Why is it so challenging being the world s most competitive energy technology?

Christian Kjaer CEO, Danish Wind Turbine Owners Association 6. February 2018 Why is it so challenging being the world s most competitive energy technology? WINTERWIND, Åre, Sweden

The onshore and offshore wind turbines of DV members produce electricity equivalent to 30% of Denmark s total power consumption The association represents over 30.000 owners, co-owners and investors in wind energy 10 staff, including 4 technical consultants operating globally

Danish Wind Turbine Owners Association Represents 30,318 owners of and coinvestors in wind turbines 3,862 MW wind turbines 75 % of Danish wind turbine capacity 2,596 MW onshore wind in Denmark 1,266 MW offshore wind in Danmark The members produces more than 30% of all Danish electricity 728 MW Onshore turbines abroad Established in 1978

Low-cost energy Oplæg til Danmarks Vindmølleforening

Low-cost energy Oplæg til Danmarks Vindmølleforening

Low-carbon energy 1954 1954 1956 1958 1960 1962 1964 1966 1968 1968 1970 1970 1972 1972 1974 1974 1976 1976 1978 1978 1980 1980 1982 1982 1984 1984 1986 1986 1988 1988 1990 1990 1992 1992 1994 1994 1996 1996 1998 1998 2000 2000 2002 2002 2004 2004 2006 2006 2008 2008 2010 2010 2012 2012 2014 2014 2016 2016 590 150000 Global Global annual installed increase capacity in capacity 1954-2016 1954-2016 Nuclear, wind and Solar (MW) 130 000 490 000 110 000 390 000 90 000 290 000 70 000 190 50000 30 000 90 000 10 000-10 000-10 000 Nuclear Wind Solar PV Nuclear Wind Solar PV Oplæg til Danmarks Vindmølleforening

Global power sector investment to 2040 Oplæg til Danmarks Vindmølleforening

Even the IEA acknowledge the change to renewables Oplæg til Danmarks Vindmølleforening

MW Total installed wind power capacity in Denmark 1977-2017 6 000 5 000 4 000 3 000 2 000 1 000 0 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 Landmøller > 25 kw Havmøller Oplæg til Danmarks Vindmølleforening

MW Annual installed wind energy capacity in Denmark 1977-2017 800 700 600 500 400 300 200 100 0 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 Landmøller > 25 kw Havmøller

1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Wind s share of power demand Number of turbines Number og wind turbines and wind s share of power demand 1990-2016 50% 7 000 40% 6 000 5 000 30% 4 000 20% 3 000 10% 2 000 1 000 0% 0 Vind-andel Antal vindmøller

Wind Power in Denmark 2017 2016 TWh % of DK s wind energy % of DKs electricity consumtion Onshore 9.6 TWh 65% 28.3% Offshore 5.2 TWh 35% 15,3% Wind energy 14.7 TWh 100% 43,4% Total demand 33.9 TWh 100%

Danish electricity supply Elforbrugets sammensætning fordelt på brændsler 100% 4,0% 1,0% 3,8% 15,3% 3,2% 8,5% 17,6% 14,9% 13,8% 80% 60% 40% 20% 51,0% 44,7% 47,2% 44,2% 1,5% 2,7% 2,5% 2,6% 21,9% 19,3% 19,5% 19,2% 4,1% 4,4% 4,6% 4,5% 9,3% 5,4% 5,3% 6,1% 0,1% 0,1% 0,1% 0,1% 3,8% 4,2% 4,8% 7,6% 16,1% 15,1% 14,6% 14,4% 37,3% 38,4% 28,3% 0,7% 0,6% 0,5% 10,1% 16,7% 12,3% 4,1% 4,3% 4,2% 9,5% 9,2% 8,8% 1,5% 0,1% 0,1% 12,8% 10,2% 9,9% 18,4% 19,9% 19,9% 30,1% 0,4% 6,5% 4,3% 9,2% 1,8% 15,4% 23,6% 19,2% 23,4% 0,5% 0,5% 5,7% 7,0% 4,3% 4,1% 8,9% 1,8% 10,3% 14,4% 2,2% 13,7% 27,7% 23,9% 19,3% 0,3% 6,4% 4,2% 10,8% 2,3% 15,2% 28,2% Nettoimport af el Kul Olie Gas Affald Biobrændsler Vandkraft Solceller Havvind Landvind Net imports Coal Oil Gas Waste Bio-energy Hydro Solar PV Offshore wind Onshore wind 0% -2,6% -3,2% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-20% Danmarks Vindmølleforening. Baseret på tal fra Energinet og ENTSO-E

Expected market development to 2030

New Danish tenders 2018 and 2019 Technology neutral Onshore wind, nearshore wind and solar PV Two tenders 2018 and 2019 Max premium paid: DKK 0.13/kWh ( ct 1.7/kWh) App 140 MW (onshore equivalents), assuming DKK 0.11/kWh ( ct 1.5/kWh) premium.

German tenders for onshore wind May 2017 807 MW contracts awarded in the first German onshore tender Winner bids: ct 4.2-5.78/kWh (31,2-43 øre/kwh) August 2017 1,031 MW contracts awarded in second German onshore tender. Winner bids: ct 3.5-4.29 (26-31,9 øre/kwh) Avg bid: ct 4.28 (31,8 øre/kwh) November 2017 1,000 MW contracts awarded in second German onshore tender. Winner bids: ct 2.2-3.82 (16,4-28,46 øre/kwh) Avg winner bid: ct 3.4/kWh (25,33 øre/kwh)

Low Danish power prices wind at a 10-15% discount ct 4/kWh ct 2/kWh

Denmark: Lowest power prices in Europe

Strong interconnectors needed to harmonise prices across Europe 2019 Oplæg til Danmarks Vindmølleforening

Reversal of the polluter pays principle, i.e. subsidies are removed for renewables while new subsidies are invented for fossil / nuclear CHALLENGES No incentive at local level to plan for new sites (DK) Offshore wind is perceived to be as cheap as onshore Lack of long-term power contracts NordPool and PPAs Banks / EIB increasingly reluctant to finance new projects due to insecure revenue streams Low certificate and power prices (S) Uncertainty from auction model (DK)

From Polluter-pays to Polluter-benefits principle CO2 market collapse: allowances are given for free to polluters and external credits disrupt the price signal Allowance surplus of 3 bn. tonnes (app 2 years of emissions) Meanwhile EU is busy inventing fossil fuel subsidies (the Commission calls them capacity payments) The average price for electricity in Denmark is 10-15% below the average Danish pool price.

MORE CHALLENGES Existing wind power capacity challenged by low income, technology issues (e.g. icing / welding) and rising costs Heavy tax penalties for using electricity for heating (DK) Need for effective de-icing / anti-icing technology and production guarantees from the manufacturers More innovation in cold-climate technology

Political objective Independence from coal, oil and gas by 2050 49,5% wind power by 2020 20% reduction in GHG by 2020 compared to 1990 30% RE by 2020; 51,9% renewable electricity Status 31,3% RE (2016) 43,4% wind power i 2016 19,3% reduction in GHG in 2016 (EEA, dec 2015) 2016: 31,3% RE / 52,4% Renewable electricity

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