DI Energi - Annual Magazine 2015

NEW REALITY

NEW ENERGY April 2015

Troels Ranis - Danish Energy

Important to be one step ahead in green energy > page 3-5

Rasmus Helveg Petersen

We must have ambitious targets > page 8-10 Top economist

Politicians should not interfere too much > page 34-37

DKK100bn 2020

DKK74bn 2014

Record high export from Danish energy industry DKK26bn 2000

> page 14-15

Export scheme focus on three countries > page 18-21

DKK74bn 2014

> page 14-15

New Reality – New Energy Oil prices have dropped to their lowest level in six years, but record high exports from the Danish energy industry are testimony to the fact that global investments in the green changeover carry on undeterred. Both in Denmark and in export markets, politicians, companies and consumers are seeking environmentally friendly and affordable energy. This goal is furthered by technological development, which means that the price of 1 kWh electricity from solar power or wind is moving closer and closer to the price of conventional energy sources.

Succes for export of danish energy

Danish energy - the past and the future

> page 24-26

DI Energy is celebrating its 10 year anniversary this year, and with the theme ”New Reality – New Energy”, we want to highlight that this new reality is also everyday life for the energy industry. We would also like to discuss how we can maintain an efficient and competitive energy industry. Competition from the outside world is growing, and the ”new reality” also means that we must become better at getting more out of every Danish crown that we invest in energy.

Bioenergy essential for a green changeover > page 30-32

The energy sector has historically been a growth engine driven by an active energy policy, and energy has acquired increasing importance for Denmark’s competitiveness and prosperity. This is due not least to an energy policy agreement, which stretches to the year 2020, while we are now facing a time when we must start discussing political realities after 2020.

In 2014, the energy industry represented every fifth Danish crown in Danish export of goods, and these exports go primarily to other EU countries. Ten years ago, when the trade association DI Energy was founded, exports were DKK 42.7 billion. Since then, exports have increased, and 2014 was the year in which we could post a record for Danish energy technology exports with DKK 74.4 billion.

It is an impressive figure, and exports of Danish energy technology has experienced a growth rate of 7.6% over the past ten years. In comparison, Danish export of goods had a growth rate of 3.0 %.

Therefore, by 2020 we expect that the total exports of energy technology will reach DKK 100 billion.

DI Energy wishes that the tradition for both ambitious and wide-ranging political energy agreements will be retained, but we see a need for international visibility to be strengthened. We cannot maintain our momentum in exports of energy technology and services, if we do not take stock of the political realities in the EU and the rest of the world. A delicate balance exists between climate, security of supply and competitiveness.

Steep fall in the price of solar energy > page 38-40

Publisher DI Energy

Design/layout Casper Heiberg

Contact DI Energy Sune Thorvildsen sunt@di.dk

Cover photo Lars Just

Produced by First Purple Publishing Editor Bent Sørensen Project management Kasper Karstensen

Head of sales Peter Karstensen Sales Troels Thomsen Mads Laursen Mark Roger Frandsen Niddal El-Jabri

Troels Ranis Director of Danish Energy Industries Federation

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Circulation 110.000 (95.000 danish, 15.000 english) Print Stibo Graphic Contact First Purple Publishing Kasper Karstensen First Purple Publishing A/S +45 3119 4000 kk@firstpurple.com

TEMA: Meget mere end mad

You have to place a bet in order to win Our energy policy is on the right track, but we need to change the way we finance the green changeover, says Troels Ranis, Director of Danish Energy Industries Federation It will not be long before Denmark hits DKK 100 billion in exports of Danish energy technology, if development in the energy industry continues as it has until now. In 2014, DKK 74,4 billion worth of energy technology and energy-related services were exported. Today, 56,000 people receive their income from the energy industry. ”It is a spectacular success, and of course we must continue down this road. At the same time, there are very large assets in the energy industry. In 40 years we have progressed from being completely dependent on fossil fuels to becoming an energy-efficient society with a very large sustainable energy production.

This has been created by consensus-seeking politicians and by a skillful energy industry, which has had stable framework conditions to ensure its development,” says Troels Ranis. ”Denmark is rapidly moving away from being NEW REALITY – NEW ENERGY | APRIL 2015

a society dominated by fossil fuels. However, we must of course not forget our competencies and substantial revenues from the oil and gas industry,” he points out. ”They are part and parcel of the competencies for which Denmark has ownership, and they span recovery, production, distribution and transmission as well as energy techno­ logy products and services. All of that is what constitutes the new energy,” he says.

New Reality – New Energy Danish energy supply has shifted fundamentally over a very short period of time.

Troels Ranis would like to achieve a broad understanding of this story of among the Danes, as well as internationally. ”Our energy industry is among the foremost in the world. It accounts for more than 10% of our export of goods and is of great im-

» Text: Jesper With, journalist Photo: Lars Just

portance to Danish society. The growth rate of our energy exports is stable at nearly 11%.

That is a lot in a period where the increase in our GNP is less than 1%,” he says. ”This meshes perfectly with the overall political desire for more and more sustainable energy in order to become completely independent of fossil fuels by 2050. The results achieved by the energy industry are signi­ ficant and crucial for the green changeover.

There are a lot of positive aspects in the energy industry that benefit businesses and prosperity in Denmark,” says Troels Ranis.

However, he does deliver a small warning.

For growth to continue in the coming 10-15 years, Danish politicians will need to understand the challenges that are present in this area: Reasonable framework conditions for investment must be created for private players in the industry. At the same time, it must

>

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”We have a unique platform of competencies. This continues to apply to fossil fuels in the oil and gas sector, and it is true for wind energy, district heating, and bioenergy, solar energy while it is true as well for the energy optimizing sector, where we have great strength.

Troels Ranis, Director of Danish Energy Industries Federation be ensured that cost develops at a level that will make Danish companies attractive on the international market. ”We have a unique platform of competencies. This continues to apply to fossil fuels in the oil and gas sector, and it is true for wind energy, district heating, and bioenergy, solar energy while it is true as well for the energy optimizing sector, where we have great strength,” he says.

In addition, Troels Ranis is of the opinion that PSO-cost (a levy that covers the premium that is paid out as a subsidy for the production of sustainable energy, as well as subsidies for the operation of decentralized plants and research in environmentally-friendly energy production) should be redistributed, as it penalizes the competitiveness of our domestic companies in relation to the rest of the world.

In fact, it may very well be a direct hindrance in the path towards the green changeover, e.g. in relation to the use of large electric heat pumps in order to develop a more intelligent energy system. At the same time, the European Union has put the model under pressure.

Danish Industry wants to have broad agreements on energy policy that will apply for a long period of time. The energy agreement from 2012 must therefore not be tampered with in any major way, because it must be remembered that behind the agreement there are companies with sales, exports and staff that are dependent on being able to rely on the framework conditions. ”The long-term agreements which have been adopted in a broad consensus have contributed to placing Denmark in the front line in many areas within energy efficiency and green changeover,” says Troels Ranis.

Invest at home to make money abroad Denmark must not relax on its energy policy ambitions, because the country is on the right track, according to Ranis. The only question is whether the pace and the way in which we chose to perform the changeover are right.

For example, we should probably not phase gas out too quickly, as it is very good for creating balance in an energy system with varying volumes of wind power in the grid. At the same time, Denmark has gas deposits of its own, and billions have been spent to create a

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well-developed natural gas network, just as many companies remain happy with gas. Finally, gas has the advantage that it produces far less CO2 than oil and coal. ”We must continue to be in the forefront of green technologies, so we are forced to invest.

In essence, the energy industry is a laboratory for companies. This has been the case for a long time with district heating, wind and biomass, and it has taken us far,” says Troels Ranis.

He singles out China, the United Kingdom and Germany, where there are great prospects for the Danish district heating industry.

