CEPOS released in September 2009 a report on the use of windmills in Denmark [PDF]. This paper is a good source for web-available references on Danish wind power. Among the conclusions is that Denmark’s highly subsidized (thus expensive) wind electricity is only partly consumed by Denmark. A large portion is exported at low prices to neighboring countries (Norway, Sweden, Germany). That wind power generates about 20% of it’s annual electric consumption is misleading, because that is only possible because Norway (99% hydro) and Sweden (40% hydro, 45% nuclear) serve as Denmark’s “battery storage”. I.e., when Denmark has an excess of wind power, their much larger Nordic neighbors can throttle back domestic production in order to absorb the under-priced Danish power. On average Denmark consumes roughly half of the wind-generated power.
As with most other studies I’ve read on the real-world costs of wind and solar, this has been a very costly way to purchase lower carbon emissions (estimated at US$ 124 per ton CO2 avoided), especially for the Danish consumer/taxpayer.
Each MWh of power generated from wind turbines that gets exported, carries away the subsidy that caused it to be generated. The price obtained for this by the Danish generators is, on average, the spot price. Any difference between the real cost of generating and its sale on the spot market is not a material consideration for the wind generators who are compensated retroactively when the spot price is low.
But for the Danish householder who is paying the subsidy in order to save imported fuel and CO2 emissions, the subsidy so exported brings no direct benefit at all. The total probable value of exported subsidies between 2000 and 2008, was DKK 6.8 billion (€ 916 million) during this period.
Keep in mind that the costly impact of the subsidized exports would be mostly eliminated if Denmark limited the proportion of wind/solar to a much smaller (like 5%) proportion of total generation.
Related to the study I found a short video interview with Martin Agerup of CEPOS and Hugh Sharman. The video is a quick introduction to the study.
I don’t know either of the authors — here’s what I found on their backgrounds:
Hugh Sharman graduated in Civil Engineering from Imperial College, London in 1962. He worked with the design and construction of off-shore structures including oil platforms, and later with the marketing and sale construction of power stations in the Caribbean. In 1986 he founded Incoteco, which has specialized in innovative conventional and renewable energy technology and infrastructure projects. Hugh Sharman and Incoteco have been involved in large projects with multinational clients all over the globe.
Henrik Meyer is Master of Economics from Copenhagen University. He has been working with environmental and development economics for twenty years, including externalities, growth and climate issues. He has been employed at: Copenhagen University, Risø/Denmarks Technical University, and the Danish Environmental Assessment Institute. From 2003 he has been responsible for the day-to-day management of Copenhagen Consensus; from 2006 as Deputy Director at Copenhagen Consensus Center (presently on leave).
CEPOS is a Danish think tank, whose website, naturally enough, is in Danish. There is an english version, but it is not kept up to date, nor complete. Even with some investment in Google Translate I still do not have clear picture of the political ’tilt’ of CEPOS, if any. It is worth nothing that this study was funded by the Institute for Energy Research (IER), an American think tank that receives funding from hydrocarbon-based industries.
To date, I’ve not found anything objectionable in the IER papers I’ve seen. They keep a useful “watchdog” focus on operating subsidies such as have been lavished upon wind and solar.
So, be skeptical of the facts presented by CEPOS, but please do not discount those facts simply because the study was funded by parties that do not profit from more wind power.
Next, please read Tom Blees Danish fairy tales – what can we learn? Excerpt:
The latter two nations [Norway, Sweden] have acted for years as Denmark’s energy balancers, allowing the Danes to utilize the erratic power of wind and still keep their grid balanced because Norwegian and Swedish hydropower stations are able to load follow the Danish grid. When electicity is pouring over the interconnector from Denmark, its partner/neighbors can refrain from letting so much water through their turbines, so in a way their reservoirs can be seen as Danish storage batteries. But later on, when the wind isn’t howling, Denmark either has to generate their electricity with coal or else buy it from their neighbors at substantially high prices. But what’s worse than buying high and selling at zero?
“In October 2009, Nordpool, the electricity trading system used in the whole Nordic area, is introducing a negative price for power. The floor price that traders will have to observe, presently zero, will be extended downwards to minus €200 per MWh. This will apply in particular to Denmark and more particularly, because of its high wind capacity, the West Denmark price area. In effect, “the market” will be penalizing other generators for excess wind power in the market.”
So while Barack Obama’s 20% number is nearly true in some sense, the reality is that wind has been supplying less than 10% of Denmark’s electricity on average over the last five years, and as little as 5% in the poor years. This despite a crippling level of subsidies that saddle Danish citizens with the highest electricity rates in the EU.
The benefits of freer trade were estimated in a paper presented by Professors Kym Anderson and Alan Winters. They found that a successful Doha Round could generate up to $113 trillion in new wealth during the 21st century, at a cost of $420 billion or less from inefficient industries going bust. If you like ratios, that’s a return of $269 for every $1 of cost. A less conservative projection puts the gains three times higher. More than 80% of this global windfall would go to the world’s poorest countries.
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