Denmark power sector

Free allocations to new entrants may also distort competition between Member States by giving different investment incentives in different Member States. In the electricity sector, this could have a serious effect on security of supply in some Member States. As an example, a comparison of the first NAP versions showed that a new power plant would get more free allowances in Germany and Finland than in Denmark - and fewer in Sweden than in Denmark. This is a point of great concern in the Danish power sector. The Association of Danish Energy Companies has estimated that a new gas-fired combined cycle plant in Denmark receives only around 80% of the free allowances it would receive in Germany and Finland. A Danish coal-fired power plant receives only half of the allowances it would receive in Germany and Finland. For both types of plant, a Swedish power plant receives even fewer allowances. 

It appears that there is not much to do in order to reduce uncertainties at least in the near future. Uncertainty regarding future allocations can however affect the investment decisions by companies. A recent report from RIS0 National Laboratory (Morthorst etal. 2005) indicates that uncertainties in the electricity market, including uncertainties in future carbon prices and allocations, may postpone investments in the power sector and reduce the security of Denmark s electricity supply. 

There are companies that offer purer plays in certain industries, specifically wind and solar energy.These include Vesta of Denmark and Gamesa of Spain in the wind-power industry, and Massachusetts-based Evergreen Solar in the solar sector. Stock prices for such companies often already reflect expected rapid rates of growth in these sectors of the energy market. If you are considering such an investment, you should consult your investment professional to determine whether it is a good time to purchase such a stock. 

The European Union supplies tax breaks and investment plans for renewable sources such as wind power. There are plans to install 40,000 megawatts by 2010. Denmark receives 10% of its power from wind energy with an installed capacity of 1,700-MW. Germany is not far behind and is the wind sector s fastest growing market. 

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