It has been developed domestically, and is now cutting edge all over the world. Studies show that the United Kingdom has the potential to supply 40% with district heating, but that the level until now is only 3 or 4%. Danish companies must of course be a part of this.

We must invest at home to make money abroad. The technologies which are not fullfledged in relation to the market must be subsidized, or we will lose what we have created, and we will not recoup all the benefits that should and must accrue by having been a first mover,” says Troels Ranis.

For example, the offshore wind sector needs to be subsidized for an additional period in the future, but this goes hand-in-hand with achieving our ambitious goal of reducing the cost for constructing offshore wind turbines by 40% in the year 2020. ”If we don’t do this, we will not recoup our potential at sea. It is mandatory that we come down in price, so that the industry is ensured long term survival in free competition. This will require assistance for a little while yet, but in the long term it will lead to ever-increasing exports of Danish energy technology,” says Troels Ranis.

He welcomes the climate and energy targets adopted by the EU for 2030 (the socalled 40-27-27 targets, which cover CO2 reductions, the amount of sustainable energy, as well as increased energy efficiency), as they are fully in line with the desires of the Danish energy industry. There are very large potential export opportunities for the energy sector in the EU as a result of the adoption of these targets, as well as the ambitious work in a large number of countries to make the green changeover come about. <

DI Energy is a trade association for the energy industry in Denmark and consists of 371 companies. The members represent three main groups of companies: > Industrial companies that develop and manufacture energy technology > Advisers that design stand-alone and integrated energy solutions > Utilities in electricity, heating, gas and water Examples of DI Energy members, which include the majority of the Danish energy industry, comprise Danfoss, Kamstrup, ABB, Rockwool, Velux, Vestas, Grundfos, Haldor Topsøe, Semco Maritime, SIEMENS, Clever, Rambøll, COWI, Grontmij, SEAS-NVE, DONG Energy and TRE-FOR. Members of DI Energy deal with all types of energy, from the extraction of oil and gas, to energy supply and the production of sustainable energy technology as well as equipment for energy efficiency in industry, building construction and households.

â&#x20AC;&#x153;In 40 years we have progressed from being completely dependent on fossil fuels to becoming an energy-efficient society with a very large sustainable energy production.

This has been created by consensus-seeking politicians and by a skillful energy industry, which has had stable framework conditions to ensure its development,â&#x20AC;? says Troels Ranis, Director of Danish Energy Industries Federation.

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”It is green energy technology in particular, which drives growth in our total energy technology exports. In 2014, exports of green energy technology increased by 15.4% and thereby became the highest ever,” says Rasmus Helveg Petersen, Danish Minister of Climate, Energy and Building.

Photo: Scanpix

High environmental targets drives exports ”Denmark is only interesting, as long as we are involved in upping the ante for the energy systems of the future – and as long as we can demonstrate good results. So it is vital that we continue along that ambitious course of action,” says Rasmus Helveg Petersen, Danish Minister of Climate, Energy and Building

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things via the ”Export of the Danish Energy Model Initiative” as well as our bilateral collaborations in countries such as China, Vietnam, South Africa and Mexico.

Why is it important for Denmark to be at the forefront of the green changeover?

Does this benefit exports for Danish companies?

Denmark’s changeover to green energy is known throughout most of the world.

Each and every week, foreign politicians or companies visit Denmark to learn from Denmark’s green initiatives. In 2014 alone, the green Danish marketing consortium State of Green managed visits from more than a hundred foreign delegations. And on part of the Danish Ministry of Climate, Energy and Building, we are also doing what we can in order to highlight Danish strengths – among other

12% of Danish export of goods consist of energy technology. In particular, it is green energy technology, which drives growth in the total energy technology exports. In fact, exports of green energy technology increased by 15.4% in 2014, and thereby became the highest ever.

In comparison, the growth in total export of goods was 0.6%. In line with the focus of the European countries in particular on energy efficiency and the introduction of sustainable energy solutions, the export of green energy technology is expected to increase even further.

But Denmark is only interesting, as long as we are involved in upping the ante for the energy systems of the future – and as long as we can demonstrate good results. So it is vital that we continue along that ambitious course of > action.

NEW REALITY – NEW ENERGY | APRIL 2015

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”Denmark has the wind to its back, so to say. We are blessed with amazingly good wind resources, and by creating a stable framework in the form of long-term energy policy agreements, we can continue the development of wind power.” have now been given a strong CO2 reduction target, which will provide the European Union with a good starting point in the international climate negotiations.

What does this mean for the competitiveness of Danish companies, when they are exposed to more stringent requirements than our direct competitors in foreign countries? What can alleviate this imbalance, so that competition will be more equal?

The combined electricity prices for companies in Denmark (the price of electricity including PSO levies and taxes) are currently below the EU average. This is not least as a consequence of the tax reductions in the Plan for Growth from 2013, so we have actually done a great deal already. From this point of view, Danish companies are not excessively challenged with regards to their competitiveness by electricity prices compared with companies abroad.

The government is very concerned about the competitiveness of the industry. That is why we have also lowered the companies’ PSO payment considerably with the Plan for Growth.

Historically, Danish companies have been highly energy efficient, and Denmark still has one of the lowest energy intensities within the industry in the European Union, which in isolation gives Danish companies a competitive advantage. For this reason also, increased energy efficiency continues to be a key element in our energy policy.

Do you see the EU’s climate targets in the 2030 plan as satisfactory? How could the bar be raised?

I am pleased with the fact that it has been possible to secure unanimous support among the member states for a target of reducing EU greenhouse gas emissions by at least 40% by 2030 in relation to 1990. We

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But there is no doubt that I would have liked to have seen a higher level of ambition for sustainable energy and energy efficiency. However, negotiations have been tough, and a number of countries did not even want targets to be adopted.

Under the given circumstances, I think we can be satisfied. The targets define a clear direction for the EU and provide clarity on the framework for investors and companies far ahead into the future. This is inherently of great value.

Britain and France to make the Commission’s proposal more ambitious.

39% wind power in the Danish electricity grid in 2014 resonates within other countries. How can we continue the electrification of the Danish society? And should we continue at the same pace from where we stand?

The development of wind power means both cost-effective changeover of the energy system and jobs in Denmark. That is why we are first movers by demonstrating that it is possible to implement large volumes of sustainable energy in the electricity industry.

Should one continue to work on getting the EU quota system for CO2 emissions to work better?

Yes, I certainly think so. The primary objective of the quota trading scheme is cheaply and uniformly to lower emissions of CO2. The system makes it possible for the companies themselves to designate the most cost-effective ways to reduce their emissions in the short term, medium term and long term for the benefit of the green changeover in the EU. The system does not work optimally today, since the quota price is way too low to facilitate the green changeover. Therefore, Denmark is proposing a structural reform of the EU quota trading scheme by permanently cancelling a large number of quotas by the year 2020. But in this area we lack support among the member states.

On the other hand, the Commission is proposing to remove large parts of the quota surplus by re-allocating quotas to a reserve with the possibility of rollback, if severe shortages arise in the market.

Denmark has the wind to its back, so to say.

We are blessed with amazingly good wind resources, and by creating a stable framework in the form of long-term energy policy agreements, we can continue the development of wind power.

In order to ensure good incorporation and exploitation of wind power, an increased electrification of society is necessary. The budget for 2015 is an important step in the right direction. We will increase the development with heat pumps in district heating systems, and funds have been allocated for the construction of erecting teams, as well as a pool for demonstration projects of large-scale heat pumps.

In addition, there must be more electric cars on the roads in the long term, and electricity consumption in other sectors must be increased in general in favor of phasing out of fuels where this makes sense (for example heat pumps in households and industry as a replacement for oil and gas boilers).

There is no reason to hesitate with the changeover, but on the other hand, we must of course not act too hastily. The adjustment of the tools we use must be based on careful considerations, as this requires that many sectors must be planned from an overall point of view. <

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Danish energy technology exports are breaking records

» Text: Bent Sørensen

2014 was another good year for exporters of energy technologies. Calculations from DI Energi and show that after posting an increase of more than 10% since 2013, total sales around the world reached almost DKK 75 billion last year.

