Flexibility in response to market signals is the name of the game for Denmark’s centralised CHP stations. Even though their prime responsibility is to supply district heating, they can still step up electricity production when prices are high on windless days, or stop heat production when prices are low and instead meet heating demand from hot water stored earlier in giant accumulators.

If thermal power stations and wind turbines in China are supplying more electricity than needed, the typical solution is to turn off at least some of the wind turbines. In Denmark, the opposite happens. Production from thermal plant is reduced when supply exceeds demand and triggers a fall in wholesale electricity prices.

“Today, we have a system supplied by different technologies—wind, solar and a portfolio of very efficient and flexible thermal power capacity,” says DONG Energy’s executive vice president Thomas Dalsgaard. DONG is Denmark’s largest supplier of electricity and district heating.

Wind and solar do not have to buy fuel and can operate at a lower marginal cost than fossil-fuel fired plant. The significant volumes of renewable energy flowing into the grid in Denmark, Germany and southern Sweden serve to depress wholesale market prices. Coal and gas cannot underbid wind without losing money. Moreover, the low trading price of carbon emission credits contributes to keeping wholesale prices low.

Small and large combined heat and power (CHP) stations get pushed out of the market by the low prices. DONG Energy, with its CHP facilities under considerable price pressure, has shut down 40% of its thermal capacity over the past eight years. Most of the remainder has been adapted to generate electricity independently of heat.

“Six or seven years ago our CHP stations supplied baseload electricity to the market, but we’ve done a complete U-turn. Technically and commercially we have adapted to primarily supply district heating from our large facilities. We more or less only generate electricity when the system demands some extra flexibility, when prices make it worthwhile,” says Dalsgaard.

The big centralised power stations in Denmark have shown themselves to be surprisingly flexible and able to maintain power system stability in step with the growth in fluctuating supply. From system operator Energinet.dk, Peder Andreasen goes as far to describe their ability to flex from zero to 100% output as a “gift to the energy system.” He also points out that wind energy, too, can be regulated up and down, citing the 400 MW Anholt offshore plant as an example of what can be done with advanced control technology.

The extent of power plant flexibility is shown in a study published in 2015 by Agora Energiewende, a German think-tank, that looked at an episode of negative market prices on the north European market, when generators had to pay to offload electricity for which there was no consumer demand. In Denmark, operating capacity was reduced by 80% while the less flexible German fleet could achieve a 50% reduction.

In western Denmark, where most wind capacity is located, hours of negative prices over a year have increased from 11 in 2010 to 65 in 2015. Relatively new wind turbines receive a basic payment of DKK 0.25/kWh (€0.034/kWh) in addition to the sales price achievable on the market. Even with prices down to minus DKK 0.20/kWh, wind turbines still have an incentive to keep turning. For fossil fuel fired plant, negative prices result in a direct loss, making flexibility a must.

“Even really large thermal power stations can significantly reduce their electricity production, just as they can stop heat production and instead meet demand by drawing on stored hot water in giant tanks. They can also do the opposite, ramping up to full production on windless days. We’ve shown that coal and biomass fired power stations can be really flexible,” says Dalsgaard.

Getting the price right

Successful integration of wind energy into any power system is closely linked to its parallel integration into the market. That integration is dependent on continued development of essential information and communications technology. In northern Europe, a spot market with day-ahead trading as well as an intraday market have been central elements of that development, supported by a number of other markets for various grid support services, all aimed at keeping supply and demand in balance.

“The market is our number one servant. Without clear price signals you can forget all about more than five per cent wind energy,” says Andreasen.

From Ea Energy Analyses, a Danish consultancy, Hans Henrik Lindboe says the north European power system is well developed and delivers remarkably low power prices. “It’s fantastic that we can carry out such a significant market restructuring without paying a towering price for it. An hourly price signal has proved be super-effective for integration of wind and solar and I’m certain this signal will also deliver a high level of supply security,” he says.

Even so, a major debate ongoing in European energy circles is whether such a free market can keep the juice flowing at critical junctures, or whether thermal generators should be paid a flat rate to maintain a reserve of stand-by capacity, just in case it is needed.

Lindboe agrees that as the proportion of wind and solar generation grows, so does the need for more system flexibility, both from production units and the demand side. An effective way to spur additional flexibility, he says, is for the market to send price signals to both producers and consumers, giving them an incentive to produce or consume more or less electricity for any given period.

“Until we have adjusted to it, there might be a need, for just a few hours a year, to rely on a strategic reserve when there is no wind,” he concedes. Improving still further the interaction between wind turbines and the rest of the system will be a decisive factor in quantifying the size of, or need for, that reserve.

“In a few years, eighty per cent of Denmark’s electricity and heat demand will be met by wind, solar and other renewable energy sources. The last twenty per cent can be expensive and it would be sensible to spend some time focussing on adjusting demand patterns to the new times,” says Lindboe.

Coal on the cheap

The full costs of air pollution and climate change are not included in electricity prices. If they were, coal-fired power generation would have to cost a lot more. Instead, renewable energy in Denmark receives a subsidy to level the market.

“But not for much longer. Land-based wind power production is increasingly the cheapest on the market and that trend continues as the technology advances,” says Jakob Lau Holst from the Danish wind industry association, which represents wind turbine suppliers like Vestas Wind Systems and Siemens Wind Power as well as several hundred sub-suppliers.

Wind power economics are dependent on how much and how hard the wind blows, just as solar economics depends on hours of radiation. But the further electricity is transmitted, the more energy is lost on the way. It makes good economic sense to use electricity as close to where it is produced as possible, says Lau Holst. For this reason the association recommends intelligent regulation in preference to a one-size-fits-all approach.

Today, half of all electricity produced in Denmark by wind turbines, small CHP units and solar photovoltaic facilities is fed into the grid at the level of the low voltage distribution network, close to demand. Back in 1976, when Denmark’s first national energy strategy was adopted, that share was zero. •

TEXT Jesper Tornbjerg