Fast track processing of draft legislative bills in the energy sector and news on producer payments at transmission level
This week, the Danish Parliament is fast track processing three draft legislative bills related to the energy sector in Denmark, which will take effect from 1 January 2023. We are also approaching a clarification on the new rules on producer payments at transmission level, as the Danish Utility Regulator expects to decide on the approval of Energinet's method for producer payments before Christmas.
A new government has been formed in Denmark, which means that some of the draft legislative bills that have been on hold during the autumn can now be dealt with in the Danish Parliament. Ten draft legislative bills will be fast track processed in the Danish Parliament before Christmas, and here we describe the changes in three of the draft legislative bills, which concern changes in the energy sector.
Regulation of hydrogen, the reorganisation of Energinet and carbon storage
Firstly, the Danish Parliament is fast track processing draft legislative bill L8 on the regulation of hydrogen, the reorganisation of Energinet and carbon storage. The draft legislative bill proposes that the regulation of hydrogen follows in general the European Commission's proposal for common rules for the internal markets in renewable gas, natural gas and hydrogen, and that hydrogen is regulated in the Danish Gas Supply Act. It is stated that updates will be needed once the EU rules on hydrogen infrastructure are in place. The regulation of hydrogen will also be based on future political agreements on hydrogen. It is also proposed to give Energinet and Gas Storage Denmark authority to operate CO2 storage in Denmark on an equal footing with other CO2 storage operators. It is proposed to start investigating potential onshore storage sites in the Danish subsurface in the area around Stenlille, where Gas Storage Denmark owns a gas storage facility.
CCUS pools and the possibility of municipalities assuming financial obligations
Secondly, the Danish Parliament is fast track processing draft legislate bill L 7 on the implementation of CCUS pools and the possibility of municipalities assuming financial obligations. The proposal enables the Minister for Climate, Energy and Supply to organise a tender for support for the capture, transport, use and storage of CO2 for the purpose of implementing the CCUS (Carbon, Capture, Utilisation and Storage) pool. In addition, the draft legislative bill allows municipally owned electricity and heat utilities, including waste incineration and biomass plants, to participate in the proposed tenders. Under the proposal, it will be the municipalities, including the municipally owned company, that will have the possibility to be financially liable for the entire value chain, as this is a precondition for entering into a contract with the state for the allocation of support from the CCUS pool. The decision to commit financially in connection with the contracting of a municipally owned undertaking with the state is to be taken by the municipal council in a meeting.
Participation in carbon storage activities
Thirdly, the Danish Parliament is fast track processing draft legislate bill L 6 on participation in carbon storage activities. The draft legislative bill proposes that the North Sea Fund can and must participate in all licences and activities relating to CO2 storage in Denmark. The purpose of the proposal is to support the development of CO2 capture, transport and storage in Denmark. The proposal provides for the North Sea Fund to receive revenues from its share of CO2 storage activities, set at 20% as a starting point, in addition to revenues from the sale of shares of oil and gas production and tariffs.
It is proposed that the above legislative changes enter into force on 1 January 2023.
News on producer payment at transmission level
News is also expected before Christmas on the forthcoming producer payment at transmission level. Until 8 December 2022, the Danish Utility Regulator has held a public consultation on Energinet's method for producer payments. The Danish Utility Regulator is working to make a decision on the topic before Christmas. The main elements of the payment design in Energinet's method are:
1) a standard connection fee, which consists of:
- a station connection contribution, which is a standardised connection contribution to cover average connection costs in Energinet's station.
- a standard connection contribution, which is a standard contribution per MW according to the size of the connection to cover average costs in the local grid.
- a transformer contribution, which is a special connection contribution for the connection of distribution-connected plants.
2) an ongoing feed-in tariff, which is an ongoing payment to cover the downstream grid.
3) an additional connection charge, which may be levied in specific cases.
The draft decision states that the Danish Utility Regulator approves the notified method subject to the above condition. The Danish Utility Regulator has limited the approval of the method for a period of five years from its entry into force, i.e. until the end of 2027.
Do you want to know more?
Read more about the draft legislative bills (in Danish)
Read the Danish Utility Regulator's draft decision on the approval of Energinet's method for producer payments (in Danish)