Green export technology is the powerhouse driving exports (see sidebar), which increased by no less than 15.4%, and green exports now total DKK 43.6 billion, or a whopping 58.5% of total energy technology sales to the rest of the world.

Other energy technologies increased by a significant, but more leisurely rate of 4.8% in 2014. Irrespective of whether one contemplates green or traditional energy technologies, we are looking at an export success, as Denmark’s total export of goods increased by a mere 0.6% last year.

The growth in exports means that energy technologies now represent a very significant 12% of all Danish export of goods. This is not merely great when measured against pure Danish figures, but also impressive when measured in a European context, where we have cemented our pole position in this export discipline. I­taly and Finland are in a shared runner-up position, and their exports of energy technology are at 9.1% of their total export of goods. The average for exports of energy technology from the old EU countries – the socalled EU15 – remains fixed at just over 10%.

As can be seen from the graph of Danish energy technology exports, this industry also got sucker punched in 2009 and 2010 after the financial crisis, but as we can also see, we have put the crisis behind us.

DI Energi expects that exports of both green and other energy technologies will continue to increase over the next few years, and industry director Troels Ranis estimates that exports may total DKK 100 billion by 2020. This means an increase of approximately 33% over the next six years. In comparison, energy technology exports have increased by 36% during the past five years.

Green growth in the European Union If one digs deeper into the export figures for green and other energy technologies some interesting and significant differences show up.

Green energy technologies are only increasing their share within the European Union, while they have taken a hit outside of it. Other energy technologies have increased sales to both the European Union and countries outside of it, but the greatest growth has however been outside the European Union.

There is good reason to brush up on the German vocabulary among Danish companies in the energy technology business. For the past two years, sales to Germany have moved to the

head of the field, and in 2014 our neighbor to the south purchased more than 22% of our total energy technology exports. That is about three times as much as just two years ago, when the country purchased a little less than 8% of exports in the energy technology sector. The Germans are particularly pleased with our green solutions, and they purchase a little over 30% of our total exports of green energy technologies. Up to the year 2012, Great Britain was our main buyer of energy technology, but is now in a runner-up position, since the British purchase 8% of our energy technologies and barely 11% of our green technologies. (See articles about a new export scheme on pp. 18 and 20-21).

All in all, it is the European market which drives the increase in exports of energy techno­ logy, and almost 70% of exports now go to these neighboring markets. Both the so-called BRICKS countries (Brazil, Russia, India, China and South Africa) and the other countries have purchased less energy technology in 2014 than in the previous year. However, the US and China are two exceptions outside the European Union. Exports to USA increased significantly by 43% from 2013 to 2014, and this country which purchases 3.3% of exports, is therefore in fourth place among target countries. Sales to China are also increasing, and the realm in the center is located in sixth place among target countries.

Green and non-green energy technologies

Green energy technology consists of two areas according to Eurostat: 1) The exploitation of sustainable energy sources. This consists of products and technologies associated with wind power on land and at sea, the conversion of biomass to bio-energy, geothermal heating, wave power and solar energy.

2) Improved exploitation of energy sources. This consists of products, technologies associated with electricity-saving technologies, energy management and storage, green transportation solutions, combined heat and power technology, heat pumps, etc.

Other energy technology consists primarily of energy technology which is linked to fossil fuels, including offshore technology and production technology for electricity. Also included is technology linked to the distribution and transmission of electricity, as electricity is produced mainly from fossil fuels (70%). Production

technology related to sustainable energy is part of green energy technologies.knyttet til vedvarende energi indgår i grøn energiteknologi.

DKK26bn 2000 14

NEW REALITY – NEW ENERGY | APRIL 2015

Jørgen Mads Clausen is pleased with export figures » Text: Bent Sørensen

”The record exports of energy technology are splendid, and the prospects should look very bright, when we keep the German Energiewende and the European Union’s push for CO2 reductions in mind. It should be felt during the course of this year.”

This is according to businessman and chairman of DI Energi, Jørgen Mads Clausen when commenting on the new export figures.

He adds that the lowered price of oil may put a damper on the whole thing, but he does not expect that it will have major impact in Europe, because the legislation concerning green development is in place. ”It is definitely the right decision that we have been focusing on our exports to Germany, England and China – especially England, where I have just visited. Their heating system is so poor that it defies belief,” says Jørgen Mads Clausen and provides the example that when you turn the hot water, it can easily take ten minutes before hot water is available, and that a lot is wasted as a consequence.

Jørgen Mads Clausen says that Turkey can be highlighted as a curiosity on the export markets, as it is actually an interesting growth market for energy technologies, because ordinary homes are still coal fired, and the Turks have become increasingly energy conscious.

If one contemplates our energy technology exports, Jørgen Mads Clausen believes that there are three important factors that affect our sales to the rest of the world, and both of them weaken and benefit our exports. Had it not been for the negative factors, exports could have been even higher.

Three factors On the negative side there is Russia, where exports clearly could be higher if there were no problems. Russia has traditionally been a major buyer of items such as insulation, thermostats and pumps, and these sales have taken a hit. In addition, companies are selling less in terms of euro, due to the weak ruble. According to Jørgen Mads Clausen, the figures from the first quarter of 2015 show that this trend has continued.

Germany has also been weaker than could have been expected. ”So far, it’s as if the so-called German Energiewende has not really come on steam. It would clearly have a greater effect if we could get the Germans to take out their wallets, but I do not know how to do it,” says Jørgen Mads Clausen, who would like to see even greater exports to our neighbors to the south.

One thing that is affecting exports positively, is the increase in value of the dollar, which has given green-only technology a boost in the United States.

Jørgen Mads Clausen points out that there are no quick fixes for the industry, when it has to react to large fluctuations in the export markets. ”All the industry can do is to try to sell in the countries where things are improving, but that is not something one does straight away,” he says, and points to the fact that an extended order horizon is typical for energy technologies. As an example he mentions wind turbines, where many months pass from the time when they are ordered and until the customer actually makes the purchase and erects them. <

DKK100bn Objective 2020

DKK74bn 2014

... and the objective is set at DKK 100 billion in the year 2020 Source: Eurostat and calculations made by DI Energy

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Source: Eurostat and calculations made by DI Energy

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Green energy technology NEW REALITY – NEW ENERGY | APRIL 2015

Other energy technology

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Energy for everyone The Danish energy sector does not just deliver power to our sockets and heating to our homes.

The sector is also a major contributor to the national economy, and this applies both to its 56,000 employees as well as the sector’s major contribution to the coffers of the state in the form of taxes and levies » Text: Bent Sørensen

fixed assets

like much, but must be seen in relation to the fact that in 2013, every Swede paid DKK 5,800 abroad in energy bills, and every German DKK 9,300. However, in oil-rich Norway, every Norwegian had a trade surplus of DKK 108,600 in 2013. < Source: “The historical importance and significance of the energy industry for Denmark and its changeover”, prepared by Quartz+Co, January

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Generally speaking, one can divide the development of the energy sector over the last few decades into three stages. First, there was a period of growth up to the millennium, where oil and gas extraction from the North Sea increased.

Then a stable phase arrived in the 2000s, where oil and gas production was at its peak.

In the last phase from the end of the 2000s, production from the North Sea has decreased, but countering that there has been a strong growth in energy technology and energy service companies. From 2009 to 2013, these companies have increased their exports by 39% to DKK 68 billion.

Total exports from the energy sector and energy technology companies tallied DKK 125 billion in 2013 and accounted for a fifth of our combined export of goods.

With fixed assets of DKK 274 billion in 2012, energy is one of the most capital intensive sectors in Denmark, and for the past 20 years, an average of DKK 15 billion has been spent annually to renew the capital stock of the sector.

