Knud Pedersen Deputy Director General Danish Energy Authority Ministry of Transport and Energy Renewables and Energy Security in Liberalised Electricity Markets in Liberalised Electricity Markets

How can renewables contribute to energy security? Potential for diversification of sources of energy supply. Potential for diversification of sources of energy supply. But there challenges to overcome to enable renewables to deliver in a market framework. But there challenges to overcome to enable renewables to deliver in a market framework.

Centralized production in the mid 80tiesDecentralized production of today Development of the power production structure

Integrating wind power into the system (Western Denmark as an example)

Conditions for an efficient market Competition. Competition. –Open and equal acces to transmission net for all producers System flexibility. System flexibility. –Fast and efficient response to prices from different kinds of producers and consumers Credibility. Credibility. –Stable and credible long term market framework

Legacy of monopoly High reserve margins High reserve margins High system adequacy High system adequacy Unflexible system with centralised production structure Unflexible system with centralised production structure Unflexible demand side Unflexible demand side Overlapping ownership between SO and producers Overlapping ownership between SO and producers SO oppose changes SO oppose changes

System Flexibility Create conditions for short term price signal to reach producers and consumers Create conditions for short term price signal to reach producers and consumers Enable market participants to react to prices Enable market participants to react to prices Secure adequate net infrastructure Secure adequate net infrastructure Integration of markets (better use of interconnectors) Integration of markets (better use of interconnectors) Ensure independence of SO from markets players. Ensure independence of SO from markets players.

Efficient Market Mitigates use of market power Mitigates use of market power Enables system to absorb fluctuations from wind power Enables system to absorb fluctuations from wind power May reduce price fluctuations May reduce price fluctuations

Conditions for Investments SO has a central role in designing market framework SO has a central role in designing market framework –promote efficient and flexible markets with fast price response –unbundle ownership of SO Create stable, long term and credible market framework Create stable, long term and credible market framework –long term goals for energy and environmental policies –no intervention in pricing mechanism –define clearly role of Govt. and SO –harmonise role of SO in interconnected markets

Investments in Renewables? Costs of electricity from on shore wind generators Costs pr. kWh reduced to ¼ (by 75 %) from 1973 to 2003