DENMARK Trends and Developments Contributed by: Henrik Sjørslev, Peter H. Knudsen, Henrik Lund-Koefoed and Levent Kitir, DLA Piper Denmark
have become less valuable than anticipated at the time of planning and construction. This shift has cre - ated an urgent need for battery energy storage sys - tems (BESS) to stabilise the grid and absorb surplus green power. BESS are emerging as a key asset class in the green energy economy, offering flexibility and resilience amid volatile market conditions. Their ability to store and dispatch electricity on demand helps protect asset value, reduce reliance on fossil backups and unlock new revenue streams in increasingly complex power markets. Investor Hesitation and Financial Distress In recent years, Danish and European investors have allocated substantial capital to green energy pro - jects, motivated by ambitious climate targets, regula - tory incentives and broad public support. For a time, renewable energy assets were perceived as stable, bond-like investments, offering predictable returns and low risk in a policy-driven market. However, this perception has shifted markedly. As highlighted in last year’s analysis, several promi - nent companies in the sector have encountered sig - nificant financial distress. Rising production costs, supply chain disruptions and delays in electrification – particularly in heavy industry and transport – have contributed to weaker-than-expected returns. Vola - tile power prices and grid constraints have further undermined revenue stability, challenging the viability of many projects. This has led to a noticeable shift in investor senti - ment. Green energy assets are no longer viewed as low-risk infrastructure investments. Instead, they are increasingly priced with higher-risk premiums, reflecting uncertainty around future cash flows, regu - latory changes and competition from alternative asset classes. Investors are becoming more selective, and in some cases, hesitant to commit capital under cur - rent market conditions. The implications are far-reaching. If investor caution persists, it could slow the pace of the green transi - tion and exacerbate financial pressure on companies already operating with tight margins. Insolvency risks
are rising, particularly among developers with high leverage and exposure to merchant power markets. Restructuring activity in the sector is likely to increase, requiring legal and financial frameworks that can accommodate the unique characteristics of energy assets – including long-term contracts, regulatory dependencies and cross-border financing structures. Political Uncertainty and Regulatory Shifts Denmark remains committed to advancing its green industrial strategy. In 2024, the Danish government introduced a targeted investment scheme aimed at accelerating the development of strategic green tech - nologies. By 2025, the initiative had allocated DKK422 million to seven selected projects, with expectations of catalysing over DKK3 billion in private investment. This reflects a broader political ambition to foster public-private partnerships as a cornerstone of the green transition. At the same time, major uncertainties around foreign governments’ views on the value of green energy exist, most notably the US government, and the major Danish energy company Ørsted has expressed in 2025 that unforeseen political headwind may cause major challenges – even for windfarms. The success of government initiatives, including those of the Danish government, depends on more than just capital injection. While financial support is essential, it must be accompanied by regulatory clarity, long- term policy consistency and stable market conditions. In the current environment – marked by rising input costs, supply chain volatility and fluctuating energy prices – even well-funded projects face considerable execution risks. These risks are compounded by polit - ical uncertainty, including shifting subsidy regimes, evolving EU-level frameworks and local permitting challenges. For investors, this creates a complex risk landscape. The viability of green investments increasingly hinges on the predictability of legal and regulatory frame - works. Uncertainty around future tariffs, grid access and environmental compliance could delay projects or erode expected returns. As a result, investor con - fidence is fragile, and capital allocation decisions are becoming more cautious.
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