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Based on the number of people, the energy sector is not particularly large at first sight with its 15,400 employees. But when you take

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there is a grand total of 56,000 employees in the energy industry. Jobs are distributed all around the country, so they contribute to employment everywhere in Denmark.

Swe

In 2012, the sector’s total contribution to the state coffers in the form of taxes and levies was DKK 22.7 billion, of which 95% comes from oil and gas recovery in the North Sea. For the government, ten out of those DKK 22.7 billion consist of corporate income tax, which accounts for 21% of total corporate tax revenues. This is more than corporate taxes from the pharmaceutical industry, information and communications companies and the transportation sector combined.

In addition, the sector contributed with added value totaling DKK 73 billion in 2013. In comparison, added value in construction was DKK 74 billion the same year.

employees

w ay

taxes and levies

56,000

years later developed into a net exporter of oil. This degree of self-sufficiency has since been reduced, but looking back upon the importance of the North Sea for the balance of trade, Denmark achieved a total trade surplus of DKK 200 billion with energy raw materials from 1996 to 2012.

In terms of the entire population, the 2013 surplus corresponds to every Dane having a trade surplus of DKK 57. This may not sound

N or

DKK22.7bn

the 40,600 employees working in energy technologies and energy services into account,

EU 28

The importance of the energy sector for Denmark consists of a long string of positive effects, which extends far beyond the wide range of companies that are engaged in energy.

The energy sector used to live a somewhat shadowy existence, but in the past few years the debate concerning CO2 emissions, new energy solutions and the climate have made energy prominent on the political agenda. Danish companies in the energy technology and energy service have been able to take advantage of the increased focus on sustainable energy and energy savings. In this way, the energy industry has prepared itself for a future with fewer fossil fuels and a rising demand for alternative energy sources and energy savings.

This is demonstrated by a review of the energy sector, which the industry analyst Quartz+Co has performed for DI Energy.

20

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A new export scheme will focus on Germany, the United Kingdom and China Green Danish energy solutions need to be promoted internationally. That is why a new program called ”The export scheme” has been implemented by the Danish Energy Agency and the Trade Council under the Ministry of Foreign Affairs of Denmark in conjunction with Danish Energy Industries Federation and other trade organizations. Three countries – the United Kingdom, Germany and China – have been selected as focus countries. These are countries with which Denmark is already cooperating on energy issues, but where exceptional opportunities are envisaged for Danish energy technology companies. Germany and the United Kingdom are in the process of making the changeover to a greener economy, while China is also pushing the changeover to green technologies. ”In the context of the cooperation, the energy authorities in Denmark and the three

countries will strive to strengthen their dialog and engage in genuine cooperation. It is a good thing when authorities meet more often.

When it comes to Germany and the United Kingdom, we have as neighboring countries a strong common interest in integrating our cooperation in the energy sector further,” says Senior Consultant Hans Peter Slente from DI Energy, which represents DI Energy members when working with the export scheme.

His experience is that both countries welcome closer cooperation with a country such as Denmark, which is advanced with regards to energy – e.g. within waste to energy and combined heat and power in combination with district heating. Rasmus Helveg Petersen, Danish Minister for Climate, Energy and Building, recently concluded a specific agreement concerning energy cooperation between

Denmark and the German federal state of Baden-Wuerttemberg, which is very focused on SE (Sustainable Energy), energy efficiency and district heating. A similar agreement has been entered into with Scotland, which focuses on district heating, and additional agreements are on the way. ”We don’t have to kick down doors in either in Berlin or London, because we already know one another, and the door is already open.

We just have to walk right through it. Here we can strengthen the energy changeover in the countries in question, and at the same time facilitate Danish energy technology companies.

The competent authorities will cooperate on regulation. Companies must be ready to follow up on the political work with a technical and commercial effort directed at specific solutions and projects,” says Hans Peter Slente.

Britons are crying out for green solutions The green changeover in the United Kingdom needs speeding up. That is why the David Cameron government has established the Green Investment Bank, which in two years has invested 2 billion Sterling (DKK 20 billion) in green projects. We have met up with Director Edward Northam in the head office of the Bank in London » Text: Jesper With, journalist Photo: Leda Festini

The United Kingdom is in a hurry, if it is to meet the EU 2020 targets and the 2030 targets ten years later. Until now, the changeover has not progressed fast enough, and it is to be expected that only some of the objectives will have been achieved by 2020. Danish companies have already contributed with a wide range of solutions within the areas of wind, district heating and bioenergy, but there is the potential for much more.

This is explained by Edward Northam in his office in the Millbank Tower in Central London.

He is the director of Investment Banking in

18

”We support projects which demonstrate that you can

the Green Investment Bank, which has been utilize green technologies in an economically profitable tasked with the great challenges of injecting a way. Going green is the common thread in everything we invest in. There has to be more sustainable energy lot more sustainable energy into energy proin our energy mix, and this must happen much faster duction, reducing the CO2 emissions of the than in the past,” says Edward Northam, Director at country and increasing energy efficiency subGreen Investment Bank. stantially. ”We support projects which demonstrate that you can utilize green technologies in an economically profitable way. Going green is the common thread in everything we invest in.

There has to be more sustainable energy in our energy mix, and this must happen much faster > than in the past,” says Edward Northam.

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The British government has set itself the goal to get as close as possible to the 2020 targets, and to meet the 2030 targets. Development has been rapid in wind energy, where a large number of very large offshore wind farms have been established. Among other things, this has taken place with the assistance of the Green Investment Bank, which has invested 240 million Sterling in the Westernmost Rough offshore wind farm project alone, which so far has 35 Siemens 6 MW wind turbines. ”DONG Energy has developed the project and is in every way a major player in the wind market in the United Kingdom,” says Edward Northam.

The Bank has also made a number of investments in ”waste to energy” projects, as too much organic waste ends up in landfills without being exploited energy-wise. A new European Union levy on depositing waste means that British local authorities will have to pay to send rubbish to landfill sites. This may be a golden business opportunity for D ­ anish companies. The Green Investment Bank supports projects based on gasification technologies. ”For example, we have invested in the Bernard Matthews Group, a turkey producer who has established a biogas plant next to one of its food proces­ sing plants. They convert turkey waste into biogas, which via a gas turbine produces electricity and heat for the factory. It is an elegant green loop, which demonstrates that things can be accomplished in a green and cost-effective manner”, says Edward Northam, Head of Investment Banking.

The company saves money, improves its CO2 footprint and becomes a greener brand. Xergi A/S in Denmark has manufactured the biogas plant.

Must meet green objectives In order for a project to receive support, it has to meet a number of green objectives and at the same time be economically promising. The reduction of CO2 emissions, sustainable energy, energy from waste and energy efficiency must be integrated into the project – although not neces­s arily all elements at the same time. ”The good news is that there are plenty of good projects. Every day, companies and developers are knocking on our door with new project proposals. Most often we support projects that are missing the final 20% of the necessary financing, in order for the project to get up and running.

The aim is to squeeze these technologies down in price quicker, so that they can emerge and compete in the free market,” says Edward Northam.

He says that major investments are happening now and that money is moving around faster in the SE sector. The Green Investment Bank is also involved in the development of district heating, but so far it has not been as successful in this area as with wind and waste. ”We have not quite broken the code yet in relation to how we should do it commercially. But we do have some small-scale projects going on in conjunction with hospitals and universities in combination with small combined heat and power (CHP) plants. Here, we hope to expand ­gradually by proliferation, because we would very much like to have more district heating,” he says. <

The Green Investment Bank has identified four main areas, where it will make its primary investments: > offshore wind power > infrastructure for waste treatment, recycling > energy efficiency, including insulation, biomass boilers, district heating > (local) community-based activities within SE

20

The Bank has invested 2 billion Sterling, while the private sector has invested another 4 billion Sterling, so total investments in two years amount to 6 billion Sterling.

