German power spat with Denmark holds up single market trade

A long-running squabble between Denmark and Germany over power cables linking the countries has cut the amount of electricity Nordic producers can supply to Europe’s biggest market to the lowest level in 17 years.

Germany cut import capacity from mainland Denmark by 89 percent on average last year, the most since a power market between the nations started in 2000. It’s a consequence of Chancellor Angela Merkel’s unprecedented Energiewende: the shift to wind and solar power mean surges in renewable energy production make it hard for the nation’s grids to handle its own electricity, let alone imports.

The dispute is undermining the European Union’s goal of breaking down national barriers for power to boost energy security and cut costs through more cross-border trading. Talks between Germany and Denmark have floundered, with no resolution emerging from their latest meeting on the matter in Berlin last week.

“The Danish position is to solve it as quickly as possible,” Lars Christian Lilleholt, Denmark’s energy minister, said in an interview after a meeting with Germany’s environment minister last Tuesday. “We have had some fine negotiations, but we need to see some results.”

Denmark hasn’t made an official complaint to the EU about the restriction of cross border flows, preferring to continue negotiations that started in 2012 after available capacity was cut to 49 percent the previous year. The European Commission is awaiting the outcome of the talks before taking any measures, a spokeswoman said last week.

The restriction is costing Nordic power producers about 20 million euros ($22 million) a year in lost revenue, according to Sweden’s energy regulator. A resolution may come with Germany’s planned 22 billion-euro expansion of the nation’s grid, which will increase transportation of wind power from the north to the industrial south, but not until 2025 at the earliest.

Click here for more on Germany’s green-energy drive

The congestion at the German-Danish border is most apparent on breezy days when generation from wind turbines in both countries exceeds local demand and there’s nowhere to send the excess power. That can cause prices to turn negative, which is when generators must pay consumers to take electricity.

Germany limits imports by restricting the capacity on the link that it offers in the day-ahead and intraday markets. Denmark hasn’t reciprocated in the same way because its phaseout of traditional power plants in favor of renewables means it’s dependent on foreign supplies to meet peak demand on windless days.

While Germany is increasingly restricting imports, last year it sold almost five times as much power through west Denmark as it bought, contributing to a net export record. The west Denmark link is the largest interconnector between the Nordic area and mainland Europe, accounting for 40 percent of the installed capacity between the markets.

Germany “is in touch with Denmark over the issue of electricity trading capacities,” Beate Baron, a spokeswoman for Germany’s Energy Ministry in Berlin, said by email. She declined to comment on details as the talks are private.

Grid Expansion

The expansion of Germany’s network will involve doubling the capacity of its main connection to Denmark by 2022 and the installation later of high-voltage direct current cables from the north of the country to the south to bolster the existing network.

“The grid expansion, especially in northern Germany, is going on and will be the solution to the existing problem,” said Ulrike Hoerchens, a spokeswoman for TenneT TSO GmbH, one of four grid companies in Germany and the operator of the border link with Denmark.

Grid managers in northern Europe are working on ways to sidestep the German congestion. Denmark and the Netherlands are planning a 700-megawatt power line for 2019, the first interconnector between those countries. Norway and Britain agreed last year to build a 1,400-megawatt link that will be the longest sub-sea power line.

“Current practice is not a good way to handle grid limitations,” said Kristian Gustafsson, a policy manager at Vattenfall AB, the biggest onshore wind power producer in Denmark. “The solution must allow for trade to continue according to EU rules.”

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