Danish companies take a lead in green technology

Receive free Renewable energy updates

We’ll send you a myFT Daily Digest email rounding up the latest Renewable energy news every morning.

There is regular gnashing and wailing in Europe over its inability to produce a rival to Apple, Google or Facebook. But in one area, the continent — and in particular a small country in its north — is way ahead: green technology.

Denmark is home to a former oil company that transformed itself into a renewable energy giant (Orsted), one of the world’s largest wind turbine manufacturers that came back from a brush with financial collapse to new highs (Vestas), and a leader in products helping with energy efficiency (Danfoss) among many others.

It is a similar story for the Scandinavian country itself and climate goals: it is aiming to cut emissions by 70 per cent from 1990 levels by the end of this decade, one of the most ambitious and legally binding targets in the world. It has also announced an end to all new oil and gas exploration.

Denmark’s companies and politicians show Europe how green action can offer decent shareholder returns and economic growth, but also point at some of the challenges ahead.

It is perhaps not surprising that the Danish public and private sector co-operate on things both big and small, ranging from a new energy island to be built in the North Sea to a joint push for the EU to raise its own targets in renewable energy and energy efficiency.

One of the smaller things was the rare sight of a finance minister and a chief executive sitting down for a joint interview with the Financial Times.

Nicolai Wammen, the Social Democrat finance minister, called the co-operation unique. He added: “We see this as an opportunity not only to transform the Danish economy and address climate change in a Danish context but in a global context. We do believe we can save the planet and at the same time create growth and jobs.”

Kim Fausing, the chief executive of privately owned Danfoss sitting across from Wammen in central Copenhagen, stressed that it “makes a very big difference where we have such a big coalition”.

It is a crucial time in Europe as countries not only set out their targets for the next decade but get ready to spend a large part of the EU’s Covid-19 recovery fund on the green transition. The rewards for companies positioned correctly could be big.

Wammen is aware there is only so much Denmark, with its population of fewer than 6m people, can do by itself. That is why he is urging the EU to be more ambitious on energy efficiency, arguing it should boost its 2030 target for energy reduction to 40 per cent from 32.5 per cent. “If we can get the whole of the EU moving, it’s a much stronger muscle for green change,” he added.

Increasing energy efficiency — normally by renovating existing buildings with everything from valves and thermostats to more advanced energy-saving technology — is the “low-hanging fruit” for the EU, according to Fausing.

But what do you do when the low-hanging fruit have been plucked? That is the position Denmark finds itself in. The Danish Council on Climate Change said in February that current policies took the country only a third of the way and that the remainder would be harder to achieve.

Twice weekly newsletter

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

One of the more ambitious plans is to establish an artificial island in the North Sea at a potential cost of more than DKr200bn ($33bn) as a green energy hub that could eventually provide 10m people with renewable power. Orsted and Danish pension fund ATP this week teamed up to bid on a tender for the island, with interest expected from others. The project, and several others in Denmark, could also produce “green” hydrogen, a fuel that could be useful for shipping and heavy transport.

But these projects will take years, if not decades, to come to fruition. Wammen concedes the government does not have all the answers to reach its 2030 targets but that co-operation with business is “absolutely essential” for developing new solutions.

For companies, the green technology space is becoming more crowded as competition heats up. Orsted has complained about infrastructure investors and oil majors pushing up prices in offshore wind auctions, potentially making renewable energy less competitive. It is branching out into new areas such as Poland, the Baltics, and onshore wind in search of more growth.

Denmark’s public-private co-operation could help the country maintain its lead in green technology. But companies will need to be sharp to stay ahead.

richard.milne@ft.com