The almost newly constructed The Shard, the tallest building in London and the EU, which points to the sky and touches the clouds at London Bridge Station and the old Borough Market will be using district heating.

Photo: Scanpix

«

District heating is on its way in the United Kingdom Just three to four percent of the heating supply in the United Kingdom is district heating, but according to the British power authority DECC (Department of Energy and Climate Change), the potential is 40% as we move towards 2050.

The British government has reported that it wants district heating, but that there is work ahead in order to learn more about it and develop it. England, Scotland and London – as a state within the state – have established subsidies to promote district heating. For the moment, completing large projects remains elusive, because they require much planning, and it is difficult to make them cost-effective in the short term, but there are projects in cities such as Leeds, Manchester, Glasgow and London. ”The problem is that there is no planning authority in Great Britain, and there is also no requirement to connect, because the municipalities do not dare force the issue. Only in London, where the Greater London Authorities have introduced the London Plan, is there a requirement to install district heating in large new build-

Dantax_Anzeige_185x132mm.indd 1

NEW REALITY – NEW ENERGY | APRIL 2015

ings/towers,” says Morten Jordt Duedahl, Business Development Manager at DBDH (Danish Board of District Heating) who has worked with district heating development in Great Britain.

For example, this is the case for the almost newly constructed The Shard, the tallest building in London and the EU, which points to the sky and touches the clouds at London Bridge Station and the old Borough Market.

A great deal has also been achieved in Glasgow, Scotland. Here, it started with small projects in housing developments and at Glasgow University. Now they are in the process of tendering for a plan that ties it all together in a large district heating network. ”This necessitates a business model that ensures that the district heating system will continue to be viable in 50 years. These kinds of projects show the way for other cities, and here Danish know-how in CHP plants in combination with district heating can really bring benefits. A number of Danish companies are already active,” says Morten Jordt Duedahl. <

Top 10 recipient countries of total energy technology DKK Billion GERMANY 22,65 8,08 UNITED KINGDOM 5,56 SWEDEN 3,32 USA 2,89 NORWAY 2,65 CHINA 2,60 FRANCE 1,89 BELGIUM 1,55 POLAND 1,40 FINLAND

Source: Eurostat and calculations made by DI

17.04.15 18:20

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An energy sector with green growth » Text: Jesper With, journalist photo: Lars Just

The Danish energy sector has changed fundamentally over the past 40 years. Ambitious political objectives for a green changeover in combination with a strong and growing energy industry ensure that change will continue in the decades ahead In 2014, 39.1% of the Danish electricity consumption was covered by power from wind turbines. That is world record. The ever-­ increasing quantity of wind power means that concerns are expressed on a regular basis, about whether we have an energy system that can handle the varying volumes of electricity in the grid. But the fact of the matter is that for the time being, the grid is delivering the goods with no blackouts, and that there are times when it can handle 50 - 60% wind power in the grid.

The energy system is balanced out by natu­ral gas and energy-efficient combined heat and power plants that sell excess heat in a well-developed district heating network.

60% of the inhabitants receive district heating. The plants have traditionally been fired

with coal as primary fuel, but in recent years an increasing number of plants have been, or are in the process of being converted to solid bio­mass. The use of coal is rapidly on the way down. The green changeover has necessitated some tough decisions and hard targeted work, helped by the fact that Denmark has been almost self-sufficient in oil and gas from the North Sea. ”It has been a long haul lasting for 40 years, which minute by minute demonstrates the excellent interaction between stakeholders and technologies,” says Torkil Bentzen, President of EUDP (Energy Technology Development, State of Green and Demonstration – an energy research program under the Danish Energy Agency).

A large number of Danish companies have specialized themselves in various areas of the

The oil crisis takes place and Denmark is hit hard.

Deliberations begin concerning changes to Danish energy policy.

Challenges The changeover also results in challenges, and according to Torkil Bentzen they can be divided into three categories: • Continued efficiency improvements in energy use.

• The changeover of the energy supply to sustainable energy.

• Smart and intelligent ways in which to use and produce energy.

For example, it is a challenge to continue the successful development of wind power. The Danish Energy Agency has published scenario reports which indicate that it is possible to increase wind

1985

1978

1973

energy sector and contribute with export earnings and the creation of jobs.

Adoption of Denmark’s first overall plan for district heating, where waste heat from power plants and waste incinerators are used for heating. The goal was min. 60% coverage nationwide in 2000. The goal was reached.

The Danish Parliament signs an agreement with the energy companies that greater quantities of wind power are required in the electricity grid. Nuclear power is rejected as an option.

1984 1972

Denmark begins initial oil production at Dan­feltet in the North Sea.

24

The first natural gas produced in Denmark is pumped into the newly established gas network.

1990

Energy 2000 – an action plan for sustainable energy sources is published. It is the world’s first energy plan with CO2 objectives.

The decision is to reduce CO2 emissions by 20% for the period 1988-2005.

NEW REALITY – NEW ENERGY | APRIL 2015

>

1993

2005

A political decision is made that combined heat and power plants must use increasing quantities of biomass (straw and wood), in order to reach a level of at least 1.4 million tons per year by the year 2000.

Danish produktiDansk producon og gas tionafofolie oil and topper. gas peaks.

1999

A political agreement is made to deregulate the Danish electricity market, so that consumers are allowed to choose their supplier freely by the end of 2002.

Distribution and transmission is separated from production and supply activities.

1991

The worldâ&#x20AC;&#x2122;s first offshore wind farm is brought on line with a capacity of 5 MW. By 2014, the total offshore wind turbine capacity has grown to 1200 MW.

1997

Denmark becomes energy self-sufficient. Danish oil and gas production exceeds the total Danish energy consumption, and Denmark becomes a net exporter.

2007

A Climate Commission is created. It is tasked with analyzing how Denmark can become independent of fossil fuels by 2050.

2007

A political decision is made concerning increased energy efficiency, which will result in an annual reduction in energy consumption of 1.7%.

2008

Exports of energy technology and equipment reach DKK 65.8 billion.

Âť

25

power significantly. This will require the continued development of electricity transmission connections leading abroad, and an increased electrification of the energy sector. ”And in addition, obvious opportunities for improvements consist of heat pumps, cartridge heaters and a wider dissemination of electric cars. The latter requires that battery technology becomes cheaper,” says Torkil Bentzen.

All in all, the story of the Danish energy sector for the past 40 years must be described as a success. Since 1990, Denmark has succeeded in lowering energy consumption by 1%, while the GNP has grown by 38%. Emissions of greenhouse gases have been reduced by 25%, and large volumes of sustainable energy have become part of the energy supply. ”This is something that has caught the eye of the rest of the world, and many would like to learn from it,” says Torkil Bentzen, who is also Chairman of State of Green, which is tasked with selling the Danish energy success story abroad.

We have broken the curve This Danish success is not just backed by wind, but by an entire energy model, in which biomass, solar panels and other forms of SE, or Sustainable Energy, cover an increasing proportion of the Danish production of electricity and heat. In addition, waste incineration is an energy-efficient and partially fossil-free fuel which provides excess heat for heating homes. All in all, in the year 2013, SE provided approximately 205 petajoule (PJ) out of Denmark’s total energy consumption of 767 PJ. Coal and natural gas covered 143 and 139 PJ respectively. Contemplated from a green perspective, the transportation sector

is the most negative factor, since it is almost 100% covered by oil (281 PJ).

The EU target is that SE must account for 27% by the year 2030. Denmark has already reached that figure. A large number of countries have taken up the challenge, and most of the major economies have legislation in some form in order to reduce emissions of greenhouse gasses and promote a green changeover, although it is very debatable whether it will suffice. At the same time, a wide range of ”bottom-up” initiatives are happening all over the world, which focus on energy efficiency and green changeover while inspiring countries to follow suit at government level.

