Danes set the pace on green energy vision

While Denmark and the UAE may be geographic opposites, they are completely in step when it comes to the development of a renewable power sector.

Wind energy now accounts for 22 per cent of electricity consumption in Denmark and is expected to rise to 35 per cent by 2020. Axel Schmidt / AFP

Denmark and the UAE appear to have very little in common apart from being oil-producing countries.

But scratch beneath the fossil-fuel surface and you will find both nations are planning a green energy future.

By 2050, the Danes hope to power their country entirely by alternative sources. Even cars are to be fuelled by renewable energy. They believe this revolution will be made possible by an abundance of wind, which is already blowing fossil fuels out of the energy mix.

In the UAE, the targets are more conservative but solar and wind power will play a vital role in the years ahead.

"I don't think you can build the green transition on charity or morality. You need to make a convincing business case," says Martin Lidegaard, the Danish minister for climate, energy and building.

Sitting atop the European mainland, Denmark is Europe's biggest exporter of crude. And while its oil trade is paltry by UAE standards, the country makes up for its declining hydrocarbon reserves with an enthusiastic commitment to alternative energies.

Wind power now accounts for 22 per cent of electricity consumed domestically, a proportion that is set to rise to 35 per cent by 2020. Other forms of alternative energies, such as biomass, are also expected to gain in prominence, while coal and natural gas are to be phased out.

The Danish government can strive to shut down fossil-fuel-fired power plants because Danes are buying its message, says Mr Lidegaard.

"The Danish population and industry have been convinced that it is economically a good idea," he adds.

The popularity of alternative energies has enabled the government to establish a substantial regulatory framework for renewables. Three supporting laws have already been voted through by parliament this year and two more are expected to pass by the end of the year.

So far, the economic case for alternative energy in Denmark seems sound. Despite added costs arising from the construction of windmills, electricity bills are still within the European average and are lower than those in the United Kingdom and Germany.

The green economy, driven by Denmark's burgeoning wind energy sector, is creating jobs and ensures the country is well positioned to profit from the invariable global growth in renewable energy, argues Mr Lidegaard. Renewables offer another selling point to the Danes, who have long relied on their oil and gas reserves to provide them with their energy needs.

"Denmark is used to [being] self sufficient in energy," says Mr Lidegaard. "There is a huge national concern that we should stay [self sufficient] also in the decades to come and also make a business out of exporting energy."

With its offshore oil fields fast depleting, Denmark can retain its energy independence only if it harnesses the potential of alternative sources.

The roll-out of wind capacity is gradual and new mills are installed after the construction costs for existing mills have been paid off over a 10-year period.

Wind power is a lot cheaper once repayments are complete and it is likely that overall electricity costs will fall once the windmill fleet has been installed and no new construction costs arise. As the price of new technologies tends to fall over time, further cost reductions beckon.

While renewable energy could be more economical than predicted, it would also insulate the country from increases in global energy prices. Struggling economies in Europe are suffering from high oil prices, which refuse to drop below the US$100 a barrel mark despite sluggish demand.

"We are buying an insurance premium for prices," says Mr Lidegaard.

Despite their obvious differences, comparisons between Denmark and the UAE are more than skin-deep in regards to their energy policies. Much like the Scandinavian country, the UAE is something of a pioneer when it comes to alternative energy. Abu Dhabi was the first government in the Arabian Gulf to establish a renewables target, pledging to derive 7 per cent of its electricity from alternative sources by 2020. A modest goal compared with ambitions in Europe and elsewhere, it is nevertheless a departure from the thinking of the past.

Other Gulf governments have since developed their own alternative energy policies, the most noteworthy of which is Saudi Arabia, which aims to generate a third of its energy from solar sources by 2032.

Abu Dhabi was also the first in the region to have a serious look at the economic potential of alternative energy. Recognising diversification of its economy away from oil exports relies on modern industries, the Government tasked Mubadala Development with the creation of the clean tech company Masdar. Mubadala is a strategic investment company owned by the Abu Dhabi Government. Apart from owning the power plants that are expected to achieve Abu Dhabi's renewables target, Masdar is also investing in clean tech companies abroad and has created sizeable research and development operations. It also seeks to attract companies to Masdar City, the carbon-neutral complex that serves as an incubator for Abu Dhabi's green industry.

Gulf countries have started paying attention to alternative energy forms for similar reasons to the Danes. A spiralling demand for electricity is exhausting domestic supplies of natural gas, the preferred feedstock for power generation in the region. With the exception of Qatar, the world's biggest exporter of liquefied natural gas, Gulf countries have been forced to import gas, or burn crude oil to make up for the shortfall. Ironically, the energy-rich GCC is losing its energy independence, or is at least being forced to forgo some of its crude export revenues. No one in the Gulf has felt the pinch more than Dubai, where declining oil and gas production forced it to import gas long ago. High costs and fluctuating prices have led the emirate to embrace renewables and it now plans to generate 1,000 megawatts of solar power at the Mohammed bin Rashid Al Maktoum Solar Park by 2030.

"My advice would be to calculate not only the investments but also the costs if you don't do so," says Mr Lindegaard when asked about the benefits of renewable energy.

"Not only the benefit when it comes to the environment but also the benefit of energy security, the insurance premium for prices in the future and the innovation you create in your industry."

Denmark is easily outpacing the UAE in its adoption of renewable energy, and the Emirates may never catch up. Yet the two countries share common objectives, such as the optimisation of the electricity grid to guarantee the efficient distribution of energy.

Mr Lidegaard says the connection between European countries is not sophisticated enough yet.

"We have installed a lot of renewables already but due to a bottleneck in our grid we don't get the optimal use of it."

Alternative energy that could be sold for higher prices elsewhere cannot leave the country, a deterrent for investment.

Gulf countries have taken to pooling their resources via the GCC Interconnection Grid, a recently completed link-up that enables electricity to be traded. Although it will be some time before renewable energy crosses borders, Abu Dhabi last year first sold standard electricity abroad, providing Bahrain with 300mw.

Denmark, which chaired the European Union for the first half of this year, pushed to get the European efficiency directive adopted in the bloc. That is predicted to save the EU 17 per cent of its energy. "To be more energy-efficient is the first step to a greener future," says Mr Lidegaard.

Abu Dhabi seems to have recognised this, too, and new buildings in the emirate now have to comply with green building codes.

Denmark, the epitome of a European environmentalism developed over the decades, may be way ahead of the UAE in applying green thinking to its energy sector. But the challenges and opportunities faced by both countries are similar and their policy responses are starting to acquire a uniform look, too.