A tricky, turbulent transition

Their policy is similar to that of neighbouring Germany, which has spent tens of billions pursuing wind and solar power, and is likely to hit 30 per cent renewable power on the electric grid this year. But Denmark is the more interesting case. The 5.6 million Danes have pushed harder than the Germans, gotten further — and they are reaching the point where the problems with the energy transition can no longer be papered over.

The trouble, if it can be called that, is that renewable power sources like wind and solar cost nothing to run, once installed. But as more of these types of power sources push their way onto the electric grid, they cause power prices to crash at what used to be the most profitable times of day.

That can render conventional power plants, operating on gas, coal or uranium, uneconomical to run. Yet those plants are needed to supply backup power for times when the wind is not blowing and the sun is not shining.

With their prime assets throwing off less cash, electricity suppliers in Germany and Denmark are on edge. They have applied to shut down a slew of newly-unprofitable power plants, but nervous governments are resisting, afraid of being caught short on some cold winter’s night with little wind.

Throughout Europe, governments have come to the realisation that electricity markets are going to have to be redesigned for the new age, but are not pursuing this task with urgency. A bad redesign could itself throw customers into the dark, after all, as happened in California a decade ago.

Denmark is geographically lucky. It has strong electrical linkages to neighbouring Sweden, with plentiful nuclear power capacity, and Norway, with power available on demand from dams. But Swedish politicians have vowed to shut down the country’s nuclear plants and go renewable, and Norway’s cheap hydroelectric power is in rising demand.

So the trick now is to get the market redesign right. A modest version of reform would essentially attach a market value, and thus a price, to standby capacity. But Rasmus Helveg Petersen, the Danish climate minister, said he was tempted by a more ambitious approach. That would involve real-time pricing of electricity for anyone using it — if the wind is blowing vigourously or the sun is shining brightly, prices would fall off a cliff, but in times of shortage they would rise just as sharply.

Yet, even if Denmark can figure out a proper design for the electric market, it has another big task to meet its 2050 goal: squeezing the fossil fuels out of transportation.

“Technology needs to save us here,” Petersen said.