Onshore electricity is cheaper than coal Over the last 40 years, Denmark’s early startup of the changeover to a greener energy supply as well as increased energy efficiency has provided Danish companies with great opportunities to test and sell products which contribute to the green changeover. This has created the basis for exports. In 2014, Denmark exported energy technologies for DKK 74.4 billion, and exports have increased in recent years.

“The energy sector has delivered solutions providing more efficient energy use in power plants, industry and in homes. Along with wind turbines, district heating and the use of biomass, this has provided Denmark with a position of power as the EU country with the largest share of energy technology in its export of goods (12%),” says Torkil Bentzen.

The constant growth of green energy exports demonstrates that it is good business for Denmark to be a first mover, and this is one

of the reasons why the Danish government has set ambitious climate and energy targets for the country. Many other countries have also set ambitious targets, and this creates larger markets for Danish technology and know-how.

Therefore, research must be carried out in new technologies. An essential precondition for success is the Danish energy research programs, which each year invest about DKK 1 billion in research and innovation. At the same time, it is no less important to enhance and reduce the cost of the technologies that we know today. ”For example, we have seen an ongoing reduction of the cost of land-based wind turbines, which have grown much larger, more efficient and less expensive than they were only a few years ago. It is amazing that land-based wind power is now cheaper than electricity from a coal-fired power plant,” says Torkil Bentzen. <

The targets which the European Council adopted in October 2014 for the EU climate and energy policy towards 2030 have not been translated into national targets for Denmark. The targeted 40% reduction in CO2 emissions is to be achieved partly through reductions within the EU quota system, where there will be shared EU targets, and partly through reductions outside of the quota system, where national targets for member states will be established at a later date. The goal of 27% SE by the year 2030 is a shared target for the EU as a whole, which cannot be translated into national targets for the individual member states.

2030

The EU goal of a 40% reduction of CO2 emissions in relation to 1990 must be achieved. This includes the climate target of 27% sustainable energy by 2030.

Agreed in 2014.

2014

39.1% of electricity consumption is covered by wind turbine power.

Denmark continues to be self-sufficient in oil and gas.

The future >

26

2020

A political agreement from 2012 exists which stipulates 35% sustainable energy and 50% wind energy in the Danish electricity supply by 2020. This will entail two major new offshore wind farms with a capacity of 1000 MW, consisting of 500 MW wind turbines on the coast, as well as 500 MW onshore turbines.

2040

A political majority has decided that Denmark must become independent of fossil fuels.

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Bioenergy is essential for a green changeover

ÂŤ 30

Today, bioenergy contributes with more than twice as much sustainable energy as wind turbines in Denmark, but this is somewhat overlooked by the Danes, says Michael Persson, who is the new Director of the DI Bioenergy Secretariat » Text: Jesper With, journalist Photo: Lars Just

Energy and district heating companies are converting central power plants on a grand scale from coal to biomass and building new district heating plants based on biomass. Bio­ mass typically consists of wood pellets and wood chips, but Denmark is among the few countries in the world that also uses straw in large power plants. This crucial change in the Danish energy supply has taken place in a r­elatively few years and has received little attention from the media. Wind energy, the other weighty factor in Danish sustainable energy, maintains a far more prominent place in the media and in the awareness of the Danes. ”I’m very pleased with the large amount of wind in the Danish energy system, but we must bear in mind that for many years to come, bioenergy will be pulling a much greater load in the combined energy supply. Without bio­energy, the green changeover will become both more difficult and far more expensive,” says Michael Persson, Director of the DI ­Bioenergy Secretariat Many plants have already been converted to biomass and more huge operators are on the way. For example, DONG Energy is in the process of converting the large CHP (combined heat and power) plant at Studstrup near the city of Aarhus to biomass. Without this conversion, the second largest city in Denmark would not stand a chance of achieving its ambitious energy and climate target of being CO2

neutral by the year 2030. A second example is the Skærbæk plant in the energy-intensive socalled Triangle Region in Jutland, which will remain natural gas-fired, but in combination with a wood chip-fired biomass power plant.

A major incentive for energy companies is that biomass is not taxed as oil, coal and natural gas are, and that makes it economically attractive, while the companies contribute to the green changeover at the same time.

Overlooked It is due to a number of factors that the importance of bioenergy for the green changeover has been somewhat overlooked, assesses Michael Persson. One factor is that this has been a rapid development. Just a few years ago, coal was the dominant fuel type in power plants and CHP plants. Meanwhile, there have been many discussions concerning the sustainability of bioenergy, which makes it more complicated to deal with than wind, because many different raw materials for are used to create bioenergy. ”Some types of biofuels can be said to compete with food production, although they typically also produce a large amount of fodder.

But this has nevertheless divided opinion on what is sustainable, and it has created a very emotional debate” says Michael Persson.

For example, the image portrayed in the media has been dominated by rainforests be-

Bioenergy production in Denmark

DI Bioenergy

distributed on energy sources for 2013 (measured in Petajoule, PJ):

Bio fuels 4,2 PJ

net importation of bioenergy 46,9 PJ Straw 20,6 PJ

Waste, biodegradable 20,7 PJ Total 91,6 PJ Biogas 4,6 PJ

ing cleared to make room for crop cultivation, which may then be turned into biofuels. There has been little focus on the fact that the same crops are used to make coconut oil for cosmetics and soaps. Clearing rainforests is not good for the climate. The unfortunate aspect for biofuels is that they have been blamed for most of it. This has tainted the image of the bioenergy industry. ”We should certainly discuss whether or not something is sustainable. This also applies to the biofuels that are used in power plants.

That is why I am pleased that Danish Energy and Danish District Heating have reached a voluntary framework agreement stipulating that the biomass which is used in Danish CHP plants must be documented as being sustainable,” says Michael Persson.

This will take place gradually starting August 2016, and be fully phased in by 2019. It will then be necessary to document that the wood pellets and chips that have been used come from forests cultivated in a sustainable manner. ”DI Bioenergy wants common EU rules, and we are working on that, but we are really happy that the Danish industry has gone ahead with a voluntary agreement, until such common EU rules exist. This will ensure credibility for the biomass which is used, and thereby for the green changeover,” he says. <

DI Bioenergy is a section of DI Energy which unites the bioenergy industry in Denmark.

The members represent three main groups of companies:

Other, eg. sun, geothermal, heatpumps 8,1 PJ

> Companies, which develop and manufacture bioenergy technology and installations > Advisers that design stand-alone and integrated energy solutions > Energy companies that use bioenergy as fuel

Wind power 40 PJ

Wood (pellets and chips) 41,5 PJ » Source Energistyrelsen, Energistatistik 2013

31

Combined heat and power plants:

There is strong growth in biomass and waste B&W Vølund welcomes increased international demand in their core area: CHP (combined heat and power) plants based on biomass and waste incineration installations. 85% of the installations that are developed and manufactured by the company are exported. For example, there is a great demand for energy-efficient waste-incineration plants in Great Britain. Focus is also on district heating, and Technology Director Ole Hedegaard Madsen expects that this will lead to further sales of CHP plants. At the same time, B&W Vølund is constructing plants in the United States, Singapore and Scandinavia. ”The international trend is that customers want turn-key installations, where we develop, construct and then service the plants. The challenge is that there are no common EU rules in the field of biomass-fired CHP plants, and public subsidies are granted according to varying criteria,” says Ole Hedegaard Madsen.

He wants to have common EU rules, but is the first to point out that he has no reason to complain, as business is booming. B&W Vølund has just contracted for the construction of a waste incineration plant in Scotland valued at DKK 1.4 billion. Similarly, a contract has been signed for the construction of a plant in Swansea in Wales, which includes a 15-year operations contract.

Amager Bakke makes for good international publicity At the time being, the company is involved with three projects in progress in Denmark: a plant in the municipality of Hørsholm, two large boilers at the DONG Energy CHP plant in the city of Skærbæk, as well as the much-publicized waste incineration plant called Amager Bakke, or Amager Hill in Copenhagen. ”Undeservedly, bioenergy is somewhat over-

looked in relation to its key role in the green changeover,” says Ole Hedegaard Madsen.

