What is the Future of Green Transition in Denmark? Issues with Interconnectedness May Create Uncertainty

The Danish government has announced its ambition to construct a minimum of 9 GW offshore wind ca-pacity by 2030. This achievement will be closely connected to and dependent on the ambition of having 4–6 GW of electrolysis capacity by 2030. Surplus green electricity production from the projected offshore wind capacity will be used to produce hydrogen through green hydrogen facilities. In this regard, hydro-gen infrastructure is a crucial part of realising the ambitious so-called power-to-x targets enabling green hydrogen to be exported to Denmark’s European neighbours.

The construction of a minimum of 9 GW of additional Danish offshore wind capacity with a commercial operation date (COD) before the end of 2030 originating from the political agreement of 30 May 2023 is currently being tendered, with 6 GW covering sites in the North Sea, Kattegat and the Baltic Sea, and 3 GW covering sites close to the Island of Bornholm. The deadline for bids for three of the tenders located in the North Sea (North Sea I – A1; North Sea I – A2; North Sea I – A3) was 5 December 2024 and the deadline for the remaining three tenders (Hesselø; Kattegat II; Kriegers Flak II) is 1 April 2025. In order to achieve the final construction of the offshore wind farms before the end of 2030, the Danish Energy Agency has initiated planning, environmental assessments and preliminary investigations for the areas designated for establishing the offshore wind farms in the ongoing tenders.

The Danish state is set to become a co-owner in the offshore wind projects through a newly established state-owned company by equity contribution ensuring an ownership share of 20% in each project. Although this ownership model is novel in the offshore wind industry, it has historical roots in the oil and gas extraction industry and has been used in the North Sea for years. Here, the state-owned fund, Nordsøfonden, owns 20% of most of the oil and gas licences in the North Sea area. It likely stems from the idea of enjoying a 20% profit share for the Danish taxpayers and accommodating the changed geopolitical landscape to mee considerations for energy independence and security.

As the December 5 bid submission deadline for the three sites located in the North Sea came to pass, it was evident that the tender proved unsatisfactory as the Danish Energy Agency did not receive any bid for any of the sites. Poor macro-economic conditions (lack of profitability, increasing interests, increasing supply chain costs, etc) and unfavourable tender conditions have been identified as the main drivers for the lack of bids. The Minister of Climate, Energy and Utilities, Lars Aagaard, states that it is “in all ways disappointing, and of course critical”, and that the government will enter a dialogue with developers. So far, the tenders of 1 April 2025 will go ahead as planned, but it is widely expected that changes will be made to the tender conditions for these sites, or if no changes are made, that these sites will end up like the sites in the North Sea.

The massive construction of offshore wind requires solid offtake opportunities and, amongst other things, incentivises the need for sufficient hydrogen infrastructure. In April 2023, an agreement on the economic framework conditions for hydrogen infrastructure was reached. In the agreement, it was decided that Denmark would develop the necessary framework for the establishment of hydrogen infrastructure for pipeline transportation and underground storage.

Establishing hydrogen infrastructure in Denmark, which will facilitate export to Germany via a so-called “hydrogen backbone” in Jutland, is also a strong demand in the industry, and is emphasised as a crucial element in ensuring the profitability of future offshore wind projects. In March 2023, the Danish and Ger-man energy ministers signed a joint declaration of intent in which the countries confirmed their ambition to work together to ensure the commissioning of cross-border, onshore hydrogen infrastructure between Western Denmark and Northern Germany as of 2028. In November 2023, the ambition was backed by a co-operation agreement entered into between the Danish and German transmission system operators (TSOs) for gas: Energinet and Gasunie Deutschland.

Although the establishment of cross-border hydrogen infrastructure between Denmark and Germany has been postponed from 2028 to 2031, public opinion has expressed that there is a very high demand for green hydrogen via Danish hydrogen infrastructure. The analysis and market dialogue carried out by En-erginet support this by highlighting the potential for hydrogen transportation demand in the Danish market of up to 6.9 GW in 2025.

The delay is not only unfortunate for most hydrogen developers, who will have to postpone their projects, but it will also likely make it more difficult for the government to meet its goal of 4–6 GW electrolysis capac-ity by 2030. Several stakeholders in the industry have pointed out that the postponement may paralyse the green hydrogen movement in Denmark. This is notably due to new emerging supply chains in Germa-ny that will have to look in other directions to fulfil EU demands of a minimum of 42% green hydrogen by 2030. The uncertainty of the project may also lead to difficulties when trying to attract private investors.

Furthermore, the future of the hydrogen infrastructure and the tender for the offshore wind farms are inex-tricably linked as it will likely not prove profitable to construct a hydrogen pipeline to Germany if there is not enough electricity supply to produce green hydrogen. Similarly, having a hydrogen pipeline to Germany is key for the wind farm tenderers' business case as the pipeline will help increase the offtake opportunities through green hydrogen production facilities.