Denmark has been an early leader in decarbonisation and is inspiring many countries around the world. The technological transformation of Denmark’s energy system is fast and visible, notably in electricity with offshore wind, biomethane, district heating, and carbon capture and storage (CCS) development.

Denmark has the highest share of wind electricity (54%) in the IEA, which together with bioenergy and solar photovoltaic (PV) make up 81% of the power mix. The district heating sector has practically phased out coal, helping lower the reliance on fossil fuels in Denmark’s total energy supply (TES) from 75% in 2011 to 53% in 2022, well below the IEA average of 79%.

Denmark is committed to ending fossil fuel production by 2050. Reaching 100% biomethane in heating before 2030 has become a key priority since Russia started the invasion of Ukraine.

The Danish society is fully engaged in the energy transition through broad political agreements on energy and climate, which guide policy making and public-private partnerships. Denmark has a robust energy and climate governance under the Ministry of Climate, Energy and Utilities and “the year wheel” of the Climate Act of 2020 to ensure annual policy actions and funding are geared towards emissions reductions. Under the Act, Denmark also publishes every year a global climate impact report, analysing the climate and carbon footprint of its consumption.

Since the IEA’s last review in 2017, Denmark has considerably stepped up its energy and climate targets. Under the 2020 Climate Act, the government is legally bound to reduce greenhouse gas (GHG) emissions by 50-54% in 2025 and by 70% towards 2030 from 1990 levels.

In 2022, the new coalition government proposed to bring forward the climate neutrality target to 2045 and target a 110% emissions reduction by 2050. The goals have not yet been adopted in the Climate Act, but the Act is expected to be revised.

Reducing GHG emissions by 70% by 2030 requires achieving in only seven years what was achieved over the past 30 years. In 2023, the Danish Energy Agency’s (DEA) Climate Status Outlook warns of a gap towards the 2030 targets based on existing measures and policies. Additional measures will be needed to reach the targets, notably in transport, agriculture and industry. The government is pursuing a green tax reform in these sectors and aims to phase in a carbon tax from 2025 onwards. This is critical given the fact that in 2021, only around 45% of Denmark’s emissions were covered by an effective carbon rate (by either carbon or fuel tax), according to the OECD Effective Carbon Rates analysis.

Thanks to the integration with Nordic and European continental power systems, Denmark is well placed to advance the decarbonisation of its economy and become a major exporter. Denmark’s deployment targets are impressive: by 2030, onshore wind and solar power generation are to quadruple. Offshore wind capacity is targeted to increase potentially sevenfold to 18 gigawatts (GW) by 2030 and 35 GW by 2050, from today’s 2.3 GW. Under the Power-to-X (PtX) Strategy of 2021, Denmark is targeting 4-6 GW of electrolysis capacity by 2030.

Moreover, at a regional level, Denmark supports the deployment of 20 GW in the Baltic Sea for 2030 and together with eight European countries in the North Sea has signed up to the joint pledge of 120 GW of offshore wind capacity by 2030 and at least 300 GW by 2050.

Denmark is a regional hub for shipping and aviation and together with the industrial clusters in the North Sea region, a centre of demand for low-emission hydrogen, e-fuels as well as carbon capture, utilisation and storage (CCUS). Within a record time of three years, Denmark has created framework conditions and rules for CCS, completed a first CCS tender and allocated a first CO₂ storage licence. The PtX Taskforce is supporting the roll-out of the hydrogen and low-emission fuels strategy with more than 30 PtX projects and actions underway.

For industry to go ahead with the business and export opportunities at a fast pace, the government needs to support the framework conditions and lower investment risks for industry for infrastructure roll-out for grids, CO₂ and hydrogen by evaluating supply chain risks, supporting bilateral agreements and the development of European Union (EU) rules. These rules include the Carbon Border Adjustment Mechanism, the certification of hydrogen and a framework for CO₂ transportation and storage, and EU rules for negative emissions.

With such ambitious projects, system integration challenges may increase in the Danish system, depending on the renewable expansion in the region. The creation of a regional green infrastructure master plan is critical for business to make investments, allowing for demand and supply areas and future trade connections to be identified. Denmark has decided that the state-owned transmission system operator Energinet and gas distribution company Evida will own and operate the future hydrogen pipeline infrastructure. Progress is underway with bilateral agreements. Denmark and Germany will build a hydrogen pipeline by 2028 and agreed to co-operate on wind offshore and CCUS collaboration projects at the Ostend Summit in May 2023.

The export orientation of Denmark’s clean energy technology development should be incorporated in the coming years into the country’s global climate diplomacy to form industrial net zero partnerships with partners across the globe.

The government’s policy imperatives are to ensure the targets are implemented in the most cost-effective and socially balanced manner while avoiding carbon leakage, as enshrined in the Climate Act’s principles. This will require improved tracking, readability and visibility of the targets, which are set out across a wide range of agreements, and an implementation partnership with municipalities and businesses.

