Draft bill proposes new model for prioritising access to the Danish electricity grid

Background

The draft bill is based on the premise that grid capacity has become a scarce resource. According to the Ministry, demand for grid connection has increased substantially in recent years as a result of electrification, the development of renewable energy, new large electricity consumers, Power to X projects, batteries and data centres.

Under the current framework, requests for grid connection are generally handled on an ongoing basis and, in practice, often according to the order in which requests are received and the maturity of the relevant projects. The Ministry considers that this approach is no longer adequate in a situation where the total demand for grid connection may exceed available and planned grid capacity.

The political understanding behind the proposal is therefore that grid capacity should no longer be allocated merely on a first come, first served basis. Instead, capacity should be actively allocated to those needs which, in the view of the legislator, are most important for ordinary consumption, critical societal functions, electrification, the green transition and the efficient use of the electricity grid.

Main elements of the proposal

The draft bill proposes to amend section 24 of the Danish Electricity Supply Act. The central change is a new express authority for collective electricity supply undertakings to refuse grid connection for certain projects to the collective electricity grid where there is insufficient capacity in the grid.

The right to refuse grid connection requests is to be seen together with a new statutory authority for the Minister to lay down rules on prioritisation of grid connection requests, including rules on “grid friendliness” and the allocation of already granted capacity.

The draft bill indicates that the first implementation of the model is expected to introduce four prioritisation categories:

Category 1 will cover protected needs, including ordinary and expected consumption growth in the existing customer base, new households, smaller businesses and critical societal functions.

Category 2 will cover other projects, including projects supporting electrification and the green transition, such as industrial electrification, transport, heating, CCS, hydrogen, biogas and Power to X.

Category 3 will cover projects which typically have no function other than providing system services, including certain energy storage projects.

Category 4 will cover certain large energy consumers characterised by very large capacity needs and a significant impact on the grid capacity situation. The first implementation is expected to include data centres in this category, although data centres supporting critical societal functions may fall within category 1.

The model is not intended to operate as a strictly sequential system. Projects in lower priority categories may still obtain grid connection if they can be accommodated within available capacity and do not displace higher priority needs. However, grid connection for projects in categories 3 and 4 may be refused if they cannot, through sufficient grid friendliness, be accommodated without limiting the ability to meet higher priority needs.

A new role for “grid friendliness”

A key element of the proposal is the concept of grid friendliness. This refers to the overall impact of a project on grid capacity and the extent to which the project contributes to an efficient use of the grid.

Relevant factors may include the project’s load profile, flexibility, geographical location, technical characteristics, contribution to grid robustness and willingness to adapt consumption or production to periods with available capacity.

For projects in categories 3 and 4, grid friendliness may become decisive. A project may be allowed to remain in the connection queue if it can be accommodated through flexible grid access, interruptibility or a similar solution. Conversely, a project which cannot demonstrate sufficient grid friendliness may be rejected.

Impact on existing and pending projects

A key issue is whether the proposal will affect projects that have already applied for grid connection.

The answer depends on the status of the project.

For projects where no binding grid connection agreement has been entered into, the draft bill indicates that the new prioritisation model may apply. The proposal states that a right to grid connection will only arise once a binding grid connection agreement has been concluded or a decision on grid connection has been made. A pending request will therefore not, in itself, create a protected right to grid connection.

This means that projects which have already submitted a connection request, but have not yet secured a binding connection right, may be subject to the new prioritisation model. In practice, this may lead to delay, changed queue position or, for category 3 and 4 projects, rejection if the project cannot be accommodated within the model.

For projects with already allocated capacity, the proposal is more nuanced. The draft bill states that it will not be possible to deprive customers of capacity already allocated to them. However, the draft bill also contemplates that certain dispositions relating to already allocated capacity may be treated as new connection requests for prioritisation purposes. This may include situations where a connection point is to be re established, where reduced capacity is to be increased, or where previously unused capacity is to be taken into use.

The proposal therefore does not appear to introduce a general cancellation of existing connection rights. However, it may have significant practical consequences for projects relying on unused or only partly utilised capacity, and for projects where the intended use of allocated capacity changes over time.

Expropriation considerations

The draft bill expressly addresses the question of expropriation in relation to already allocated capacity.

The Ministry’s position is that, where the user does not lose the right to the agreed capacity but merely experiences a deferral of the ability to bring unused capacity into use, the measure will generally not amount to expropriation. However, the Ministry also states that it cannot be excluded that the model may, in certain situations and following a concrete assessment, have expropriatory character. If expropriation is found to exist, the affected undertaking will be entitled to compensation under section 73 of the Danish Constitution.

For project owners affected by Energinet’s grid connection pause or the proposed prioritisation model, it will be important to assess the specific circumstances of the project. This includes the process leading up to the pause, the status of any pending connection request or grid connection agreement, and the concrete impact of the new rules on timing, queue position and access to capacity.

Next steps

The draft bill proposes that the amendments should enter into force on the day after publication in the Danish Official Gazette. The detailed prioritisation model is expected to be implemented through executive orders.

Businesses with existing or planned grid connection projects should consider reviewing the status of their connection process, including whether a binding grid connection agreement has been entered into, whether capacity has been allocated, whether the project relies on unused capacity and whether the project may be able to document sufficient grid friendliness.

The consultation process will be particularly important for projects that may fall within categories 3 and 4, and for businesses that have already made significant investments in reliance on pending or expected grid connection rights.

Plesner is monitoring the development closely. If you have any questions, please do not hesitate to contact our Energy and Infrastructure team.