Energy Taxes for the Transition to a Low-Carbon Society

The hourly wholesale price of electricity reflects how clean Danish electricity is. However, things are different for end-consumers, as the wholesale price is only about 20% of the price they pay. This means that consumers can’t make significant savings by shifting their consumption from hours when the wholesale electricity price is high, to periods where it goes down, or is even negative. This is sub-optimal as with a high penetration of fluctuating renewables, we will require significant storage systems to have green electricity even in hours where the wind doesn’t blow. The simplest way to reduce those storage needs is to make sure consumers consume at the right time, ideally by giving them an incentive to invest in smart devices (heating, cooling, washing, electric vehicle charging..). The current tax scheme on electricity and energy is prohibiting smart and flexible consumers to help balancing the system.