Changes in the support scheme, the introduction of locational grid charges, the slow pace of grid investment as well as onshore permitting barriers have impacted onshore renewable investment in the past few years. The IEA expects the expansion to pick up again in 2024 and 2025 thanks to accelerated deployment of solar PV. DEA is forecasting a 117% share of variable renewables in electricity by 2030. The IEA expects Denmark’s total renewable electricity capacity to almost double over the 2022-2027 period thanks to offshore wind additions in 2023-2024 at Vesterhav Sud and Nord and Thor (1 GW by 2027-2028). Taking into account the Bornholm Energy Island and additions from solar PV, growth could be even higher.

While Denmark has a world-class permitting system in place for offshore wind, no such support exists onshore. For the decarbonisation of heat, municipal planning is in place but a greater degree for co-ordination is required to phase out old oil and gas boilers in the coming years. National screening of areas suited for onshore wind turbines, solar PV and PtX are proposed to achieve the goal of quadrupling onshore renewable energy by 2030. The government wants to support and accelerate the municipalities’ planning process by establishing energy parks. To do so effectively, it could review Europe’s best practices for permitting, including one-stop shop registrations onshore for renewables, with digitalisation and designated areas as well as overriding public interest obligations.

The National Energy Crisis Team (NEKST) could become an important co-ordination body across all levels of government to identify barriers, enable an energy system approach, prepare reforms and speed up the implementation of critical measures to achieve the
near-term targets for 2025 and 2030. Launched in 2022, the NEKST initiative would be effective with a clear mandate and terms of reference and a timetable for delivering the recommendations. NEKST could be tasked with the national co-ordination of an accelerated roll-out of renewable energy and co-ordinated actions across local actors.

To reduce the impact of the associated structural change in its regions, the government aims to locate energy projects in affected regions. As part of Denmark’s decision to phase out oil and gas production in the North Sea, the government adopted an aid package to ensure local jobs for the existing skillset of oil and gas workers through CCUS and electrification projects.

At a global level, Prime Minister Mette Frederiksen headed the IEA high-level Global Commission on People-Centred Transitions, which provided a set of recommendations on how to ensure people are at the centre of the global energy transition. 

In the context of Russia’s invasion of Ukraine and the energy crisis in 2022, Denmark’s policy focus has reinstated the urgent need to reduce dependency on fossil fuels. While coal and gas use have decreased, oil still makes up a third of TES and the share has not decreased in the last decade.

To address the energy crisis, in June 2022, the government reached a broad agreement that supports 100% biomethane in heating by 2030. Denmark had already decided to phase out natural gas use by switching to district heating and heat pumps. Denmark is among the global leaders in biomethane, with around 70 large producers that inject into the gas distribution network. In 2023, the DEA expects gas consumption to consist of 39% biomethane and 61% of natural gas. Increasing the energy efficiency of the transport system, raising targets for biofuels and electric vehicles (EVs) should all be part of an energy security road map for the medium term.

Such an energy security road map could help Denmark navigate a secure energy transition, considering both new and traditional fuels and Denmark’s role in the regional context as an oil and gas producer.

Denmark’s vulnerability and reliance on fossil fuel and large bioenergy imports was brought into sharp relief with the crisis. Denmark relied on Russian imports for 44% of its coal supply and 15% of its oil supply prior to the start of Russia’s war on Ukraine, and substantial use of biomass in co-generation power plants that are used as a source of heat for 70% of the district heating system. Approximately 75% of biomass is imported, primarily from Baltic states (especially Latvia), as well as other international sources. Wood pellets can be stored but storage of woodchips is more difficult as the quality of the chips degrades over time. The temporary halt of domestic production at the Tyra field due to modernisation works meant that Danish oil and gas production dropped and imports increased at a time of global market constraints.

Denmark can learn from the energy crisis with a view to prepare for the winter 2023-24, which will require a continuous focus on energy savings, renewables deployment, maximised energy production and the scaling up of clean energy investment.

One lesson learnt is that demand-side flexibility can be enabled. In 2022, Danish households reduced gas, electricity and district heat consumption by around 20%, based on price signals. In 2023, consumption levels remain below historic averages, showing that the crisis action is potentially leading to real behaviour change. The government should ensure the economic and energy system benefits are long-lasting by accelerating the roll-out of biogas, peak shaving through demand response, increasing digitalisation, implementing strategies for smart consumer behaviour and increasing the flexibility of the power system. 

Energy efficiency alongside digitalisation can be an enabler of energy system integration to support efficient investment in grids and aligning supply and demand and greater system flexibility. It can also boost affordability. In 2022, Denmark had one of the highest average household annual energy expenditures after the United States and the Netherlands. Between 2019 and 2022, Denmark’s household energy expenditure increased by 49% because of higher energy prices. A new vision and strategy for energy efficiency would be an important plank for government action on energy security.