Radical Green is the New Black for Business in Europe
Under CEO Anders Eldrup, Dong – Denmark’s biggest utility – has embarked on an ambitious project that it calls the 85/15 plan: to slash 85% of its carbon emissions within one generation by drastically moving away from fossil-fuel production and investing more in renewable energy. Time Magazine has the story on this and other innovative CleanTech projects in Europe.
By Stacy Perman in Copenhagen for Time Magazine (12 April 2010):
Towering 88 m above frigid waters, scarcely 5 m from the seawall south of the industrial area of Avedore Holme, near Copenhagen, stand two prototypes of the largest and latest generation of offshore wind turbines.
With blades stretching 59 m, nearly 10% longer than those of some of the biggest turbines now running, these two white giants have the capacity to generate 7.2 MW of electricity — equal to the annual power consumption of about 4,900 Danish homes.
Constructed and operated by Dong Energy A/S, Denmark’s biggest utility, the turbines are being tested for use in an offshore wind farm that the company plans to build in the Irish Sea.
Back on terra firma in Kalundborg, northwest of Copenhagen, stands Dong’s gleaming Inbicon demonstration plant. Built for the large-scale production and commercialization of second-generation bioethanol, Inbicon is Dong’s bid to prove that cleaner, renewable energy made from agricultural waste is viable for investors and consumers. Among the spate of fossil-fuel alternatives the plant produces: straw-based ethanol, biopellets (a coal substitute) and feed booster for biogas production made from C5 molasses.
More than just demonstration plants, these sites represent a dramatic shift in business strategy at Dong, which was founded in 1972 as a North Sea oil and gas concern and later expanded to include Denmark’s electric utilities. Under CEO Anders Eldrup, Dong has embarked on an ambitious project that it calls the 85/15 plan: to slash 85% of its carbon emissions within one generation by drastically moving away from fossil-fuel production and investing more in renewable energy. Oh, and to be profitable. Says Eldrup: “We are not doing this from a feel-good perspective. We see it as sensible business.”
So do a number of other European companies — many involved in some of the dirtiest industries — that are taking radical steps to develop and deploy green energy solutions. It hasn’t been completely voluntary. European governments and strong public sentiment have pressed industry to improve environmental standards through a combination of regulations, subsidies, incentives and publicly financed research. Rather than resist, some companies used the enviro-prodding to become more innovative and energy efficient, and they now find themselves with a global competitive advantage in the green tech so coveted by the U.S.
There’s no better example than Aurubis AG, the largest copper producer and processor in Europe, which as far back as the 1980s was facing some stringent environmental-protection laws. The company is headquartered in Hamburg, the industrial port city once ruefully nicknamed “the black hole of Europe,” which had put into effect some of the most severe climate-protection targets on the continent.
Aurubis, founded in 1866, had long contributed to that blackness and figured it had few options beyond outsourcing or shutting down — both of which were roundly rejected. According to Bernd Drouven, Aurubis’ CEO, the company took a different tack. It decided to go radical green and invested in and developed state-of-the-art energy-efficient plants and environmental technologies to drastically curb emissions. Says Drouven: “The pressure from regulations and society forced us to be creative in finding technological solutions and ideas in order to cope.” (See pictures of the world’s most polluted places.)
Today Aurubis considers sustainability a cornerstone of its strategy. Over the past 30 years, Aurubis has invested some $410 million in reducing emissions — a third of its total capital expenditure. Aurubis’ investment has led to technological solutions such as building thermal-power plants, using filters to reduce fugitive emissions and eliminating up to 95% of the copper, sulfur, arsenic and lead in the air and metal loads of wastewater at its production sites. Aurubis has seven production sites across Europe that manufacture some 1 million tons of copper cathodes and more than 1.2 million tons of other copper products annually. Incidentally, the European Commission designated Hamburg, “the black hole,” as its Green Capital for 2011.
Green innovation has made Aurubis a world leader in copper-recycling technology. The company recycles and processes more than 400,000 tons of raw materials in its proprietary facilities, which reduces energy consumption, saves natural resources and prevents the loss of valuable materials. Roughly 40% of Aurubis’ copper products come from the processing of copper scrap and other copper-bearing recycling materials.
