Premium tariff (Law on the Promotion of Renewable Energy)

Updated: 09.02.2017

Author: Anna Pobłocka-Dirakis

Denmark promotes renewable electricity generation through a premium tariff. Plant operators receive a variable bonus on top of the market price. The sum of the bonus and the market price shall not exceed a certain statutory maximum, which depends on the date of connection of a given plant and the source of energy used. In certain cases, plant operators are granted a guaranteed bonus on top of the market price. In such cases the maximum is not defined by law.

Eligible technologies

The Law on the Promotion of Renewable Energy promotes all technologies except for geothermal power generation (§ 2 par. 2 VE-Lov).

Wind energy

Both on-shore and off-shore plants are eligible (§§ 35 a-43 VE-Lov).

Premium tariffs for off-shore wind parks are awarded through tenders (See: Tenders).

Solar energy

Eligible (§§ 47 VE-Lov). 

Biogas

Eligible (§§ 43a – 43e VE-Lov).

Hydro-power

Eligible under the following conditions (§§ 47 VE-Lov):

  • Conventional hydro-electric power plants. Eligible. For installations connected to the grid on 01.01.2016 or later the installed capacity must be less than 500 kW (§ 47 par. 10 VE-Lov).
  • Wave power plants. Eligible. For installations connected to the grid on 01.01.2016 or later the installed capacity must less than 500 kW (§§ 47 par. 1 no. 1 and par. 10 VE-Lov).

Biomass

Eligible (§§ 44-46 VE-Lov).

Amount

There are two types of bonuses:
  • Maximum bonus: The bonus varies according to the market price and the statutory maximum set for the sum of both the market price and the bonus.
  • Guaranteed bonus: In certain cases, plant operators are granted a guaranteed bonus on top of the market price. In such cases the maximum is not defined by law (§§ 36-48 VE-Lov). 
The following bonuses apply to new plants coming on line:

Wind energy

On-shore plants commissioned on or after 01.01.2014 and off-shore wind turbines outside tenders:

  • Guaranteed bonus of 0.25 DKK (approx. €ct 3) but maximum subsidy (bonus plus market price) may not be higher than 0.58 DKK (approx. €ct 8) per kWh for the sum of 6,600 full load hours and 5.6 MW per 1 m2 rotor area plus 0,013 DKK (€ct 0,2) for covering the balancing costs for 20 years from the date of connection (§ 35 a VE-Lov).
  • On-shore plants financed by utility companies: maximum subsidy (bonus plus market price) of 0.33 DKK (approx. €ct 4) per kWh, limited to 10 years from the date of connection of the wind farm, plus guaranteed bonus (unlimited term) of 0.10 DKK (approx. €ct 1) per kWh (§ 40 VE-Lov).

Off-shore plants:

  • Plants financed by utility companies: maximum subsidy (bonus plus market price) of 0.353 DKK (approx. €ct 5) per kWh, applicable to 42,000 full load hours, plus guaranteed bonus (unlimited term) of 0.10 DKK (approx. €ct 1) per kWh. An extra bonus of 0.007 DKK (< 0.1 ct€) per kWh on a daily average will be paid, if the electricity producer must pay a grid tariff for feeding in the electricity (§ 40 VE-Lov).
  • Off-shore wind plants, which are part of pilot projects in the territorial sea and the exclusive economic zone: 0.70 DKK (approx. €ct 9) per kWh for for the sum of 15,000 full load hours and 12.7 MW per 1 m2 rotor. The Climate, Energy and Building Minister may, on application, grant a bonus for wind farm consisting of maximum 8 plants and need additional support to be realised. The support ends by the end of 2016 and is restricted to a total power of 50 MW. The bonus will not be paid during hours in which the market price (i.e. the Nordpool spot price) is not positive (§ 35 b VE-Lov).

