Grid congestion explained: Why Denmark can, in some situations, struggle to use all the renewable energy it already produces

Denmark produces large amounts of electricity from wind turbines and solar panels. At the same time, parts of the electricity grid can be under pressure, which can create limits on how much power can be transported and connected locally. The problem is not necessarily a lack of energy in the system in every hour. The problem is a lack of space in the cables that have to carry that energy.

This phenomenon is called grid congestion, or network overload. In this article, the term refers to physical bottlenecks in the electricity grid, not to market prices as such. It matters for business because it can affect operating economics through grid tariffs and through limits on electrification options in specific grid areas.

This article covers the technical and structural causes of grid congestion in Denmark. We look at the socioeconomic consequences, the long-term infrastructure plans, and how industrial battery storage works as a local tool for handling the physical limits of the electricity grid.

What is grid congestion in the electricity grid?

In practice, the electricity grid functions like a road network for electrical energy. Just as a motorway has a maximum capacity for the number of cars per hour, power lines and transformer stations have a maximum physical limit for how much electricity they can carry at once. That limit is set by the thermal properties of the cables and by the system's ability to maintain a stable voltage.

In practice, it is useful to distinguish between the transmission grid, the distribution grid, and the market mechanisms. The transmission grid is the high-voltage connections that move large amounts of electricity over longer distances. The distribution grid is the local networks that deliver electricity onward to businesses and households. The market mechanisms determine how trading, pricing, and balance are handled, but they cannot change the physical limits of the grid.

In a legal and market context, grid congestion arises when the electricity grid cannot transport the desired electricity without hitting physical limits in the network. That means that even if a wind farm produces cheap electricity and an industrial business wants to buy it, the trade cannot always be carried out physically, because the grid between them is full.

When the market's desired trade exceeds the grid's physical capacity, a bottleneck arises. The system operator must then handle the situation within the applicable operating and safety requirements. That can include, among other things, downward regulation of production or activation of reserves in parts of the system, but the concrete handling depends on the situation and the grid conditions.

Why does the problem arise specifically in Denmark?

Denmark has a particular geography and an electricity production mix that has changed markedly over recent decades. A larger share of new production today is decentralised and weather-dependent, and that can increase the need to move electricity across the country.

Geographic imbalance: Production of wind and solar electricity is not evenly distributed across the country, and that can create long transport distances in the transmission grid. It means bottlenecks can arise between the areas where electricity is produced and the areas where it needs to be used.

Bidding zones and price differences: The Danish electricity market is divided into two bidding zones: DK1 (Jutland and Funen) and DK2 (Zealand and the islands). These are the price areas used for wholesale trading in Denmark. Energinet's material on mFRR in DK1 and DK2 shows that bottlenecks can require zone-based handling of capacity in operations. Energinet is Denmark's national transmission system operator. The result is that price and capacity differences can arise between the zones when the transmission grid cannot fully even out the load across the country.

Electrification of society: At the same time as production shifts, total electricity consumption in many sectors is rising gradually, for example through heat pumps in heat supply and electric drive in transport and process plants. That can create new loads on the local distribution grid, which in many areas was originally dimensioned for a much lower and more predictable consumption pattern.

Commercial consequences for business

Grid congestion is not only a problem for system operators. It has direct economic consequences for businesses that depend on the electricity grid.

To understand the consequences, it is necessary to look at the concept of grid adequacy in the local networks. Grid adequacy is the ability to get electricity transported to where it needs to be used, without the grid becoming a bottleneck. When that adequacy is missing, three primary challenges arise for industry:

Rising and variable tariffs: Many grid companies use time-differentiated tariffs to reflect load in the local distribution grids, but the level and design vary between areas and companies, and not all business customers face the same tariff structure. Danish grid tariffs are the charges for transporting electricity through the network. That means the price of transporting electricity can be higher in some hours than in others, without every business experiencing it in the same way. For a manufacturing company with continuous operations, that can make the electricity bill more sensitive to when consumption occurs.

