EFK, Alm.del - 2016-17 - Endeligt svar på spørgsmål 355: Spm. om, hvorvidt det på Facebook blev udlagt som om, at regeringen ville fjerne PSO-afgiften og EU-ordren, til energi-, forsynings- og klimaministeren

Energi-, Forsynings- og Klimaudvalget 2016-17
EFK Alm.del
Offentligt

NOTE

20. April 2015

Center for Climate and Energy Economics

Update PSO levy

The EU Commission has questioned the Danish PSO system. The Commission claims that the PSO sys-

tem discriminates against foreign Renewable Energy Suppliers (RES) producers and thus violates the EU

Treaty. This is because the PSO levy is applied to all electricity consumed in Denmark, regardless of

whether the electricity is produced in Denmark or abroad, however only domestic RES electricity produc-

ers can receive the PSO subsidies.

It is of outmost importance to the Danish Government to find a durable solution to this issue. A tempo-

rary solution for 2015-2016 has been approved by the Commission, and long-term solutions are currently

being analyzed.

The Danish Government will make a proposal on a long-term solution to be approved by the Commis-

sion as well as a majority in the Danish Parliament, with the aim of having a long-term solution in opera-

tion from 2017 and onwards. Politically, the Danish energy policy is traditionally based on broad political

agreement.

Danish prices on electricity compared with other EU countries

In recent years the Danish prices on electricity paid by industrial users have been below the average prices

of the EU. In the first semester of 2014, the Danish prices of electricity for a large company (70-150

GWh) are below the prices in both Germany and the UK and at the same level as prices in the Nether-

lands. The Danish prices are higher than the French and the Swedish prices, as shown in figure 1 below.

Comparable official statistics are not available for consumption bands larger than 150 GWh, as very few

countries provide this information, and much of it is confidential.

Side 1

EFK, Alm.del - 2016-17 - Endeligt svar på spørgsmål 355: Spm. om, hvorvidt det på Facebook blev udlagt som om, at regeringen ville fjerne PSO-afgiften og EU-ordren, til energi-, forsynings- og klimaministeren

Figure 1: Electricity prices for 2014(I) incl. PSO and taxes, 70-150 GWh companies

90,0

80,0

70,0

60,0

49,4

50,0

40,0

30,0

20,0

10,0

0,0

Sweden

France

Denmark

Netherlands

EU (28)

Germany

Note:

The price for Denmark includes a correction of +3.0 øre/kWh for this consumptions band found in a recent survey of the Danish

prices on electricity performed for the 1st semester of 2014.

Source:

Eurostat, calculations by the Danish Energy Agency.

øre/kWh

79,3

63,5

58,6

57,9

84,3

36,4

As of 2014, the tax on electricity for process energy has been reduced to the minimum level allowed by

EU legislation, which is currently 0.4 øre/kWh. The reduction of the PSO levy and other similar initiatives

have lowered the average electricity prices with effect from January 1

this year (2015).

Growth Packages 2013 and 2014

The Growth Packages introduced in 2013 and 2014 have reduced taxes and levies on energy for compa-

nies. The tax on electricity consumption for process energy use has been reduced to the minimum allowed

by EU-legislation. This does not, however, apply to electricity consumption used for space heating. For

this purpose the tax rate is 38 øre/kWh in 2015.

The PSO levy will also be reduced by (cumulated) 13.2 billion DKK towards 2020. This consists of sever-

al reductive elements concerning both a general and a targeted reduction for companies. The general re-

duction applies to all companies, and amounts to 3 øre/kWh in 2015 and 2016, subsequently increased to

5 øre/kWh for 2017-2020.

The reduction targeted at energy-intensive companies amounts to 185 million DKK annually, equivalent

to approximately 7 øre/kWh, from 2015 through to 2020. To qualify for this further reduction, a compa-

ny must be eligible according to the state aid guidelines (Annex 3) and must commit to a binding agree-

ment of improving the energy efficiency of their production.

Additionally, the latest Growth Package contains initiatives to postpone some of the planned wind-power

projects as well as annulling the PSO levy on gas. Both of these initiatives will contribute to a further re-

duction in the overall costs related to the PSO for companies.

How much can a company expect to pay in PSO in 2020?

Side 2

The level of the PSO levy for companies is currently 21.1 øre/kWh in the first quarter of 2015. This in-

cludes the reduction of 3 øre/kWh adopted under the Growth Package 2014. As mentioned, this reduc-

tion increases by 2 øre/kWh to 5 øre/kWh from 2017.

Based on the latest projection of the PSO levy from the Danish Energy Agency, the PSO levy for compa-

nies in 2020 is predicted to be approximately 13 øre/kWh (2015-prices). This number includes the PSO

reductions adopted under the Growth Package 2014. The prediction is based on the latest projections

from March 2015. However, it is important to note that these are predictions and subject to a high degree

of uncertainty

depending on the projection’s timespan.

PSO reduction for large energy consuming companies (+100 GWh)

Currently, energy-intensive companies can receive a reduction in the PSO levy on parts of their energy

consumption. Energy-intensive companies eligible for this reduction are defined as companies with energy

consumption above 100 GWh per place of consumption. These companies receive a reduction in the PSO

levy on all consumption above 100 GWh. Hence, the PSO levy on the first 100 GWh is at present 21.1

øre/kWh; all energy consumption above that incurs a reduced PSO levy of 5.2 øre/kWh.

