to a commercial success with a proven product. Yet research, test and demonstration ensure a constant push for higher ambitions and innovation. As a result, the Danish companies maintain a strong focus on product development and continue to explore, green solutions to meet the global demand for renewable energy sources.

Photo: MHI Vestas Offshore Wind

The world’s most powerful turbine add value to projects and save on Capital Expenditure (CAPEX) costs, With an aim to drive down the cost of offshore wind while increas- as fewer turbines are needed to meet park capacity. ing the energy output per turbine, MHI Vestas Offshore Wind has In April 2016, the first two commercial 8 MW turbines were com- brought its V164-8.0 MW to market. The nacelle is 20 metres long, missioned in an onshore project at Maade in Denmark. The 258 MW 8 metres wide and 8 metres high. Each blade is 80 metres long and Burbo Bank Extension offshore project in Northwest England, devel- weighs more than 35 tonnes. The prototype, located at the Østerild oped by the Danish utility company DONG Energy, is the world’s first National Test Centre for Large Wind Turbines, broke the energy gen- offshore wind park (32 turbines) to fully comprise the record break- eration record for a commercially available offshore wind turbine in ing 8 MW platform. December 2016 by producing 216,000 kWh over a 24-hour period. MHI Vestas has now uprated the 8 MW wind turbine, enabling it to MHI Vestas Offshore Wind reach 9 MW at specific site conditions. The increased production will

Challenging the known wind concepts aim is to lower the levelised cost of energy (LCOE) of wind as well as In cooperation with the Technical University of Denmark, Vestas has address transport and installation challenges in some markets. Many installed a concept demonstrator turbine to test the technical feasi- new load and control features will need to be developed, tested, and bility to operate and control a multi-rotor turbine. The test turbine proven to assess the technical and eventually the commercial feasi­ has four refurbished 225 kW nacelles instead of one with a total of bility of the concept, and first after successful demonstration will 12 blades. In July 2016, the turbine produced its first kWh and this Vestas know more about the possible use of the technologies. was an important step in the monitoring and testing phase. With the test turbine, Vestas is challenging the scaling rules, which imply that Vestas Wind Systems turbines have to grow in size to increase their energy output. The

Illustration: DONG Energy

Hornsea Project One high voltage AC electrical system. The system will take the clean With a capacity of 1.2 GW, Hornsea Project One will be the world’s electricity produced by the wind turbines, transmit it to shore and first offshore wind farm to exceed 1 GW in capacity and become – by then feed it into the national grid. This system includes more than a considerable margin – the world’s largest ever offshore wind farm. 900 kilometres of cables. It will be capable of powering well over 1 million UK homes when op- Hornsea Project One will mark yet another milestone for offshore erational in 2020. Hornsea Project One is located 120 kilometres off wind as a utility-scale, domestic source of renewable energy. And im- the Yorkshire coast and the project will span a total area of approx. portantly, offshore wind can bring economic revitalisation to coastal 407 km2. The project will use 7 MW wind turbines each with a height areas and create thousands of jobs in construction, manufacturing of 190 metres – larger than the Gherkin building in London. As part and operations. of the project, DONG Energy will construct the longest ever offshore DONG Energy

Photo: Vestas Wind Systems

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