He points out that there have been several stories in the media about waste incineration, which have almost made it look as if waste is not sorted at all in Denmark. ”There is a need for energy-efficient waste incineration during the green changeover, and as far as exports are concerned, we are also well assisted by the fact that a world-famous architect such as Bjarke Ingels has designed Amager Bakke. It really has sparked an interest in us,” says Ole Hedegaard Madsen.

He sees great export opportunities within both biomass and waste, since Denmark has plenty of competencies in the area such as technological solutions, systems for export and advice. In Denmark alone, he expects to hire 25-30 employees in 2015, so that the company will approach 450 employees. <

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NEW REALITY – NEW ENERGY | APRIL 2015

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Remove the obstacles preventing a free energy market It is important to have good framework conditions, but politicians should not interfere too much, says Eirik S. Amundsen, Chairman, Danish Environmental Economic Council » Text: Jesper With, journalist Photo: Scanpix

Denmark was an early mover with its major expansion of wind power production as well as the combined heat and power sector, and this has provided the basis for major exports of energy products. A very large body of expertise has been created in the field of energy, and Denmark should be thrilled about this. ”But as a specialist in macroeconomics, I must ask what this gamble has cost in macroeconomic terms; the reason being that society has provided considerable subsidies. This means that production resources have been redirected from other possible uses, which could have provided a higher socio-economic yield.

Being a ”first mover” and at the same time having high development costs is not necessarily an advantage. It may be better to enter later

and benefit from the results of the development costs of others,” says Eirik S. Amundsen.

Subsidies are not always a benefit As an example, he mentions subsidies for the development of offshore wind farms which have stimulated development, but where conversely, negative prices have occurred at times when the wind is blowing so much that it is not possible to sell all of the power that is generated. In this scenario, the electricity companies lose money, and the loss is dumped on consumers. The strong development of wind power has not been followed up sufficiently with the establishment of cables leading abroad, more electric cars and largescale heat pumps in the combined heat and power plants, which could solve the problem.

”Here the schism is that we want to achieve specific energy objectives, and then we subsidize in order to reach them. Is this good for the business sector, and from a macroeconomic point of view?” asks Eirik S. Amundsen.

He acknowledges that 56,000 employees in the energy sector is a high figure, and that it is an important sector for Denmark, also from the point of view of exports. However, the poli­ ticians need to ask themselves whether the subsidies are balanced.

Amundsen and his colleagues in the ­Danish Economic and Environmental Councils have an interest in ensuring that funds are not squandered. There must be good reason to grant subsidies, because they drain resources from other areas of society. This is fundamen-

”There is a tendency that Danish politicians try to control the market. It is best to remove the obstacles preventing a free market. We members of the Danish Economic and Environmental Councils are not opposed to Danish companies doing well.

It is all about the management of Danish resources,” says Eirik S. Amundsen, Chairman, Danish Environmental Economic Council.

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>

INNOVATION PROJECTS TO OPEN THE WAY FOR SUSTAINABLE DISTRICT HEATING ENERGY SOURCES District heating is key to Aarhus City Council’s plans to become CO2 neutral by 2030. The transition from coal to wood pellets is already in progress at the Studstrup power plant. But more effort is needed. Once 2030 comes around, a large proportion of district heat is to be generated from sustainable sources.

The Studstrup plant lies to the north of Aarhus and is just one of the plants that provide heat to the local population. So far, its primary source of heat has been fossil fuels, but the future has arrived. District heating needs to remain cheap yet become CO2 neutral. The first step is to switch from burning coal to biofuels.

“The ’Affaldvarme Aarhus’ plan, designed to generate heat from refuse, will ensure green heating for our customers. We can already ensure CO2 neutral district heating by using biofuels such as wood pellets.

But our aim is that sustainable energy sources such as solar and wind power, complemented by biofuels, will be the primary energy sources for district heating,” says Bjarne Munk Jensen, head of the Department of Waste and Heating, City of Aarhus.

The department already has a range of demonstration projects in progress, ranging from heat pumps using seawater as energy source to the READY project generating energy from refuse. ”We are very interested in quality, relevant demonstration projects that we find via our own curiosity and the position of strength we are in, not to mention working with partners able to develop district heating solutions,” adds Munk Jensen.

New technology paves the way To achieve that aim, the department is working on the development of new technology. ”We need to develop new solutions and that’s where we as a utility can act as a laboratory to test their application working together with various partners. They can be businesses or academic institutions,” explains Munk Jensen.

District heating today: The majority of heat production in Aarhus is based on coal.

Heating is to be CO2 neutral by 2017. The mix of district heating in 2017 will be comprised of:

2015 Heating in 2030. The illustration shows what the composition of heat production is expected to be by 2030.

2017 Fossil

Biofuel

Non-fuel-based

SUSTAINABLE HEAT PRODUCTION By being CO2 neutral, the Department of Waste and Heating can work towards 2030 and a growing level of sustainable heat production. It will supply an increasingly sustainable local authority in continued growth with district heating.

2030

The department will be able to gradually introduce more sustainable energy via an increasingly diverse supply system, made possible because biofuel plants will no longer have to bear such a large part of production. The entire heating system will be upgraded to be able to take heat from sustainable energy and there can be new forms of energy partnerships extending across regions and local authorities, able to open up for more non-fuel production.

Denmark’s greatest strengths: + Significant human capital in the form of engineering know-how and organizational know-how in the energy sector (including the know-how built up by significant state subsidies). This concerns the wind power sector, but also district heating, waste (waste to energy) and energy efficiency. + Good opportunities for increased exports and exchange of electricity, provided more cables leading abroad are established. (Denmark can produce cheap wind power because of its topography. A power cable to the United Kingdom is in the planning stages, and extensions to Norway are on the way. Larger cables can provide reasonable interaction between hydroelectric power from Norway and wind power from Denmark.) + An increase in production and exports, if efficient markets for SE quotas (sustainable energy quotas) are created under the EU’s 2030 goals. However, it is uncertain when they will arrive, and it will probably not be until after 2020.

tal for all economic policies in which members of the Danish Economic and Environmental Councils involve themselves. For example, in their previous report (”Economy and Environment” from 2014) they draw attention to the fact that the offshore wind farms at Horns Rev (3) and Kriegers Flak are over-ambitious.

In the report they asked whether it was reasonable to proceed at such an early date, and recommended lower subsidies. ”The maturity of the market for offshore wind farm technology is not just a Danish concern, and technological development does not only take place in Denmark. The DONG Energy wind projects in the United Kingdom will also be able to provide technological improvements and cost reductions by ”learning by doing” for the benefit of Denmark and other

+

places. Overall competition between companies will drive costs down, and offshore wind farm projects can also be started up too early,” says Eirik S. Amundsen.

Why the rush?

In principle, he and his fellow members of the Danish Economic and Environmental Councils are opposed to subsidizing, unless ”errors in the market” can be demonstrated – a situation in which the allocation of goods and services is not efficient. When it comes to energy research, Amundsen recognizes a basis for public subsidizing, because research will otherwise take place on too low a level, if it is entrusted to private funding alone. Everyone will benefit from a research breakthrough, not just the private stakeholders who are conducting the research.

Eirik S. Amundsen has no desire to stop investments which have been allocated, as well as the support for ongoing projects, but going

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NEW REALITY – NEW ENERGY | APRIL 2015

forward, one should build on analyzes which demonstrate the expected return. ”Why is everyone in such a rush? Among other things, effective balancing mechanisms are missing, considering all the wind in the grid,” he says.