However, due to a conflict with existing EU legislation this reduction will be removed by the end of 2015.

Given the EU legislation, it will not be possible to introduce subsidy schemes where the subsidies are dif-

ferentiated according to the size of energy consumption.

Is the company in question eligible for the gains of the PSO reductions targeted at energy-

intensive companies implemented in the Growth Package 2014?

In order to be eligible to receive the targeted PSO reduction, a company is required to be recognised as

belonging to an industry/branch on the so-called Annex 3 list of the Energy and Environmental State Aid

Guidelines. Furthermore, companies on the Annex 5 list may also be eligible under certain circumstances.

However, the company in question is mostly clearly associated with the IT industry/sector, which is not

one of eligible industries on either list (Annex 3 or Annex 5).

Thus, for the company in question to become eligible, not only would political agreement in Denmark be

needed, but also approval by the EU. According to the guidelines Member State can include an undertak-

ing in its national scheme granting reductions from costs resulting from renewable support if the under-

taking has an electro-intensity of at least 20 % and belongs to a sector with a trade intensity of at least 4 %

at EU level (not at national level) and approved by EU.

The targeted PSO-reduction is based on a state-financed scheme of DKK 185 million annually and an ex-

pected consumption of 2.6 TWh. If more companies are included that consumes say

2.5

TWh annually,

and if the rules are changed so that the companies are eligible, the consequence would be that the level of

support would be approximately halved (from expected 7 øre/kWh to approximately 3.5 øre/kWh), as the

expected consumption eligible for reduced levies would be doubled. Hence, the company in question will

be eligible for the general reduction (the 3 øre/kWh in 2015-16 increasing to 5 øre/kwh from 2017), but

with the current rules and regulation not for the targeted PSO reduction., even if it does not belong to a

sector listed in Annex 3.

How large is the reduction in PSO in the case of self-production of renewable energy?

Electricity generated by RES and supplied to the public grid is eligible for PSO support. The level of sup-

port differs, depending on the specific RES technology and on the purpose of the RES plant. If a RES

Side 3

plant is connected to the public grid and delivers electricity into the public grid, public support (PSO) is

provided. For an onshore wind turbine, current rules imply that a fixed PSO premium of 25 øre/kWh

(nominal prices) is provided for electricity delivered to the grid typically for the first 7-8 years of the life-

time of the wind turbine, after which no support is provided.

The electricity produced at a RES plant may be used for own consumption or delivered to the public grid.

The share of production consumed on site, i.e. “inside” the electricity meter is regarded as own produc-

tion, e.g. production from a wind turbine located on the premises of an industrial production facility. The

RES electricity produced and used on the premises, metered on an hourly basis, will not receive the fixed

premium support. The share of the electricity produced and delivered to the public grid, i.e. “outside” the

meter and on an hourly basis, will according to current rules receive PSO support.

The business case of an industrial RES plant does not only rely solely on the PSO support, but also on the

tariff regime. Tariffs on electricity purchased and consumed from the public grid include the PSO tariff

and other tariffs (transmission and system tariffs, etc.). The tariffs fluctuate, but may be expected to

amount to approximately 25 øre/kWh on average for the period 2015-2020 (in 2014 prices).

Tariffs on the consumption of electricity that is produced internally are significantly lower, currently

amounting to 1.1 øre/kWh. Enterprises will thus experience a reduction of the tariffs on electricity con-

sumed of approximately 24 øre/kWh, if they produce electricity themselves. The benefit of the reduced

tariffs is obtained for the lifetime of the renewable energy producer, e.g. a wind turbine.

The benefits of reduced tariffs by self-production may be expected to exceed the value of the direct sup-

port to RES electricity delivered to the public grid. The value in øre/kWh is approximately the same, but

the RES support for supplying the grid is only provided for 7-8 years, whereas the tariff reduction may be

obtained for the whole life-time of the turbine. Furthermore, the value of the RES support is gradually re-

duced by inflation.

Existing and planned interconnections with neighbouring countries

Strong interconnections are key elements for enabling a high and increasing share of wind energy in the

power system, to ensure the functioning of the electricity markets, and to ensure a high level security of

the electricity supply at all times to the consumers. Denmark is closely connected to her neighbouring

countries, and the Danish transmission system serves to a large extent as a transit for electricity between

the Scandinavian countries and Germany. The need for the transport of electricity within Scandinavia, and

between Scandinavia and Europe, is increasing, and additional interconnections have been decided or are

being planned/considered.

By 2019, three new interconnections are to be implemented: A new 700 MW interconnection with the

Netherlands has been decided. A new 400 MW interconnection to Germany via the planned offshore

windpark Kriegers Flak is planned, as is an upgrading from 220 to 400 kV of the existing interconnection

between Jutland and Germany. This interconnection will increase the present capacity from 1500 MW im-

port/2000 MW export to 2500 MW both ways. The existing and planned interconnections are presented

below.

Side 4

Side 5