costs to decline, as they are expected to,
subsidies to support EVs could be lower;
• EV subsidies have disproportionally favoured
city dwellers but have reduced air pollution in
cities. China could use similar measures to
bring down air pollution in its urban areas.
This could, however, raise equality concerns;
• a combination of a neutral tax system, public
infrastructure and R&D support has kept
investors interested in Norwegian oil and gas,
revenues from which have financed the EV
transition. This model of financing is now
being challenged by low oil prices. China
may need to consider sustainable ways of
financing the energy transition; and
• Norway’s EV transition has failed to translate
into manufacturing jobs due to a highly
underdeveloped automotive industry. China
is better situated to capture the supply side
benefits of a changing vehicle stock.
(2) Denmark
Denmark is a world leader in developing and
integrating offshore wind into its electricity system. Wind power’s share of domestic electricity
consumption was more than 40% in 2015, as
shown in Fig. 79. Denmark’s wind power
capacity has increased five times since 1997,
reaching 5,227 MW in 2016.
Interconnectors with neighbouring countries
have enabled high uptake of offshore wind, while
maintaining energy supply security. Denmark is
interconnected with Norway, Sweden and Germany, a result of the 2013 System Operation
Agreement in the Nordic countries. By integrating its electricity market with those of its
neighbours, Denmark can draw on a portfolio of
otherwise inaccessible energy resources. Norway
and Sweden have a hydro- and nuclear-based
electricity system respectively, while Germany
has a large electricity market that is based on a
range of generation technologies. Denmark has
benefitted from interconnecting with these markets because they offer supply security when the
wind does not blow and potential offtake markets
when excessive wind energy is generated. Interconnection has helped solve the intermittency
problem and limited the otherwise large system
integration costs associated with variable wind
power.
Interconnection has also reduced the need for
investment in energy storage facilities. Energy
storage, such as batteries and hydro-pumped
storage are often considered vital to integrating
non-dispatchable renewables. However, by
interconnecting with neighbouring countries and,
more importantly, with a range of generation
technologies, Denmark has avoided the significant costs associated with building storage
facilities (Fig. 80).
For China, Denmark’s wind transition provides lessons on how to increase wind integration
into the electricity system while fostering
employment opportunities for energy workers.
The key findings from Denmark’s supply revolution are:
• Denmark’s energy transition was financed by
taxing residential consumers and small and
medium-sized companies, while exempting
heavy industries. This taxation system is
inefficient from an environmental perspective
as it does not align carbon costs, although it is
politically expedient. China may wish to
consider more direct carbon pricing to minimise the cost of its energy transition;
• Danish wind integration and deployment was
achieved through subsidies, supported by
initiatives such as interconnection and policies to increase the flexibility of conventional
power plants. Similarly, China may wish to
support its renewable subsidy regime by
integrating its different energy generation
technologies
through
intra-country
interconnections;
• Ørsted (formerly DONG Energy), originally
an NOC, has played an important role in the
Danish wind transition and China’s NOCs
may wish to consider whether to follow its
example; and
• Denmark’s early entry into wind power has
created a domestic industry that is globally
competitive and sustains high-value jobs in
rural areas. Similar employment opportunities
exist in China. Energy workers could be
Special Report 1: A Study of China’s Energy Supply Revolution
193
subsidies to support EVs could be lower;
• EV subsidies have disproportionally favoured
city dwellers but have reduced air pollution in
cities. China could use similar measures to
bring down air pollution in its urban areas.
This could, however, raise equality concerns;
• a combination of a neutral tax system, public
infrastructure and R&D support has kept
investors interested in Norwegian oil and gas,
revenues from which have financed the EV
transition. This model of financing is now
being challenged by low oil prices. China
may need to consider sustainable ways of
financing the energy transition; and
• Norway’s EV transition has failed to translate
into manufacturing jobs due to a highly
underdeveloped automotive industry. China
is better situated to capture the supply side
benefits of a changing vehicle stock.
(2) Denmark
Denmark is a world leader in developing and
integrating offshore wind into its electricity system. Wind power’s share of domestic electricity
consumption was more than 40% in 2015, as
shown in Fig. 79. Denmark’s wind power
capacity has increased five times since 1997,
reaching 5,227 MW in 2016.
Interconnectors with neighbouring countries
have enabled high uptake of offshore wind, while
maintaining energy supply security. Denmark is
interconnected with Norway, Sweden and Germany, a result of the 2013 System Operation
Agreement in the Nordic countries. By integrating its electricity market with those of its
neighbours, Denmark can draw on a portfolio of
otherwise inaccessible energy resources. Norway
and Sweden have a hydro- and nuclear-based
electricity system respectively, while Germany
has a large electricity market that is based on a
range of generation technologies. Denmark has
benefitted from interconnecting with these markets because they offer supply security when the
wind does not blow and potential offtake markets
when excessive wind energy is generated. Interconnection has helped solve the intermittency
problem and limited the otherwise large system
integration costs associated with variable wind
power.
Interconnection has also reduced the need for
investment in energy storage facilities. Energy
storage, such as batteries and hydro-pumped
storage are often considered vital to integrating
non-dispatchable renewables. However, by
interconnecting with neighbouring countries and,
more importantly, with a range of generation
technologies, Denmark has avoided the significant costs associated with building storage
facilities (Fig. 80).
For China, Denmark’s wind transition provides lessons on how to increase wind integration
into the electricity system while fostering
employment opportunities for energy workers.
The key findings from Denmark’s supply revolution are:
• Denmark’s energy transition was financed by
taxing residential consumers and small and
medium-sized companies, while exempting
heavy industries. This taxation system is
inefficient from an environmental perspective
as it does not align carbon costs, although it is
politically expedient. China may wish to
consider more direct carbon pricing to minimise the cost of its energy transition;
• Danish wind integration and deployment was
achieved through subsidies, supported by
initiatives such as interconnection and policies to increase the flexibility of conventional
power plants. Similarly, China may wish to
support its renewable subsidy regime by
integrating its different energy generation
technologies
through
intra-country
interconnections;
• Ørsted (formerly DONG Energy), originally
an NOC, has played an important role in the
Danish wind transition and China’s NOCs
may wish to consider whether to follow its
example; and
• Denmark’s early entry into wind power has
created a domestic industry that is globally
competitive and sustains high-value jobs in
rural areas. Similar employment opportunities
exist in China. Energy workers could be
Special Report 1: A Study of China’s Energy Supply Revolution
193