For plants with an installed capacity of up to 25 kW that generate electricity for the operator's own use, the Energinet.dk (Danish transmission grid operator) may prior to the launch of a project grant commitments in tariff in 2016 for electricity from wind turbines that are connected to their own consumption installation. The commitment will be granted within a pool is 1 MW (§ 41 par. 4 VE Lov). The maximum subsidy (bonus plus market price) depends on the total installed capacity of the plant: 

    • For plants with total installed capacity up to 10 kW: 2.12 DKK/kWh (approx. €ct 28) for 12 years from the date of grid connection of the plant (§ 41 par. 4 no. 1 VE Lov). The plant has to be connected to the grid no more than 2 years after grant of the aid (§ 41 par. 5 VE Lov).
    • For plants with total installed capacity > 10 kW and up to 25 kW: 1.32 DKK/kWh (approx. €ct 18) for 12 years from the date of grid connection of the plant (§ 41 par. 4 no. 2 VE Lov). The plant has to be connected to the grid no more than 2 years after grant of the aid (§ 41 par. 5 VE Lov). 
    • However, for projects where the decision on commitment for tariff was met on 01.01.2017 or later, the total aid per project may not exceed an amount equivalent to € 15 million (§ 41 par. 5 VE Lov).

    Solar energy

    The Danish grid operator (Energinet.dk) may grant support for electricity produced in PV-installation for a pool of 20 MW per year for 5 years starting in 2013. In 2016 and 2017 only PV-installations with installed capacity of less than 500 kW are eligible. For projects where the decision on commitment for tariff was met on 01.01.2017 or later, the total aid per project may not exceed an amount equivalent to € 15 million (§ 47 par. 8 VE Lov). Following installations may receive the support (§ 47 par. 7 VE Lov):

    • Installations with an installed capacity of max. 6 kW per household and connected to self-consumption installation: maximum subsidy (bonus plus market price) of 1.30 DKK (approx. €ct 17) per kWh, applicable for 10 years after the grid connection. For plants connected on or after 01.01.2014 the bonus will be reduced annually by 0.14 DKK (€ct 2) (§47 par. 7 No. 1 VE-Lov). The maximum subsidy in 2016 is 0.88 DKK/kWh (approx. €ct 12) and in 2017 0.74 DKK/kWh (approx. €ct 10).
    • Common PV installations established on the roofs of buildings or integrated into buildings that are not built with the purpose of mounting solar cells: maximum subsidy (bonus plus market price) of 1.45 DKK (approx. €ct 19.5) per kWh, applicable for 10 years after the grid connection. For plants connected on or after 01.01.2014 the bonus will be reduced annually by 0.17 DKK (€ct 2) (§47 par. 7 No. 2 VE-Lov). The maximum subsidy in 2016 is 0.94 DKK/kWh (approx. €ct 13) and in 2017 0.77 DKK/kWh (approx. €ct 10).
    • Common PV installations, which are not connected to self-consumption installation: maximum subsidy (bonus plus market price) of 0.90 DKK (approx. €ct 12) per kWh, applicable for the 10 years of operation. For plants connected on or after 01.01.2014 the bonus will be reduced annually by 0.06 DKK (€ct 0.8) (§47 par. 7 No. 3 VE-Lov). The maximum subsidy in 2016 is 0.72 DKK/kWh (approx. €ct 10) and in 2017 0.66 DKK/kWh (approx. €ct 9).

    Biogas

    Plants using pure biogas or gas from gasification: maximum subsidy (bonus plus market price): 0.793 DKK (approx. €ct 11) per kWh (§ 43a par. 2 VE-Lov). The tariff is net-price indexed. It is calculated every year on 1 January and based on 60% of the increase in the net price index of the previous year as compared to 2007 (§ 43a par. 6 VE-Lov).  Additionally, the operator receives a guaranteed bonus of: 

    • 0.26 DKK (approx. €ct 3.5) per kWh (§ 43a par. 5 VE-Lov). This bonus is: decreased, in case the price of the natural gas in a previous year is higher than the basis price of DKK 53.20 per GJ, by 0.01 DKK per kWh for every 1 DKK of this difference; increased, in case the price of the natural gas in a previous year is higher than the basis price of DKK 53.20 per GJ, by 0.01 DKK per kWh for every 1 DKK of this difference (§ 43 e par. 2 VE-Lov).
    • 0.10 (approx. €ct 5) per kWh (§ 43a par. 5 VE-Lov). As of 01.01.2016, this bonus is: decreased by 0.02 DKK (ct€ 0.27) and will cease by the end of 2019 (§ 43 e par. 4 VE-Lov).

