3.1.1. The Operation of the Wind Turbines and the DH System in a Co-Ownership Solution
DH companies determine their optimal operational strategy (i.e., the one that meets the heat demand at the lowest possible cost) for the portfolio of technologies available and for every hour [22
]. In Denmark, the portfolio may consist of CHP units, boilers, P2H units, solar collectors, waste heat from nearby companies, and thermal storages [14
]. Therefore, the calculation of the optimal operational strategy may include production and storage capacities, demand estimation, sun energy resource estimation, and fuel, heat, and electricity prices [22
]. In the case of Hvide Sande, where the DH company also owns wind turbines, the calculation also includes wind resource estimation, the market price wind power could get, and the cost of self-consuming the wind power [22
]. In this case, the operational strategy defines, among others, when to sell the wind power in the electricity market and when to self-consume it [22
]. This means that, as suggested by the theoretical approach presented in Figure 1
, the operation of the wind turbines and the P2H unit are different in the co-ownership solution implemented in Hvide Sande and the separate ownership solution that is currently the norm.
Hvide Sande DH argues that they—deliberately—built a (smart) energy system that reduces the curtailment of the local wind turbines and the DH system’s natural gas consumption while keeping in consideration the need for the wind power in the Danish electricity system. According to the DH company, they self-consume the wind power in periods with low power electricity market prices (i.e., when the demand/value of wind power in the market is low) and they sell it in periods with high electricity market prices (i.e., when the demand for power is high) [29
EMD International pointed out that the understanding of “high” or “low” power prices by the DH company is subjective as it based on the alternatives that the DH company has to meet the energy demand. During sunny summer days, with low heating demand and high (cheap) heat production from the solar collectors, the DH company may not need (all) the wind production to cover the heat demand and could decide to sell the electricity at lower prices than in winter, when the alternative to self-consumption of wind power could be to operate the (expensive) natural gas boilers. Therefore, EMD International argues that the self-consumption or sale of wind power is not optimised from the Danish electricity system perspective, but from the DH company’s perspective; i.e., by not making the wind power available in the Nord Pool market at all times, the co-ownership solution results in “sub-optimisation” of the electricity system [34
The remark made by EMD International indicates that this stakeholder assumes that the (current) institutional incentive system optimises the operation of the electricity system. This is in line with Energinet’s opinion [33
]. However, the current institutional incentive system is still strongly influenced by the path dependency of a centralised and fossil fuel energy system with separated energy sectors [12
] (as further explained in Section 3.2
). One of the consequences is that the current market structure, in combination with electricity grid tariffs and taxes, results in curtailment of wind power (which is assumed not to have any market value) in moments with transmission grid congestions while flexible electricity demand from P2H units in DH systems has not been activated and fossil fuels are being burnt to meet the heat demand of the DH systems [29
]. This means that the curtailed wind power could have actually had a market value. Therefore, the optimisation of the national electricity (or energy) system through the electricity market and other institutional incentives is also questionable. Moreover, it is not clear if, under the current institutional incentive system, the separate ownership solution results in a better or worse optimisation of the energy resources than the co-ownership solution.
Some of the remarks made by EMD International [34
] and Energinet [33
] show a rather technocratic approach, where it is assumed that, while keeping the traditional single-sector or separate ownership solution, the right combination of institutional incentives will lead to the optimal operation of the energy system with regard to the political/societal goals. In contrast, scholars of sustainable socio-technical transitions advocate for creating spaces for experimentation and nourishing of niches in order to allow for innovation that could lead to fundamental changes, in this case, in the energy system [35
]. Therefore, this preliminary study intends to break with the path dependency of the single-sector ownership approach and explore the (theoretical) ability of consumer cross-sector ownership to address the organisational challenges of SESs.