He notes that neither the energy sector or the politicians fear for the security of supply, and hands out some praise. ”Clever people are controlling the power supply, and at the same time the Nordic electricity market works really well, so the framework conditions are good. Today, district heating is seen as a huge advantage for Denmark (cheap and easy heating supply), where export opportunities should be good. Denmark has developed a technology, which is a world leader – based on subsidies,” says Eirik S. Amundsen.

noted. At the same time, the cost incurred to gain this status will likely have been taken into account, as well as the cost that will be expended in the future to pursue this ambitious policy. He stresses that it is important to have good framework conditions, but that politicians should not interfere too much. ”There is a tendency that Danish politicians try to control the market. It is best to remove the obstacles preventing a free market. We members of the Danish Economic and Environmental Councils are not opposed to Danish companies doing well. It is all about the management of Danish resources,” says Eirik S. Amundsen. <

Denmark’s greatest weaknesses: - The PSO levy will raise electricity prices for private consumers and prevent the transition to an increased use of electricity.

- Maintaining the high security of supply within electricity supply is a challenge in the light of the continuously increasing share of volatile wind power and the decommissioning of power stations.

- High expansion costs for infrastructure when phasing-in wind power.

- The establishment of reserve capacity markets and interaction with balance-power markets.

Remove the obstacles preventing a free market Internationally, the high share of wind power in the energy sector in Denmark has been

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The price of solar energy is Prices of solar energy and wind power will soon drop to the point where it will become difficult to stick with fossil fuels. That is the message coming from Ramez Naam, a Seattle-based technologist who conducts research in new technologies. He monitors developments closely in the field of sustainable energy » Text: Jesper With, journalist

The price of solar panel technology has fallen dramatically in the USA, and in the long term, solar panels look set to stabilize at incredibly low prices compared to traditional fossil fuels. ”This landmark news comes from financial analysts who advise investors on major trends in energy technology. This makes it remarkable, because it means that investments will shift towards solar panels and away from fossil fuels. It has already started,” says Ramez Naam.

He is so excited about the news that he placed it on his Twitter statement in the end of 2014, which listed the biggest advances that had been made in the United States during the course of the year.

Based on this, Ramez Naam draws two conclusions:

1) Solar panels will become very much cheap­er than anything else, and are perhaps on their way to becoming the cheapest form of energy in a large part of the world. The key to this development is that solar power, wind and batteries are tech­ nologies, and not general commodities such as coal, oil and natural gas. Commodities shift up and down in price. Technologies almost always drop in price.

2) Industry and the financial markets have woken up. More and more capital is shifting towards solar power, wind and batteries, while correspondingly, more investors are moving away from coal, oil and natural gas.

Oil is used for transportation and does not compete directly with solar power and wind, but the drop in oil prices still helps the develop­ ment of SE. ”I spoke to a high ranking officer, who is responsible for energy supply at American military bases. He told me that he has a budget surplus because of the low price of oil, which he now uses to invest in more sustainable energy on the bases. On the whole, the US Department of Defense is one of the largest supporters of a green changeover,” says Ramez Naam.

This serves Danish technology developers well. For example, a Danish solar panel company located in the eastern part of Jutland called SolarDrive Container Power (SDCP) has managed to get its foot in the door with the US Department of Defense. The company’s patented solar panel solution, which is installed on a standard ISO container, provides access to cheap power in challenged areas.

the price of power based on natural gas. So it is very interesting, what is happening right now. Despite the fact that Northern Europe is not as sunny as California, this development will also apply to Europe,” he says.

Of course, there are risks and challenges posed by solar panels. It is uncertain where the price will end up, as e.g. labor and land costs for solar panel installations will vary, but taken as a whole, prices for end-users have fallen dramatically in recent years. ”We also need energy at times when there is no solar or wind activity, so it is necessary to devise an interaction between the various forms of energy. But in fact, wind and solar panels complement each other very well, ” says Ramez Naam.

At the same time, there is a need for good and efficient energy storage. This is coming now.

Close to cross-over Ramez Naam expects a continued decline in prices for energy derived from solar power and wind. ”In 2016, it looks like a cross-over for solar power in relation to fossil fuels in the United States.

For the time being, we are seeing non-subsidized solar panel power carrying a lower kWh price than

Coal stocks are dropping ”Just look at the way coal stocks have suffered direct hits on the stock markets during the past three years in the United States. Demand has not grown as expected. Cheap energy from solar power and wind is good for society. It is clean energy, it is unlimited and there are virtually no side effects. This is almost a dream scenario, of course,” says a happy Ramez Naam.

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NEW REALITY – NEW ENERGY | APRIL 2015

dropping rapidly ”In 2015 and 2016, we will see the deployment of flow batteries that are heavy, but can store energy from sun and wind, and are just the thing for backup in buildings and electri­ city networks, as they are inexpensive. Several hundred million dollars’ worth of venture capital has been invested in them,” he says.

>

Seattle-based technologist Ramez Naam predicts that power from solar panels and wind will become cheaper than power derived from fossil fuels.

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Electricity from solar power and wind are erratic resources, and when large quantities are involved, it is necessary to manage big data in a smart and intelligent manner. But Ramez Naam stresses that wind farms and solar panels that are geographically large, are less variable in their power output than smaller units. Improved sensor data, better calculation models for wind and weather, and better algorithms have resulted in impressive progress in the management of large quantities of SE, and thereby the quantities that can be sent into the grid. ”Denmark is a good example in this respect.

In Colorado, where there is plenty of wind power, sensor data compiling from the wind turbines has made management much more intelligent. It has tripled production from the turbines. This kind of thing will spread quickly to other manufacturers. Technological development is advancing rapidly,” says Ramez Naam.

He refers to the fact that the difference in the price of fossil fuels and solar panels is even greater when the socio-economic effects are included. He points out that at least 200,000 people die each year from diseases related to coal pollution. Many more become ill. In the United States alone, burning coal is respon-

sible for around 554,000 asthma attacks and 16,200 cases of chronic bronchitis each year. ”Healthcare costs should be part of the equation. At the same time, the environmental costs associated with coal mining are very high,” says Ramez Naam.

He understands the concerns of the many people who work in the coal, oil and gas industries. But it will be a gradual transition to a more widespread use of non-fossil fuels. More and more jobs are located within sustainable energy. The technologist points out that in the United States, the number of employees in the solar panel industry has just passed the number of employees in the coal industry, so in this way the pressure exerted by the argument about jobs will decrease.

”China is moving in the right direction – forced by circumstances such as extreme pollution. It is also a major step forward that USA and China have stated that they now want to work together and commit themselves to a reduction of CO2 emissions. This is the first time that we have seen this,” he says.

In the US, progress will be uneven, among other things because there are those who are opposed to the development. But as the price of solutions drops, there is less reason to go against the development. Opponents are becoming fewer and fewer. Even George Bush Senior has said that we need to focus on sustainable energy,” says Ramez Naam and laughs. <

Biggest challenges Ramez Naam wants a fossil-free USA – and a fossil-free planet in so far as this is possible.

Getting there, he sees two major challenges: 1) the climate policies of individual states 2) improved energy storage

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NEW REALITY – NEW ENERGY | APRIL 2015

Do you feel the energy?

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we develop solutions for the future The Municipality of Randers is dedicated in developing energy solutions for the future. This is best done in a close cooperation between the municipality and private businesses – for mutual and environmental benefit.

Together with the company Bolther-Stensgaard A/S we came up with an innovative new bracket to attach solar cells to roofs. And we are looking forward to engage in the next new energy solution in cooperation with companies located in the Municipality of Randers.

Welcome. Please read more about us in English on: www.workandlive.randers.dk Our Danish website for businesses is: www.erhverv.randers.dk. If you have any questions please call our service for businesses at +45 8915 1600 or send an email to: erhvervsservice@randers.dk.

The brackets are property of Bolther-Stensgaard A/S. The Municipality of Randers contributed by helping the development based on experience in the fields of energy and environment

NEW REALITY – NEW ENERGY | APRIL 2015

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