    The plant operator may choose between maximum subsidy (bonus plus market price): 0.793 DKK (approx. €ct 11) per kWh and a guaranteed bonus of 0.431 DKK (approx. €ct 6) per kWh. This decision is then binding for at least one calendar year after the change. The application for the change of support must be submitted until 1st October to take effect from the end of the year (§ 43a par. 4 VE-Lov). For projects where the decision on commitment for tariff was met on 01.01.2017 or later, the total aid per project may not exceed an amount equivalent to € 15 million (§ 43a par. 8 VE Lov).

    The operators of plants with an installed capacity of up to 6 kW, which were connected to the grid on 20.11.2012 or later, can choose between maximum subsidy (bonus plus market price): 0.793 DKK (approx. €ct 11) per kWh and maximum subsidy (bonus plus market price) of 1.30 DKK (approx. €ct 17) per kWh, applicable for 10 years after the grid connection. For plants connected on or after 01.01.2014 the bonus will reduce annually by 0.14 DKK (€ct 2) until 01.01.2018. Request for choice of price supplements must be filed simultaneously with plant’s grid connection (§ 43a par.7 VE-Lov). For installations connected to the grid on 01.01.2016 or later, the choice of the support is conditional on Energinet.dk's approval before commencement of the project (§ 43a par.8 VE Lov).

    Co-firing: for the proportion of electricity generated from the combustion of biogas: guaranteed bonus of 0.431 DKK (approx. €ct 5.8) per kWh (§ 43a par. 3 and 5 VE-Lov). The tariff is net-price indexed. It is calculated every year on 1 January and based on 60% of the increase in the net price index of the previous year as compared to 2007 (§ 43a par. 6 VE-Lov).  Additionally, the operator receives a guaranteed bonus of: 

    • 0.26 DKK (approx. €ct 3.5) per kWh (§ 43a par. 5 VE-Lov). This bonus is: decreased, in case the price of natural gas in a previous year is higher than the basis price of DKK 53.20 per GJ, by 0.01 DKK per kWh for every 1 DKK of this difference; increased, in case the price of natural gas in a previous year is higher than the basis price of DKK 53.20 per GJ, by 0.01 DKK per kWh for every 1 DKK of this difference (§ 43 e par. 2 VE-Lov).
    • 0.10 (approx. €ct 5) per kWh (§ 43a par. 5 VE-Lov). As of 01.01.2016, this bonus is: decreased by 0.02 DKK (€ 0.27) and will cease by the end of 2019 (§ 43 e par. 4 VE-Lov). 

    The plant operator may choose between maximum subsidy (bonus plus market price): 0.793 DKK (approx. €ct 11) per kWh and a guaranteed bonus of 0.431 DKK (approx. €ct 5.8) per kWh. This decision is then binding for at least one calendar year after the change. The application for the change of support must be submitted until 1st October to take effect from the end of the year (§ 43a par. 4 VE-Lov).

    Hydro-power

    Guaranteed bonus of 0.10 DKK (approx. €ct 1) per kWh, applicable for 20 years from the date of connection of the plant (§ 47 par. 9 no. 3 VE-Lov). For installations connected to the grid on 01.01.2016 or later the installed capacity must be less than 500 kW and the granting of the support is conditional on Energinet.dk's approval before commencement of the project (§ 47 par. 10 VE-Lov). For projects where the decision on commitment for tariff was met on 01.01.2017 or later, the total aid per project may not exceed an amount equivalent to € 15 million (§ 47 par. 10 VE Lov). 

    Plants deemed to be of strategic importance by the ministry in charge (currently, only wave energy comes under this definition): For installations connected to the grid on 01.01.2016 or later the installed capacity must be less than 500 kW and the granting of the support is conditional on Energinet.dk's approval before commencement of the project (§ 47 par. 10 VE-Lov). For projects where the decision on commitment for tariff was met on 01.01.2017 or later, the total aid per project may not exceed an amount equivalent to € 15 million (§ 47 par. 10 VE Lov). Following support is available: 