Limited access to expansions: Businesses that want to expand production or install large charging facilities for electric trucks can meet local capacity limits in the distribution grid. In practice, that can mean an expansion requires new investment in transformer stations or cables before it can go ahead.

Socioeconomic losses: At the macro level, bottlenecks can lead to extra costs. Energinet's method descriptions link such costs to situations where the grid or system operations must handle imbalances and constraints that could otherwise have been avoided. In system operations, wind turbines can in some situations be down-regulated even when there is production, if the grid or the balancing need cannot handle the energy at that time. That type of cost can enter the overall grid costs, especially when the constraint sits in the local distribution grid or in transfer between grid areas.

The long-term solution is more grid capacity and better flexibility

A substantial part of the solution to grid congestion is to build more grid capacity where it is needed. That can mean thicker cables, larger transformer stations, and new connections across the country, but in practice it often has to be combined with better flexibility in consumption and storage.

This work is already under way. Denmark is planning a significant grid expansion toward 2030 and further toward 2050. These large transmission lines are part of the capacity that will move electricity from wind and solar parks to consumers.

The challenge with grid expansion is time. It takes many years to plan, approve, and build high-voltage connections. For a business that needs more capacity today, a grid expansion in 2030 is therefore normally not a solution to current operating constraints, even though it can change the conditions in the area over the longer term.

Flexibility and storage as a possible supplement

Because physical expansion of the electricity grid takes time, there is a continued need for solutions that can use existing capacity better. This is also recognised on the political and regulatory side. Danish grid planning recognises flexible consumption and energy storage as possible supplementary measures to system expansion.

Instead of building the grid large enough to handle the absolute peak load in the coldest and darkest hour of the year, consumption can be moved away from the critical hours. Here, industrial battery storage can form part of the flexibility toolkit.

Batteries function as a short-term flexibility tool that in some cases can reduce or defer the need for grid upgrades. An industrial BESS (Battery Energy Storage System) placed at a business works as a local buffer between the collective electricity grid and the business's internal consumption, but it does not change the underlying capacity limits in the grid area.

When the electricity grid is under pressure and tariffs are high, the business can draw electricity from its own battery instead of from the grid. When pressure on the grid falls and electricity is again cheap and plentiful, the battery is charged. In that context, flexible consumption and batteries can form part of the toolkit for handling congestion in the system, especially at facility and grid-area level.

Limitations and assumptions for battery storage

Although a BESS is an effective tool for navigating an overloaded electricity grid, it is important to understand the technology's limitations. A battery does not create new energy, and it does not increase the permanent capacity of the business's grid connection. It only changes the timing of when energy is drawn from the grid.

Continuously high consumption: If a facility has constant, flat electricity consumption close to the grid connection limit around the clock, a battery will not by itself solve the capacity problem. The battery needs time and spare grid capacity to charge. If the grid connection is already fully used, there is limited room for charging.

Short-lived peak loads: BESS technology is, by contrast, relevant for businesses with fluctuating consumption. If production has high, short-lived peaks caused by starting heavy machinery, the battery can deliver the extra power locally. That can help with peak shaving and with keeping consumption within the existing grid connection.

Tariff optimisation: For businesses that can move part of their consumption to other times via the battery, there can be an economic gain. The size of that gain depends on the consumption profile and the local tariff structures, and it will vary from site to site.

ZynexGroup's approach to site assessment

When we assess whether an industrial BESS is a relevant solution for a specific facility, we always start from the business's actual data. We analyse historical consumption profiles, the current grid connection, and the applicable tariff structures in the specific supply area.

The purpose of the assessment is to determine whether a BESS can reduce the business's net peak load, improve use of existing grid capacity, and create a better economic outcome relative to the business's consumption pattern.

If you want a concrete assessment of a facility, you can contact us here: https://zynexgroup.com/da/contact