DONG powers Denmark's renewable energy future

Danish Oil & Natural Gas (DONG) was established in 1972 to manage gas and oil resources in the Danish North Sea. In 2006 it merged with several electricity producers and distributors to become DONG Energy, Denmark's largest energy company. Since then, DONG Energy has proven itself a global leader in the fields of wind and biomass resources. Ulrik Stridbæk (pictured), the head of regulatory affairs at DONG Energy, discusses the strategic role of his company and the future of renewable energies.

 

 

The renewable program has been going on for at least 10, maybe 20 years, and I think that in many ways you could say that onshore wind power was first developed, or at least it started to take off in Denmark, almost 30 years ago. But we have really come to a phase in Denmark where renewable energy is really substantially picking up in scale. I believe we crossed the 30 percent wind power mark and we have a share in our electricity generation above 30 percent power with a total renewable share above 60 percent, the other being mainly biomass. Also a little bit of solar, but mainly biomass. We are now working on another broad energy policy agreement that will last until 2020 and when that is fulfilled the decisions therein are implemented so then we will have around 50 percent wind power in our electricity generation and probably quite a bit above 70 percent renewable energy in our energy generation.

 

 

I think with these 2020 elements we are on a good course to 2050, but there are many years between 2020 and 2050 so I think it’s a little bit premature to say whether we are on track or not. A lot of challenges will still have to be overcome in the last thirty years, no doubt.

 

 

We have actually been using biomass in heat production for at least 15 years I believe, and it all started out with an agreement between the government and the large energy companies at that time to start using straw that was otherwise burnt on the fields, and we developed a capability on our centralized combined heat and power plants to use straw, initially by just putting it on the coal stack, and we have also for some time been burning wood pellets in a couple of our plants and will continue to develop that further. We are now converting one of our coal power plants and one of our gas fire power plants into also being able to use 100 percent wood pellets.

 

 

No, most of Denmark’s electricity comes from 30 percent wind power and, as far as I remember, about 20 percent from biomass, and then there is a good share from natural gas. So no, coal is no longer the largest for electricity generation.

 

 

If you do not take the external costs of harming the climate and things like that into account, coal is very cheap. We certainly see that societies are starting to put a price on CO2, to put a price on the effects on the climate, but that is an ongoing political process. If you do include such a price, then we can see already that offshore wind for example is clearly competitive with natural gas. And it is actually also more or less competitive with coal when you include the cost of climate change. Offshore wind is still more costly, clearly, but we have set targets for ourselves at DONG Energy to reduce the cost of wind energy and we believe sometime in the next decade we will be able to bring down the costs so that offshore wind will also be able to compete.

 

 

Offshore wind is of course benefitting hugely from the fact that the wind is blowing a lot more offshore. And just to put that in perspective, on average onshore wind turbines will probably blow between 20 and 25 percent of the time. Offshore, for example at [windmill park] Horns Rev 2, we are around 50 percent. On the other hand, it is a lot more tricky to build these big installations offshore and you need much larger turbines and equipment that can endure the tougher environment. Compared to onshore wind this technology is relatively new, not much more than ten years old. So we are learning a lot and we are bringing down the costs but it will take some time.

 

 

I believe one of the reasons that Goldman Sachs found an interest to invest in our company was they believe in our competence and skills, for example in developing offshore wind, so no we have set out our strategy before that and we are now working according to that strategy of developing offshore wind, converting to biomass and so on and so forth. That transaction has not changed our strategy.

 

 

One is to continue to excel in offshore wind and quadruple the capacity that we have in offshore wind by 2020 and in that process to reduce the costs of offshore wind by 35 percent at least. Another important element is that we are going to continue to invest in oil and gas exploration. A third element is our focus on converting from fossil fuels to biomass and a fourth element of our strategic goal is to continue to develop the supply and distribution of electricity and gas to our customers in a more flexible and intelligent way, including a smarter grid and smarter solutions for our customers.

 

 

When we talk about renewable energy, I think right now the very critical challenge is that we have some clarity going toward 2020 in those markets that we are active in — Denmark, Germany, the UK. There is clarity on an EU level of what needs to happen until 2020, but there is not clarity about what will happen after, and that is critically important going forward. When you build such big projects as we do in the energy sector, 2020 is just around the corner. And we are already planning for what needs to happen after. We really hope [to see] a clear indication from European policymakers that they want to see a continuation of this transition towards renewable energy.