An introduction to the danish electricity market
The Danish electricity market is fully liberalized, with a clear separation between the wholesale (generation and trading) and retail (supply to end-users) sectors. In the wholesale market, large generators (including wind, CHP, central power plants, etc.) and traders buy and sell electricity primarily via the Nord Pool power exchange. In practice, balance responsible parties (BRPs) represent generators or suppliers on Nord Pool, submitting bids for each hourly period and scheduling next-day production or consumption. Nord Pool's day-ahead auction (for every hour of the following day) clears supply and demand via a single centralized matching process, producing area prices for each bidding zone (Denmark East/DK2 and Denmark West/DK1). 1. A continuous intraday market (the Single Intrayday Coupling) then lets participants adjust positions closer to real time. 2. In addition, financial power contracts (forwards, futures and options) are traded on exchanges like Nasdaq Commodities and the European Energy Exchange (EEX) or OTC to hedge price risk. In the retail market, any consumer can choose an electricity supplier under Denmark's "supplier-centric" model. Consumers receive a single bill from their retailer covering energy, grid fees and taxes. Distribution grid companies (DSOs) read meters and send the data to the national DataHub; suppliers retrieve this data from DataHub to settle accounts. The supplier pays the DSO for network services and Energinet (the TSO) for transmission, then charges the consumer. Under this model (introduced in 2016), the consumer's contract and contact point is always the retailer. Wholesale trading platforms: The main electricity exchange is Nord Pool (established 1996), covering the Nordic-Baltic region. All supply and demand bids are matched there: in the day-ahead market, orders for each hour are pooled and matched to determine the cheapest generation to meet demand. Nord Pool also runs intraday auctions, and its clearing results feed into the regional market coupling with Europe. Beyond spot markets, utilities and traders use Nasdaq (Nordic Commodities) and EEX for futures and longer contracts. OTC trades (bilaterals) are also common for specialized needs (e.g. very long maturities or hedging specific area prices). ## Key Market Participants Transmission System Operator (Energinet, TSO): Energinet.dk operates Denmark's high-voltage grid and cross-border links, ensuring 24/7 balance of supply and demand. It owns and runs the Nord Pool exchange (with other TSOs) and the DataHub, procures reserve power (FCR, AFRR, mFRR) and intervenes to maintain system stability. Energinet's core task is to keep the grid secure and balanced at all times. Distribution System Operators (DSOs): DSOs own the medium and low-voltage networks in defined areas. They have a regulated monopoly for power delivery to homes and businesses. DSOs handle local network maintenance and grid access, and they meter every connection. Critically, DSOs collect detailed consumption/generation data for their grid and upload it to Denmark's central DataHub. Each DSO is regulated to recover costs via grid tariffs paid by suppliers; it does not buy or sell electricity. Producers (Plant Owners): Any entity that generates power (wind farms, CHP plants, solar parks, conventional plants, etc.) is a producer. Producers sell their output into the market, usually via a BRP. In Denmark there are ~100,000 generation facilities, with roughly 60% of generation from renewables (wind, biomass/biogas, solar, hydro) and 40% from fossil/central plants. Each producer's BRP bids the energy on Nord Pool day-ahead (or in intraday/OTC) and commits to deliver. If a producer supplies more or less than scheduled, the BRP faces imbalance charges (settled later). Balance Responsible Parties (BRPs) and Traders: BRPs (often trading companies or integrated utilities) ensure that a portfolio of generators or loads is balanced. They handle the actual buying and selling of power on Nord Pool for their clients, and they submit the next-day generation/ consumption schedule to the TSO. If actual injections/withdrawals deviate, e.g. due to forecast errors, the BRP incurs imbalance costs. Traders (companies like Danske Commodities) facilitate these trades: they arbitrage differences between zones and timeframes, aiming to buy where prices are low and sell where high. Suppliers (Electricity Retailers): Suppliers buy energy (via BRPs) and sell it to end-users (households, businesses). They sign contracts with consumers and pass on wholesale costs plus a margin. They are the customer's point of contact for service and billing. Suppliers pay the BRP/ market for the energy they sell and pay DSOs and Energinet regulated fees for grid transmission. In Denmark's model, the supplier collects all payments and issues one consolidated bill (energy + grid fees + taxes). (Large industrial consumers sometimes bypass suppliers and buy on the wholesale market directly, but this is less common.) Consumers: End-users of electricity (residential or business). By law, almost all Danish customers have a supplier contract. Consumers are not responsible for grid operations or balancing; they simply draw power through the distribution system and pay their chosen supplier. These entities interact through two parallel networks of flows: energy flow (physical electricity over the grid) and financial flow (payments for energy and network services). A simplified view: producers send power into the transmission grid (Energinet) which distributes it via DSOs to consumers. In return, funds flow from consumers to suppliers (for energy) and to DSOs/TSO (for network use). Suppliers in turn pay producers for energy via the market, and grid tariffs to DSO/TSO. Table 1. Key roles in the Danish electricity market. | Role | Responsibility | | :--- | :--- | | TSO (Energinet) | Operate high-voltage grid; procure reserves (FCR, aFRR, mFRR) for balancing; manage interconnectors. | | DSO | Own