3.1.2. The Location Cases for Cross-Sector Integration and the Reduction of Overinvestments in the Electricity Grid
Grid issues are dependent on the characteristics of the local grid [7
]. In the following, a basic technical analysis is provided of what, why, and where electricity grid issues may arise in Denmark as result of the increase of installed VRE capacity in a scenario where no mitigation strategy (e.g., grid reinforcement and expansion or cross-sector integration) is implemented. The technical understanding is essential to discuss the ability of the three different cross-sector integration cases presented in Figure 2
(i.e., distant, local, and behind-the-meter) to address grid issues in Denmark.
The grid issues introduced in the following and in Figure 3
are limited to the scope of the study and the inputs provided by the interviewed grid operators. The grid issues that could arise at transmission and distribution levels due to the implementation of P2H units in DH systems are not discussed in the following. The reason is that, according to the interviewed grid operators, these issues are well-addressed by the current institutional incentive system, which promotes the flexible operation of P2H units in DH systems to avoid grid congestion [32
Denmark’s electricity system is rather decentralised compared to other EU and industrialised countries. About 50% of the electricity generation is directly fed into the electricity distribution grid nowadays, in contrast to 1%–2% in 1980 [41
]. Wind turbines, photovoltaic panels, and small-scale CHP plants have been connected to the electricity distribution grids, which has required and resulted in stronger electricity distribution grids than in other EU countries [7
]. The total installed electricity generation capacity in 2018 was 15,073 MW, divided into 6121 MW wind (4420 MW onshore and 1701 MW offshore), 5402 MW large-scale power plants (815 MW electricity only and 4586 MW CHP plants), 1904 MW small-scale CHP plants, and 998 MW solar, 9 MW hydro, and 639 MW autoproducers [14
]. In addition, Denmark is strongly connected to the neighbouring countries [39
Currently, there is no congestion issue at the electricity distribution level in Denmark; the congestion issues are at the transmission level between market zones [7
] (see Figure 3
). This means that, in moments when the local electricity production e.g., in DS1, exceeds the local electricity demand in DS1, the excess electricity is exported to other parts of the electricity system through the transmission grid, e.g., to DS2 and even to DS4 and neighbouring market zones as long as the transmission grid connecting the different market zones is not congested.
In some Danish municipalities, wind and solar energy produce as much as 500% of the annual electricity demand (these are DS1 and DS3 in Figure 3
). In Ringkøbing-Skjern municipality, the share is about 150%. In others, the share is only about 1% (these are DS2 and DS4 in Figure 3
]. At the beginning of 2017, the distribution system operator (DSO) NOE Net (which covers fully or partly the municipalities of Holstebro, Lemvig, Struer, and Herning [44
]) estimated that there were periods when the exports from their grid were 1000% of the local electricity demand and expected this number to increase with the connection of the planned new wind turbines [45
]. In a scenario where no mitigation strategy (e.g., grid reinforcement and expansion or cross-sector integration) is implemented, the increase of VRE capacity in DK1, DK2, and the neighbouring energy systems could result in:
An increase amount of hours with transmission grid congestions in DK1 and DK2. DK1 and DK2 are the two electricity market zones in Denmark. This problem occurs in moments when the electricity production in DK1 and/or DK2 exceeds the electricity demand in DK1 and/or DK2 and the transmission connections to other market zones are fully utilised. The result is the curtailment of VRE by the power market [7
The creation of new congestion nodes inside DK1 and DK2. This may occur, e.g., because of congestions in the substations that connect DS1 and DS3 with the transmission voltage cables. Such an issue has already occurred for example in one of the transmission substations in Lolland municipality, where Energinet had to contact the local DSO to achieve down regulation of wind and solar power production. Currently this is only an issue for the transmission system operator (TSO), but it is expected to become a problem for the DSOs as well [46
Additional electricity grid losses at the distribution level in areas with excess VRE. Grid losses are proportional to the current (i.e., the power flow) and the distance that power is transported. In a centralised fossil fuel energy system (where the electricity is transported from the central power stations to the consumer through the transmission and distribution grids), the power consumption in a given distribution grid can be seen as the cause of the power flow in that given distribution grid and, consequently, of the grid losses in the given distribution grid too. However, in a renewable energy system (where large shares of the power production may be fed directly into the distribution grid and go upstream or downstream) the power flow in a given distribution grid could be caused by power consumption elsewhere in the system. This is the case when the local VRE production exceeds the local power consumption. In this sense, one could say that local excess power production from VRE creates additional grid losses in the local distribution grids where the excess power is produced.
