The long-term political focus on green, renewable energy has encouraged an ecosystem of manufacturers and financiers able to collaborate on projects including an energy island for offshore wind. The current government is working on emission-based taxes on agriculture.
Denmark has a long history of developing alternative sources of energy to fossil fuels. The majority of Danish renewable energy production comes from biomass used in power plants, including wood chips and pellets, straw from the agricultural sector and degradable household waste. This biomass is almost exclusively used in the district heat networks that are connected to nearly two-thirds of Danish homes.
The second largest renewable energy source is wind power. The country built its first commercial wind turbine in 1979 and has expanded their use to the extent that on 15 September 2019 production from wind exceeded total national demand for electricity.1 Given this large share and the variable nature of wind, also true for solar power, Denmark has been focusing on how to integrate intermittent power production, leading to the Danish electricity transmission operator to develop world-leading expertise in this area.
Strong interconnections with neighboring countries which allow electricity to be exported or imported help the country manage intermittent renewable production and Denmark is planning further interconnections. As wind and solar production will continue to increase for the next decade, the government also plans to develop green hydrogen production as well as direct electricity storage in either batteries or other technologies, a strategy backed by companies that have plants planned or in operation.
Denmark has developed one of the world’s largest wind turbine manufacturing sectors and is also home of the commercial fund manager Copenhagen Infrastructure Partners (CIP) which specialises in developing renewable energy, particularly offshore wind. CIP is part of a consortium working to build VindØ, an artificial ‘energyisland’ 100 kilometers away from the coast that is due to be established by 2030. This will eventually connect 10GW of offshore wind production to Denmark through a high voltage link and will also host energy storage, a harbor, maintenance facilities and accommodation for workers with the option of adding production of green fuels from electricity.2
Michael Birkebæk Jensen, Partner, Head of Products and ESG, KPMG in Denmark, sees this network of renewable energy companies is a national strength: “This is something that has been built over time. It positions us nicely to push ahead on green power,” he says. Denmark could also draw on its experience of extracting oil and gas by developing carbon capture and storage work, he adds, given the overlap in technologies and skills.
Agricultural levies
A new coalition government formed in December 2022 announced plans to introduce new levies on agriculture, the country’s second-biggest emitting sector, although it has yet to publish details. In February 2023 the government’s independent advisor recommended an emissions-based tax that would encourage farmers to switch from beef and dairy to crops and pork production, with a lobby group arguing that this would lead to bankruptcies among Danish farmers and have little effect on global emissions, as reduced Danish production would just be substituted by increased production in other countries.3 Jensen says there are opportunities to help decarbonise agriculture through use of digital technologies such as precision farming that automates and optimises the use of inputs.
Digital techniques can also improve the efficiency of logistics and in KPMG Denmark we have among others worked with the maritime industry to optimise routes of ships, including through use of artificial intelligence. Decarbonisation will also require new fuels and Danish shipping and logistics group Maersk, which aims to achieve net zero emissions by 2040, has ordered 19 vessels that can run on green methanol produced by renewable electricity, including six large ocean-going ships from Hyundai Heavy Industries.4
In September, the company’s first green methanol powered ship, a smaller container vessel, was named Laura Maersk by EU Commission president Ursula von der Leyen in a ceremony in Copenhagen.5
On land, Danish freight operator DSV has started to electrify its vehicle fleet in North America.6 In partnership with logistics and ferry operator DFDS and food groups Arla and Danish Crown, the company is also planning to establish a carbon neutral food transport corridor to the UK by using electric trucks, refrigerated trailers and greener fuels.7 Denmark is also nearing the 2027 completion of a program to electrify the majority of its state railway network by converting 1,362 kilometers of track.8
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1 “Biomasseanalyse”, Danish Energy Agency, May 2020. https://ens.dk/sites/ens.dk/files/Bioenergi/biomasseanalyse_final_ren.pdf”B
2 ‘Energy Island VindØ‘, Copenhagen Infrastructure Partners. https://www.cip.com/approach/our-projects/energy-island/
3 Johannes Birkebaek, ‘Taxing farming vital for Denmark‘s climate target - govt adviser‘, Reuters, 20 February 2023. https://www.reuters.com/world/europe/taxing-farming-vital-denmarks-climate-target-govt-adviser-2023-02-20/
4 ‘Decarbonising ocean transport‘, Maersk. https://www.maersk.com/sustainability/our-esg-priorities/climate-change/decarbonising-ocean-shipping
5 ‘EU Commission president names landmark methanol vessel “Laura Mærsk”’, Maersk, 14 September 2023. https://www.maersk.com/news/articles/2023/09/14/eu-commission-president-names-landmark-methanol-vessel-as-laura-maersk
6 ‘DSV Places Order for 10 Electrified Trucks as Part of North American Emissions-Reduction Initiative‘, DSV, 25 January 2023. https://www.dsv.com/en-us/about-dsv/press/news/us/2023/01/north-american-emissions-reduction-trucking
7 ‘Danish companies teaming up to provide climate-neutral transport between Denmark and the UK‘, DSV, 20 June 2023. https://www.dsv.com/en/about-dsv/press/news/com/2023/06/danish-companies-to-provide-climate-neutral-transport
8 ‘Electrification programme‘, Banedanmark. https://uk.bane.dk/en/Projects/Electrification-Programme