Despite Denmark’s High Wind Penetration, Ancillary Services Prices Remain Moderate

Denmark's 5 gigawatts of wind capacity can produce nearly 40 percent of the country's instantaneous electricity demand. That's the highest share of electricity generated by wind by any nation on Earth. Yet, according to GTM Research's latest report, Ancillary Services at the Grid Edge: Distributed Energy Resources in Denmark, prices for ancillary services, which help accommodate high penetrations of variable generation, have been kept in check.

At the windiest of times, Denmark's wind farms not only meet the country's electricity demand, but actually exceed it. In fact, Denmark’s interconnections with Germany, Norway and Sweden enable it to offload its excess wind. This interconnectedness also allows for the exchange of more than 3 gigawatts of bulk power, but also more than 400 megawatts in ancillary services.

According to the report, "improvements in wind forecasting, the addition of new interconnections to other balancing areas, and 15-minute energy markets appear to have mitigated the need for increased volumes of downward reserves and regulation."

The report notes that high wind penetration and increasingly open regulations create competition among wind forecasting, demand response, storage, and combined heat and power (CHP) solutions to maintain balance on Denmark's grid. This competition has reduced the cost of ancillary services and wind; however, increasing renewable penetration in Germany’s northern half may challenge these reductions as the potential for coincident peaking increases.

Denmark drastically increased its penetration of CHP plants over the last two decades. As renewable penetration increased, these facilities began to be viewed as a contingency power source -- and this status has led to a drastic curtailment of their use. According to the report, the average load factor for CHP plants in Denmark is under 20 percent, down from 45 percent in 2000. Furthermore, 35 percent of the country's CHP plants have been retired since 2008 due to profitability issues.

The report is the first in a series analyzing the impact of variable generation on the electricity markets for ancillary services and how utilities and service providers are managing that variation.

With its high wind penetration, Denmark is an ongoing case study on a grid-edge future where intermittent renewables constitute a significant amount of generating capacity for a utility or even an entire nation.

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To learn more about this report or the Ancillary Services series, download the brochure.