It was the shock of the Middle East oil crisis in 1973 that compelled Denmark, dependent on imports for 90% of its oil supply, to become a pioneer in alternative energy. The government imposed a spate of regulations and taxes that transformed the nation’s energy production and consumption, launching an energy industry that generates billions of dollars and provides tens of thousands of jobs. Currently, wind power supplies 20% of the country’s electricity. Denmark’s energy technologies account for about 11% of its exports.
Lost in the raging debate over the implications of global warming is the fact that one way or another, all companies are going to have to get greener, but companies like Dong and Aurubis are quickly positioning themselves as market leaders. Under the plan Dong announced in September, it expects to increase its proportion of energy production from renewable sources from 15% now to 85% by 2040. At the time of the announcement, the company inaugurated Horns Rev 2, the world’s largest offshore wind farm. Some 30 km off the coast of mainland Denmark in the North Sea, 91 turbines generate 209 MW — enough electricity to power 200,000 Danish households.
Within 10 years, Dong plans to triple its production of renewable energy. In 2009 it invested $3.32 billion in development — nearly half of which was marked for renewables. Underscoring its commitment to a green transformation, Dong is in the process of shutting down 25% of its coal-fired power plants and switching to straw-based and other renewable fuels. “We’re taking the big steps now,” says Eldrup. “This is different from politicians who make big promises to do something in the future. We want to show that you must have a big vision and be ready to deliver.”
In February, Dong signed a licensing agreement with Japan’s Mitsui Engineering & Shipbuilding for Inbicon’s biomass-refinery technology to convert waste products from palm oil into ethanol. “In our view, being on the edge of new green technologies is a great opportunity,” says Eldrup. “It gives us an advantage in reducing CO[subscript 2], but it also gives us technological advantages as well as business opportunities. The U.S. has very high ambitions to increase its ethanol production, and we think this might be a great opportunity in years to come.”
Dong is leveraging its position as the front runner in wind power to put it ahead in another potentially lucrative market: electric cars. Partnering with Shai Agassi’s A Better Place, Dong is involved in a plan to store volatile wind power from turbines for electric-car batteries. Today the consumption and production of electricity from wind occur concurrently. Dong is working on a system in which batteries can be charged when cars are used least and when turbine generation is at its highest — at night.
Eldrup says Denmark makes a good test case for the large-scale production of electric cars. For starters, the country does not have an auto industry. Second, Danes pay a 180% tax for new-car registration, while there is no such fee imposed on electric autos, an attractive incentive for consumers. “If we are successful, that gives us a lot of learning and new development in new technology and businesses in Denmark,” says Eldrup. He adds, “It also gives us value in exporting.”
That’s a perspective shared by Aurubis. According to Drouven, his company’s recycling technology provides potentially lucrative opportunities, particularly in a market like the U.S. that has no such facility. But he notes the company has its eye on a bigger picture. “The climate issue is not only a question of CO[subscript 2] emissions but is one of resources, whether it is oil or energy or raw materials,” he says. “It is independent of the current status of the U.S. or Europe or China. I’m convinced that in the long run, society will not accept waste.” Drouven says people’s awareness about environmental protection will continue to increase as the energy crisis deepens. He adds, “When that happens, we are a company that has already invested in conservation of energy. We have a head start.”
The big-picture, long-term-payoff approach is what helps companies weather short-term vagaries. Dong recently reported a tumble in revenue from $11 billion in 2008 to $9.1 billion in 2009 — in large measure because of the global financial crisis and drop in energy prices. While the company said it expects higher sales in 2010, Eldrup looks beyond the quarterly reports. “This is the way the energy business is,” he says. “We are working on a long-term horizon.”
It is a sentiment echoed by Aurubis’ Drouven. His company also took a hit last year but reported first-quarter operating earnings were $64.6 million, up 50% from the whole previous fiscal year and 2½ times those of the first quarter of 2009. “Our investors want to receive good dividends,” he explains. “But our investors are more interested in long-term, stable, reliable returns than in the fast buck.”
This long-term approach to business and global warming will ultimately effect profits and climate change. Companies that act now will likely be the market leaders in the future. As Denmark’s Minister of Climate and Energy, Lykke Friis, explains, “Business, like climate change, is a global challenge and an opportunity. We are in an energy race that will determine international relations. On the one hand, there will be energy exporters, and on the other, those that rely on them.”