The Blog - Wind energy market analysis

Posted 05/10/2018

Frances Salter

    

Viking Roar - Wind Power in Denmark, Norway and Sweden

Despite their geographical proximity, Denmark, Norway and Sweden are in very different situations when it comes to wind power. So what does this mean for investors? Frances Salter explains

Scandinavian wind

Norway’s Approach to Wind Power

Of the three countries, Norway is currently the least promising market for wind - though it’s not without potential. In 2017, wind power only accounted for 1.9% of the country’s total electricity generation.

Nonetheless, it’s seen some solid PPA activity recently, as Norwegian aluminum company Norsk Hydro has signed a long-term PPA with the Green Investment Group – it’s the world’s longest power purchase agreement, with a duration of 29 years.

However, Norway’s unique geographic layout means that the windiest regions are also the most difficult to connect to the grid, creating issues for both developers and the government. For this reason, the government announced earlier in 2018 that, as of the start of 2019, developers looking to build power facilities in locations without a strong grid will need to contribute to grid upgrade investments. This is especially problematic for wind developers, who would often be looking to build projects in hard-to-reach locations.

Norway’s energy industry has criticised the plan, saying that it will end up needing to foot the bill for approximately $17bn of grid investments before 2025.

Assuming the government goes ahead with this plan, investors’ confidence may well be knocked.

 

Sweden’s Renewable Energy Goals

By contrast, wind power in Sweden is going from strength to strength.

The Swedish Wind Energy Association reported in July 2018 that Sweden is on track to reach its 2030 target of 49% energy from renewable sources by the end of 2018. This would need 7.5GW of installed wind capacity - at the end of 2017, the country had 6.7GW of installed capacity, so it’s on track to reach this goal.

Part of the reason for this success, as we’ve previously covered in our report, Europe’s PPA Revolution, is that Sweden has seen a major influx of corporate PPAs. For example, Google signed its first PPA in Europe in 2013 with OX2’s 72MW Maevaara wind farm.

There are a few reasons for this: its low power prices mean that developers find the financial certainty that comes from PPAs reassuring for the development of projects; Sweden is home to a large number of data centres, owned by companies such as Google, which require considerable amounts of energy; and thirdly, the country’s government has cut energy taxes, as well as having a predictable regulatory system.

These three factors create an environment which is ideal for investing in renewables.

 

Wind Power in Denmark

Denmark is world-renowned as a leader in renewable energy: 30% of its energy comes from renewable sources. It’s also been a pioneer in wind energy, having installed wind turbines since the 1970s – and in fact was the first country in the world to install offshore wind.

Over two-thirds of Denmark’s renewable energy production comes from biofuel from agriculture. But wind power is still a major contributor to the energy mix: it produces twice as much wind energy per capital as the runner-up country in the OECD.

It’s also seen some significant wind PPAs, such as Vattenfall’s 2018 agreement with global healthcare company Novo Nordisk, purchasing energy from its offshore wind farm Kriegers Flak.

On top of that, Denmark’s Ministry of Energy, Utilities and Climate has said that the country plans to source 50% of its energy from renewables by 2030, which far exceeds EU targets.

Plus, a 2018 sector deal has laid out plans for three new offshore wind farms, totalling 2.4 GW. There are also plans to run technology-neutral tenders, which are open to offshore wind projects - so the future’s looking bright.

Scandinavian wind was a key topic at Financing Wind Europe 2018. To find out more about the conference and our 2019 events, click below.

Find out more about Financing Wind

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