    • with an installed capacity of up to 6 kW: maximum subsidy (bonus plus market price) of 1.30 DKK (approx. €ct 17) per kWh, applicable for 10 years after the grid connection. For plants connected on or after 01.01.2014 the bonus will be reduced annually by 0.14 DKK (€ct 2) until 01.01.2018 (§ 47 par. 9 No. 1 VE-Lov). The maximum subsidy in 2016 is 0.88 DKK/kWh (approx. €ct 12) and in 2017 0.74 DKK/kWh (approx. €ct 10).
    • with an installed capacity of more than 6 kW: maximum subsidy (bonus plus market price) of 0.60 DKK (approx. €ct 8) per kWh, applicable for the first 10 years of operation, and 0.40 DKK (approx. €ct 5) per kWh, applicable for a further 10 years (§47 par. 5 No. 5 VE-Lov) (§ 47 par. 9 No. 2 VE-Lov).

    Biomass

    Electricity produced with usage of stirling engines and other special power generation plants with biomass as an energy source:

    • Maximum subsidy (bonus plus market price): 0.793 DKK (approx. €ct 11) per kWh (§ 44 par. 2 VE-Lov).
    • Co-firing: for the proportion of electricity generated from the combustion of biogas: guaranteed bonus of 0.431 DKK (approx. €ct 5.8) per kWh (§ 44 par. 3 VE-Lov).
    • The tariff is net-price indexed. It is calculated every year on 1 January and based on 60% of the increase in the net price index of the previous year as compared to 2007 (§ 44 par. 4 VE-Lov). 
    • The operators of plants with an installed capacity of up to 6 kW, which were connected to the grid on 20.11.2012 or later, can choose between maximum subsidy (bonus plus market price): 0.793 DKK (approx. €ct 11) per kWh and maximum subsidy (bonus plus market price) of 1.30 DKK (approx. €ct 17) per kWh, applicable for 10 years after the grid connection. For plants connected on or after 01.01.2014 the bonus will reduce annually by 0.14 DKK (€ct 2) until 01.01.2018 (§ 44 par.5 VE-Lov). For installations connected to the grid on 01.01.2016 or later, the choice of the support is conditional on Energinet.dk's approval before commencement of the project (§ 44 par.6 VE-Lov). However, for projects where the decision on commitment for tariff was met on 01.01.2017 or later, the total aid per project may not exceed an amount equivalent to € 15 million (§ 44 par.6 VE-Lov).

    Addressees

    The persons entitled to the payment of a bonus are the owners of plants for the generation of electricity from renewable sources (§ 56 par. 2 VE-Lov).

    Procedure

    Process flow

    Entitlement to bonus payments arises from statutory law (§ 35a-47 VE-Lov).

    Competent authority

    The authority obligated to pay the bonus is the transmission grid operator Energinet.dk (§ 56 par. 1 VE-Lov).

    Degression

    The Law on the Promotion of Renewable Energy stipulates several terms for degression of support amount. 

    Solar energy

    A degression of support amount is foreseen. For more detailed information, see the Amount section.

    Biogas

    An adjustment of support amount is foreseen depending on the price of the natural gas in a previous year. For more detailed information, see the Amount section.

    Hydro-power

    A degression of support amount is foreseen. For more detailed information, see the Amount section.

    Biomass

    A degression of support amount is foreseen. For more detailed information, see the Amount section.

    Eligibility period

    The Law on the Promotion of Renewable Energy stipulates several terms and deadlines, which depend on the technology used and the date of commissioning of the plant in question. For more detailed information, see the Amount section.

    Distribution of costs

    Consumers

    The costs of the support system are borne by the consumers (§ 8 par. 2 Electricity Supply Act).

    Distribution mechanism

    • Consumers – grid operators. Plant operators sell their electricity to the consumers via a supply company. Every consumer is obliged to pay a surcharge, the so-called Public Service Obligation. The surcharge depends on each consumer's individual level of consumption. The surcharges are determined by Energinet.dk four times a year. According to Energinet.dk, the surcharges are collected by the grid operators.
    • Grid operators – Energinet.dk. According to Energinet.dk, the grid operators submit the surcharges collected to Energinet.dk.
    • Energinet.dk – plant operators. Energinet.dk pays the bonus to the plant operators.

    Denmark

    Further information

    Basic information on legal sources