Electricity grid on the issue of electricity market reform; source: Getty Images/Hans-Peter Merten/The Image Bank

© Getty Images/Hans-Peter Merten/The Image Bank

The German and Danish government have reached an agreement to improve electricity trade between Denmark and Germany.

In recent years, electricity trade has been significantly low between Denmark-West and Germany due to grid congestions in Northern Germany. Good conditions for wind power in Northern Germany and Denmark have resulted in rapid deployment of renewables in the region, however, the grid development has not been able to keep pace with the deployment of renewables leading to reduced electricity trade capacities at this border.

Denmark and Germany have now agreed on a solution to this issue which will allow to increase trade between their countries while ensuring grid security. The aim of the agreement is to gradually make the full capacity of interconnectors between Western Denmark and Germany available for electricity trade as soon as the relevant infrastructure development has been completed.

In the interim period, the cross-border electricity trade capacity available for the market shall be increased in a stepwise approach. For this, minimum available hourly capacities have been agreed. These will increase over time. In case the agreed minimum capacity cannot be physically transported due to grid constraints, countertrading will be used to avoid congestions in the grid while ensuring the agreed minimum level of trade in every hour. As grid development in Germany progresses, congestions will decrease, allowing a gradual increase in trade across the border.

With regards to this declaration the German State Secretary of Economy and Energy, Rainer Baake, stated: “The agreement is an important step towards deepening the internal energy market and the cooperation with our neighbours. Denmark is one of our closest allies in improving the functioning of the internal energy market and fostering energy transition. I am therefore particularly pleased that we have found a common solution for the trade capacities between our countries. This agreement sends two important signals: First, Germany adresses the challenges related to its huge grid development in close cooperation with its neighbours and aims to limit possible negative implications for cross-border trade. European electricity trade is one of the building blocks for European energy transition, cost-efficient security of supply and market integration of renewable energies. We need to make sure that neighbours can rely on cross-border trade with us and we can rely on cross-border trade with them. Second, the agreement acknowledges that Germany is undergoing a fundamental energy transation and is making enourmous efforts for expanding its internal grids - not only to implement the German Energy transition, but also to foster electricity trade for Europe. This agreement recognises that his fundamental grid expansion needs time.”

The Danish Minister for Energy and Climate Lars Christian Lilleholt said to this agreement: “The agreement is a commitment to the European Energy Union based on an genuine internal energy market. Denmark supports the intention of building an integrated European power market to allow electricity to be traded freely across borders, based on competition and the best possible use of resources. This agreement between Denmark and Germany is an important step forward in solving the challenges that have impacted the interconnector between Germany and Denmark. However, it is important to timely realize the necessary grid development and make sure that infrastructure keeps pace with the rapid green transition of the electricity system and the potential of cross-border trade can be utilized. Taking the circumstances into account, Denmark considers a stepwise approach as a good solution”

State secretary Baake refered to the agreement with Austria on a capacity allocation at the Austrian German border that was announced a few weeks ago: “Germany is making considerable efforts to solve existing problems and limit the effects of the internal grid congestions on neighboring countries. In this context, we can neither reduce electricity trade at one border to zero, nor can we ignore the limits of electricity trade of another border.”

The agreed minimum capacity shall be guaranteed as of July 2017. The minimum available capacity shall be increased to 400 MW in November 2017. The minimum capacities are set at 700 MW in 2018, 900 MW in the first three month of 2019, 1000 MW as from 1 April 2019 and 1100 MW as from 2020. Denmark and Germany agreed that the costs of this measure should not exceed 40 Mio. Euro per year. If forecasts show that the costs may exceed this level, both parties will strive to find a common solution to adress this.

The agreement is between the Federal Ministry of Economic Affairs and Energy of the Federal Republic of Germany, the Danish Ministry of Energy, Utilities and Climate, Bundesnetzagentur and Danish Energy Regulatory Authority (DERA).

The relevant transmission system operators of both countries, TenneT and Energienet, will be jointly responsible for the implementation of this agreement.

The agreement shall be discussed with the European Commission.