Dong Energy exec: Energy savings are profitable

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This article is part of our special report Access to Energy.

Lars Clausen a top executive at DONG Energy, says the Danish company was able to become one of the leading energy firms in Northern Europe by seeing energy savings not as a "threat", but an "opportunity".

Lars Clausen is executive vice-president of DONG Energy, the Danish energy group focused on procuring, producing, distributing and trading in energy and related products in Northern Europe.

He was speaking to EURACTIV’s Ana-Maria Tolbaru and Henriette Jacobsen.

Do you think the Danish presidency will close the negotiations on the Energy Efficiency Directive by 1 July, when their mandate ends?

Lars Clausen is executive vice-president of DONG Energy, the Danish energy group focused on procuring, producing, distributing and trading in energy and related products in Northern Europe.

He was speaking to EURACTIV’s Ana-Maria Tolbaru and Henriette Jacobsen.

Do you think the Danish presidency will close the negotiations on the Energy Efficiency Directive by 1 July, when their mandate ends?

Our hope is that the Danish presidency will succeed with landing an Energy Efficiency Directive within their term. A new directive can create clarity, a clear direction and hopefully spur activity throughout the clean-tech industry and energy sector.

Does DONG Energy support the EU’s Energy Efficiency Directive?

What is striking is that the directive could have very well been taken from our short and long term strategic plan. The same kind of measures represent a great part of my business agenda when I try to help my customers reduce their energy consumption. We have seen a possibility here.

Maybe some people will wonder why an energy company thinks it’s fun to help others save energy – the product they are selling. But that is what we have done.

We have said “Let’s be the best in the world at this”. As opposed to other energy companies we will turn this into an advantage which will also add profits to the company. We are thankful that we have succeeded in this. We have an ambition of being one of the best energy companies and at the same time have a climate agenda that’s ahead of other companies.

What I think is interesting regarding the EU is that this is extremely easy to carry out. There’s lots of money in this, lots of CO2 reduction in this, it’s not rocket science – everyone can do it, you can start today and there are a lot of job creation opportunities in it.

You have already implemented schemes, measures, targets at national level  – many member states say that they are doing it already and they do not want the Commission to tell them what to do, and to have to change the way of doing things. Where do you stand on this?

First of all, it is the politicians who make the final call. That being said, we can see it has worked in Denmark, with national goals. We've also seen that the energy companies have been able to deliver strong energy savings results with the right framework and the right tools in place.

In Denmark, there's been a long tradition with tough energy savings targets, and with letting energy companies account for a large amount of the reductions.

We've adapted our business to this regulatory environment, managed to gain remarkable results and even build a new business based on energy counselling and partnerships with large companies, municipalities, and organisations.

To be specific, since 2006 our energy efficiency results have increased by 400%. In 2011 alone we've managed to make energy savings of 330 GWh together with our customers and climate partners.

Our projection is that we will double the total energy efficiency savings by 2015. The savings have been achieved through various combinations, for instance through change of ventilation and heating systems, change of boilers, readjustment of heating and ventilation systems, and with simple habitual changes.

Why do you think that other energy companies aren’t so interested in this transformation?

I think as humans… we always think that it’s easiest to stick to the things we have always been doing. People, in general, do not like changes. So, it might be difficult at first, but 'threats' can be turned into opportunities.

Denmark leads in energy efficiency in Europe. How did this happen, did the government introduce a scheme similar to the Energy Efficiency Directive's 1.5% annual energy savings obligation imposed on power utilities?

Yes, after creating a dialogue and leading intense negotiations between different political parties and the energy sector we have reached a long-term agreement – a scheme similar to the one in the Energy Efficiency Directive.

Who paid for the up-front costs, the initial investment needed to help energy companies turn their business models away from energy-selling solely?

In terms of energy savings, part of the costs are financed via the net tariffs. But we need to remember that this model has worked, and Denmark has managed to cut energy consumption overall. Actually, energy companies have performed above the imposed required targets. Plus, the cheapest energy is the unused energy.

Why do companies see it as an energy-capping directive?

It is because energy companies are basically asked to sell less of their product.

Has this transformation and going green been easy for DONG Energy?

Well, I’ll say that when I started working here in 2007 and we were told to make energy savings in all possible ways, none of us believed we could do it at first. But we succeeded in the end, and we had the most energy savings in the industry. And it has been like that ever since – we deliver even more than we are expected to. We live up to our responsibilities as a production company. And, on top of that, we have energy savings and are profitable.

How much did it cost DONG Energy to go green?

If we’re talking about our wind farms, then we are talking about a double-digit number in billion Danish crowns. DONG Energy's total investments in offshore wind power, as of today, amount to 25 billion Danish crowns (around €3.4 billion), and reflect investments according to our current share in the various projects.

So it’s not that easy just to do that and go green… But when we are talking about energy efficiency then we are talking about helping schools, companies, buildings, towns… Helping everybody save energy.

I want to say that “it’s a triple win(d)” (the DONG motto).

Because at the beginning we said that wind energy was the right way. And since then we have started a concept called the climate partnership that now involves 130 bigger companies, municipalities and organisations in Denmark.

The higher energy efficiency saves them money every year and also gives CO2 reduction every year.

The funny thing is we said that we could probably find savings of about 10% for our customers. After having worked with Novo Nordisk for the past 3 years, we have had 300 projects with Novo Nordisk, they have saved 50 million crowns and they are close to being CO2 neutral despite the fact that the company is growing. This is so important for these companies that they now don’t want to be without it.

And what will happen to energy-intensive companies under this directive?

In my opinion, they have a great opportunity… Even those companies that aren’t that energy-intensive can save lots of money. If you make aluminum or produce cars… there will be many processes that you can improve.

Of all the companies we have looked at we still haven’t found a place where they couldn’t at least save 10%. This is simple, easy to do, and the biggest barrier is represented by the human thoughts – change is perceived as being difficult to make.

It is my impression that the energy-intensive industries have been very interested in saving energy and the energy companies have become their natural partner in this process. The energy companies charge an amount of money per saved kWh via the electricity bill – every consumer contributes to financing the activities. 

Will energy prices go up a lot under the new regulations?

That depends on whether the politicians raise taxes. But if you save energy then there’ll be more of it and then the demand will be less. This normally means that prices will fall. And then you get another gain. This is something that saves money for the society. There’s a net gain from this. For the whole of Europe, I think we can save a triple-digit number in billions of Danish crowns which will improve the overall GDP. 

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