Denmark’s strategy for North Sea oil and 2030 climate targets

Helene Dyrhauge | 20 July 2017

Governments around the world are trying to strike a balance between climate policy and energy policy. This is difficult due to tension between the oil sector and the renewable energy sector, which has created a dualism between climate commitment and energy policies because national energy policies accommodate both fossil fuels and renewable energies. The tension within the different energy sectors is evident in Denmark, and it has implications for Danish climate targets especially in terms of its 2030 targets of 50 percent renewable energies and the long-term goal of low-carbon economy by 2050.

Denmark has traditionally been highlighted as an environmental forerunner[i], especially in green technology and wind-power, yet the current government’s policies are not enabling this transition from fossil fuel to renewable energies. The government’s climate and energy policies are inconsistent, simultaneously promoting the green technology sector through an export strategy whilst supporting the national oil industry through a new investment strategy.

Denmark is on course to achieve its 2020 EU climate and energy target for renewable energies, which is 30 percent and according to the 2017 national energy forecast[ii] Denmark will go beyond the target reaching 40 percent in 2020. The 2017 Energy Forecast is doubtful about reaching the targeted 50 percent for renewable energies for electricity in 2030. Importantly the European Environmental Agency has published a similar forecast for the whole of the EU, which only demonstrates the difficulties in implementing climate targets and changing energy production. The 2017 Energy Forecast argues this is partly due to lack of investment in renewable energies, i.e. wind-power, and conversion of existing power-plants. A further factor is predicted increase in energy consumption due to Apple and Facebook datacentres, which will lead to increased demand for mainly coal because of stagnated investment in renewable energies[iii].

According to DR news, the initial two datacentres (Facebook and Apple) will increase demand for electricity by 10 percent[iv] (the news report came before Apple announced it is building a second datacentre). Without investment in renewable energies, this increase in demand for energy will be supplied by fossil fuels, thereby negating Danish climate change commitments. However, Apple will invest in wind-power to produce electricity for its two datacentres[v]. A decision which is welcomed by the Danish government. According to Greenpeace Denmark, Apple’s investment in wind-power might not have negative effect on Danish renewable energies and climate target as the company apparently will rely on its own energy production[vi]. Thus, the problems with increased energy demand highlighted by the 2017 Energy Forecast might not be so big, but it is still unclear if Facebook will use the national energy grid or like Apple build its own power supply.

This year the government has shown a renewed commitment to fossil fuel. In January, the government signed a new deal with Danish Underground Consortium (DUC) represented by A.P. Møller-Mærsk to continue to obtain oil from the North Sea, including rebuilding the Thyra area. In the beginning of July, the government published its new strategy for investment in North Sea oil and gas[vii]. Denmark has been an oil producer for the past 40 years, and has been independent of imports, which has provided the country with high level of energy security. The government aims to continue to extract oil and gas from the North Sea thereby protecting energy security, tax revenue (despite a rebate for the DUC) and local jobs[viii].  A press release from Lars Christian Lilleholt, Minister for Energy, Utilities and Climate, stated that “in the future Denmark must have a strong and competitive energy sector with competences in both oil/gas and renewable energies”.[ix] Indeed the minister does not see a contradiction in the North Sea strategy and the 2050 goal of becoming a zero-carbon economy[x].

The dualism in energy investment, which favours both fossil fuels and renewable energies, does not enable green energy transition. It is important to remember that Denmark is not only a successful wind-power energy producer, it is also an oil producing country and the tension between these two energy sectors will increase as part of the green transition. This tension is not unique to Denmark indeed it is present in the overall climate debate. Importantly, Denmark is often mentioned as a forerunner in wind-power[xi], and the Danish fossil fuel story is frequently ignored. Yet the fossil fuel sector continues to play an important role for the national energy policy, which cast doubt on whether Denmark will reach its 2030 climate targets and eventually become a zero-carbon economy by 2050.