Grid congestions between market zones or inside the market zone may be reduced by reinforcing and expanding the electricity grid and/or increasing flexible demand inside the congestion node through cross-sector integration. Increasing shares of VRE in neighbouring market zones and energy systems reduces the effectiveness of the first two options and demands for more cross-sector integration. Furthermore, cross-sector integration is expected to be strategic to decarbonise the H&C and transport sectors [47
]. Therefore, as argued in the theoretical approach, the coordination of investments in and operations of VRE and cross-sector integration infrastructure (e.g., P2H in DH systems)—with regard to time, size, and location—will be essential to reduce unnecessary grid expansion and reinforcement (i.e., overinvestments in the electricity grid). At this point, it is important to highlight the relevance of the location aspect to that end. The congestions between market zones may be reduced by both distant and local cross-sector integration because it does not matter where the VRE production and the P2H demand are located within DK1 and DK2. In contrast, distant cross-sector integration is not suitable to address the congestions inside DK1 and DK2 because it cannot increase the flexible demand within the new congestion zone. To this end, local cross-sector integration would be necessary. Behind-the-meter cross-sector integration may also address the above mentioned congestion issues. However, it is not seen to be strictly necessary given that the congestion issues are not expected to happen at the wind farm connection point. The reason is that the Danish institutional incentive system does not allow DSOs to limit the connection of wind turbines and requires that DSOs make the necessary investments in the grid to enable the connection of new wind farms [32
]. This is to avoid the discrimination of power producers.
Regarding the additional grid losses in areas with excess VRE, DSOs have expressed different opinions. In Denmark, there is an “equalization scheme” between all the Danish DSOs that is used to cover the additional grid investments and expenses related the connection of new wind turbines to electricity distribution grids [32
]. The DSO RAH Net states that the expenses related to the additional grid losses are covered by the equalization scheme [32
]. In contrast, the DSO NOE Net argues that the scheme does not adequately cover the additional grid losses [45
]. NOE Net adds that additional grid losses have significantly increased in areas with high shares of VRE and raise the electricity bills of the local consumers. NOE Net demands a reform of the scheme [45
] and RAH Net points out that avoiding long distance transportation of electricity would reduce grid losses [32
]. In this respect, both local and behind-the-meter cross-sector integration could provide a suitable solution to reduce additional grid losses by increasing the local power demand in moments of excess VRE production.
Energinet pointed out that P2H has a strong seasonal profile [33
]. Therefore, none of the cross-sector integration cases considered in this study provides a full solution to the grid issues presented in this section. Hence, other integration technologies (such as power-to-gas) are expected to be necessary along with grid expansion and reinforcement [8
3.1.3. Consumer Ownership and Local Acceptance of Wind Turbines
The majority of onshore wind turbines in Denmark have citizen ownership, which is very diverse (see [11
]). From the middle of the 1990s, a tendency for distant and exclusive commercial and citizen ownership has been observed in the country, which significantly differs from the previous tendency for local and inclusive citizen ownership [11
]. The new ownership trend is one of the reasons for the observed increase of local opposition to wind turbines [6
In Denmark, 95% of the DH systems are owned either by a consumer cooperative or a municipal company [11
]. The interests of the local DH consumers are strongly represented in the boards of these companies and profits are shared in the form of lower heat bills [27
]. The implementation of new turbines or the purchase of existing ones by these DH companies is dependent on a beneficial business economy and the support of the local heat consumers. In the case of Hvide Sande, the purchase of the wind turbines was approved in a general assembly in August 2018 [48
]. This means that the ownership of consumer and municipal DH companies in Denmark is local and inclusive [11
]. Consequently, based on the theoretical background presented in Section 2.2.2
, the ownership of local wind turbines by such local DH companies might bring some advantages with regard to local acceptance compared to the general trend for exclusive and distant ownership observed for the separated ownership solutions [11
], where the local community has very limited decision power and access to benefits. The ownership of local wind turbines by distant DH companies would not provide any advantage over the current trend.