distribution network; connect end-users; meter usage; report data to DataHub. | | Producer | Generate electricity (from wind, solar, biomass, etc.); sell output via BRP or contract. | | BRP/Trader | Bid and trade electricity on exchanges; submit balance schedule; pay for any imbalances. | | Supplier (Retailer) | Purchase electricity from wholesale market; sell to consumers; bill for energy + grid services. | | Consumer | Purchase electricity from chosen supplier; use electricity (pays retail tariff + taxes). | ## Balancing and Settlement Electricity supply and demand must match second by second. Energinet maintains this balance using a hierarchy of reserves: primary (FCR), secondary/tertiary (aFRR, mFRR), procured from generators, flexible loads, batteries, etc. In practice, each BRP submits a planned energy schedule for the coming day; any deviation in real-time is an imbalance. These imbalances are settled after the fact: in Denmark (as across Nordics) a centralized platform eSett handles the accounting. eSett collects each party's metered injections/ consumptions and compares them to scheduled volumes. If a BRP is short or long, eSett invoices it for the required balancing energy at the imbalance price. (Any costs for activating reserves are folded into this settlement.) The result is that BRPs are financially incentivized to forecast accurately and to help the system stay in balance. The Nordic imbalance settlement model provides a single clearing mechanism and rulebook for Denmark, Sweden, Norway and Finland. This harmonization makes it easier for new retailers or generators to enter the market, since they face one common imbalance regime across all Nordics. ## Pricing Mechanisms Electricity prices in the Danish market are set by supply and demand on Nord Pool. In the day-ahead auction, the marginal price (where a supply bid meets a demand bid) becomes the hourly market price. Nord Pool calculates both a system price (as if the entire Nordics were one zone) and area prices reflecting local congestion. Denmark is always split into West (DK1) and East (DK2) bidding areas; if interconnectors or internal lines are congested, the two areas may have different prices. For example, power will flow from the lower-priced zone to the higher-priced zone until constraints bind. Several factors influence these prices: Demand and Supply: Higher demand or tight supply bids drive the price up, and vice versa. Seasonal and daily consumption patterns (heating, industrial use, daylight) create predictable demand swings. Fuel and Production Costs: The marginal cost of running different plants (coal, gas, biomass) helps form the merit order. Low-cost renewables (wind, solar) bid very low and often set the price when available. Renewable Fluctuations: Since 2020 Denmark generates over half its power from wind, sudden gusts can flood the market with cheap power, sometimes pushing prices negative (meaning generators pay to be taken off line). Similarly, rainy hydropower in Norway/Sweden can suppress Nordic prices, while drought or low wind can raise them. Interconnectors: Denmark's grid is well-integrated with neighbors. Major interconnectors link to Germany, Sweden (via Kontek, Konti-Skan), Norway (via Skagerrak), the Netherlands (COBRAcable), and soon the UK (Viking Link). These allow significant imports/exports. Thus Danish prices often track those in surrounding markets. For example, if German prices rise, power will flow from Denmark to Germany until DK's price catches up (or the link limit is reached). The high interconnection means Denmark essentially participates in the larger Continental European price formation (via the Nord Pool coupling). Market Coupling: Through the EU's price coupling (PCR/SDAC), day-ahead markets across Europe are integrated. Nord Pool's price for DK1/DK2 reflects not only internal bids but also allocated capacity on international lines. Overall, the market price is a blend of local Danish conditions and international trends. In practice, one often observes a Nordic system price (for baseline reference) and separate DK1/DK2 prices (when internal congestion appears). Denmark leads in wind power: small turbines like the Ampair 100 (shown above on a Copenhagen harbor sailboat) capture renewables. In fact, wind supplied ~54% of Danish electricity in 2022 - the highest share in the IEA. Altogether, 81% of Denmark's power generation comes from renewables (wind 54%, bioenergy 20.7%, solar 6.3%). The remaining generation is from fossil/thermal sources. Biogas contributes via biogenic power: about 11% of Denmark's gas is renewable biogas, some of which is burned in generators (often CHP for heat and power). However, ~80% of biogas is now upgraded to biomethane for the gas grid, aligning with Denmark's goal of 100% green gas by 2030. Renewable generators (wind, solar, biomass/ biogas) have grid access priority, and they bid their output on Nord Pool like any other plant. Often these facilities receive a government "market premium" per MWh on top of the market price (to support green investment), but from the grid's perspective they simply appear as another supply source. Because renewables are weather-driven, their variability causes Danish prices to swing with the wind: on very windy or sunny days, prices tend to fall; on still, cold days they rise. Interconnectors help smooth this variability: excess wind power can be exported to Germany or Norway, earning Danish producers higher revenue, and imports can backfill deficits. In summary, Denmark's energy trading ecosystem is a complex, liberalized network of producers, grid operators, traders and retailers working together. The TSO (Energinet) and DSOs ensure physical delivery and balance, Nord Pool and related exchanges match buyers with sellers, and suppliers interface with consumers. Market rules (imbalance settlement, transparent auctions) and ample interconnections tie Denmark firmly into the wider European power market, allowing renewable-rich generation to compete and stabilize prices regionally.