When comparing the case of co-ownership with behind-the-meter cross-sector integration and the case of co-ownership with local cross-sector integration, the former has advantages over the latter. In the behind-the-meter case, the closest neighbours to the wind turbines are expected to be connected to the DH system. In contrast, in a local cross-sector integration case, the wind turbines could be placed away from the DH system, probably in the countryside, where the closest neighbours would use individual heating [32
]. In this case, the closest neighbours to the wind turbines, i.e., those that will experience the local impacts the most, would not benefit from the ownership of the wind turbines by the DH company. Such local imbalance between benefits and negative impacts should be addressed in order to ensure local acceptance.
This sub-section has analysed the (theoretical) ability of the cross-sector consumer ownership solution implemented at the different location cases presented in Figure 2
to address the organisational challenges of SESs. In the following, a summary of the results is provided.
The results support the argument for the need of coordinating investments (in VRE, P2H in DH systems and the electricity grid) and operations (of VRE and P2H units) with regard to time, size, and location in order to reduce overinvestments in the electricity grid when introducing high shares of VRE. As suggested by the theoretical background, the necessary coordination is expected to be easier in the co-ownership solution than in the separate ownership solution because the wind turbines are regarded as one of the components of the DH system [22
] and the decisions are made by one single stakeholder, i.e., the DH company. Furthermore, the analysis emphasises the relevance of the location aspects to reduce overinvestments in the grid. Both distant and local cross-sector integration are suitable to reduce congestions in DK1 and DK2 but only local cross-sector integration may address the local grid issues (i.e., the creation of new congestion nodes inside the market zones and the additional grid losses in distribution grids with excess VRE). Behind-the-meter cross-sector integration does contribute to alleviate the above mentioned issues too. However, it is not seen to be strictly necessary given that the congestion issues are not expected to happen at the wind farm connection point.
The ownership of local wind turbines by local consumer- and municipal-owned DH companies may enhance local acceptance as these companies have local and inclusive forms of citizen ownership [11
], as recommended by the theoretical background. Besides, the analysis indicates that the behind-the-meter solution is better than the local cross-sector integration solution for local acceptance. In the former, the closest neighbours to the wind turbines are expected be connected to the DH system, whereas in the latter the wind turbines could be out in the countryside where the closest neighbours would use individual heating instead.
Finally, the co-ownership is expected to increase the attractiveness for DH companies to invest in wind turbines and P2H units, as suggested by the theoretical approach. This is particularly so in windy areas, where the levelised cost of wind power is even lower than the country average, and with behind-the-meter or local cross-sector integration solutions, where a higher reduction of electricity grid tariffs for the self-consumed electricity could apply (based on the advantages they provide for the reduction of overinvestments in the electricity grid expansion and reinforcement).
All in all, it may be concluded that especially the local cross-sector integration case with the co-ownership of wind turbines and P2H units by DH companies could (theoretically) provide several benefits for the implementation of SESs in Denmark. These are reduction of overinvestments in grid expansion and reinforcement, improved economic attractiveness of wind turbines and P2H units, improved utilisation of local wind power, reduction of burning of fuels, better economy for the local DH consumers, better economy for the local electricity consumers, and improved local acceptance of wind turbines. Ultimately, this ownership model could have the potential to accelerate the implementation of SESs. Therefore, it is deemed relevant to analyse the possibilities to implement it under the current Danish incentive system.