Interview with Thomas Egebo, CEO, Energinet

28 Nov Interview with Thomas Egebo, CEO, Energinet

Energinet experienced significant growth in 2023 with numerous projects to expand the electricity transmission grid, highlighted by a $6 billion investment to establish 3,300 kilometers of additional electricity connections nationwide. Looking forward, how does Energinet plan to navigate external market challenges while pursuing its growth strategy, while maintaining a commitment to a 100% green transformation?

You have already grasped the nature of our company. We are the transmission system operator for Denmark, overseeing electricity, natural gas, and, potentially, hydrogen in the future. Our overarching mission is to pave the way for a secure, green, and affordable energy system in Denmark. We envision a future that is highly electric, digitalized, and seamlessly integrated across countries and sectors, facilitated by storage solutions. It saves time and is a more cost effective fuel; achieving such an energy system is our primary focus.

You mentioned some significant figures, reflecting that the green transition, initially driven by environmental concerns and political ambitions, now faces additional impetus due to geopolitical uncertainties stemming from events like the Russian invasion of Ukraine. Consequently, politicians have expedited their green transition targets. This environment shapes our perspective, necessitating substantial infrastructure expansion, especially in the electricity grid. We await final decisions on energy islands, a concept involving the collection of electricity from offshore wind farms through alternating current (A/C) technology and subsequent conversion to high voltage direct current (HVDC) for efficient long-distance transportation. This strategy allows us to tap into offshore wind resources far from the shore, such as the North or Baltic Seas.

We are actively working on two energy island concepts and preparing for a decision on a hydrogen backbone, a network of hydrogen pipelines in Denmark. These initiatives form a critical part of our agenda, representing our commitment to embracing renewable energy sources. Another significant – but often overlooked – aspect of the green transition is the challenge of balancing an energy system with weather-dependent energy production. This necessitates incentivizing flexible consumption and maintaining deep integration with neighboring countries. These tasks and others will remain our primary focus as we progress into 2024.

Is Energinet open to foreign participation and joint ventures to contribute to these ambitious goals?

Certainly, when it comes to our infrastructure, we already have several interconnectors with neighboring countries. We ae linked with Norway, Sweden, Germany, the Netherlands, and the UK as of December 29, 2023. We inaugurated the world’s longest high voltage direct current (HVDC) interconnector, spanning 700 kilometers. Our robust integration with neighboring countries is evident, and all our projects involve collaboration with colleagues from these countries. We do not produce or sell energy; we operate as a state-owned infrastructure company, balancing the grid and facilitating cooperation with our international counterparts.

How does Energinet’s institutional role contribute to economic growth and empower Danish citizens, especially considering your new structure?

Our fundamental task is to establish a green energy system with high supply security and affordability, a value proposition we offer to society. We aim to create a system that benefits consumers and producers by staying ahead of challenges related to fluctuating green renewables. Ensuring a reliable energy supply is crucial for economic development, and we play a key role in achieving this. We focus on contributing to society by maintaining a high-security of supply and ensuring consumers have consistent access to energy. Our efforts are geared towards addressing the demands of an energy system based on renewable sources.

While climate change and geopolitical events like war have been catalysts for your growth, are there any other significant incentives or critical drivers for the government’s push towards renewable energy? How has this empowered key stakeholders like Energinet to advance its adoption?

Tracing the history of Denmark’s energy transition reveals its roots in energy crises during the 1970s when Denmark heavily relied on imported fossil fuels. Faced with these challenges, politicians shifted their focus to energy conservation, combined heat and power production, and exploring domestic resources like biomass and wind, given Denmark’s windy climate. These early drivers set the foundation for the transition. By the 1990s, the recognition of climate change emerged as a significant driver, leading to higher political goals for renewable energy use. More recently, geopolitical considerations have also played a role.

As the transition progressed, it became evident that being a frontrunner in green energy offered significant industrial policy advantages, generating jobs and fostering companies’ growth, both domestically and internationally. Denmark’s unique aspect is that it was not initially endowed with abundant hydropower or vast forests, necessitating the invention of its energy production methods, particularly from wind and solar sources. Denmark boasts the world’s highest share of fluctuating energy production, with 64% of electricity coming from wind and solar in 2023.

In 2023, 18% of all hours saw Denmark surpass 100% renewable energy. The challenge lies in balancing this highly fluctuating system, a key focus for us. Our small size and decades-long collaboration with neighboring countries in energy system integration have proven beneficial. Initially driven by economic considerations, this collaboration enables electricity to flow between Nordic countries, Denmark, Germany, the Netherlands and the UK based on market conditions. This deep integration became valuable as we introduced renewables into our system, allowing for efficient and dynamic energy flow between countries. Today, despite wind and solar availability fluctuations, our integrated approach ensures a reliable and balanced energy system.

Focusing on Energinet’s own R&D efforts in response to changing market conditions, including the recent modernization of the tariff system to better reflect electricity costs, how does this redesign support the green energy transition, and what are your main ambitions?

Optimizing the grid’s utilization becomes crucial as we transition towards a green energy system with increased electricity transportation over long distances. Redesigning the tariff system is pivotal in supporting the transition to green energy. We aim to encourage efficient grid use by incentivizing the co-location of production and consumption. Suppose we can facilitate producers setting up production in areas with a surplus of consumption and encourage customers to optimize grid utilization. In that case, we can minimize the need for extensive grid investments.

The tariff structure serves as a tool to achieve this objective. In the past, we had a simple tariff structure based solely on the number of euro cents per kilowatt-hour used without factoring in capacity needs. Our revised approach involves introducing various tariff products to align with our strategy of promoting optimal grid use. This is a critical aspect of our efforts to balance the demand for high-security supply and avoid unnecessary grid investments. The goal is to create a tariff system that encourages responsible consumption and production choices, contributing to a more sustainable and cost-effective energy transition.

How is Energinet collaborating with renewable energy manufacturers, innovators, and developers to enhance efficiency and streamline the energy supply?

We actively engage in dialogue and collaboration with renewable energy developers, recognizing the unique technical challenges associated with wind and solar energy compared to traditional power plants. One significant challenge is the need for more inertia in modern renewables. Unlike traditional power plants with rotating masses that contribute to the stability of the electricity system, renewables, such as wind farms and solar installations, lack this feature.

To address this challenge, we are working closely with the industry and partners globally, particularly in regions with extensive fluctuating renewables, like the US. A specific focus is on grid-forming capabilities and resolving the inertia problem. This collaboration extends to organizations such as the National Grid in the UK, EirGrid in Ireland, and entities in Australia, California, and Texas, where significant amounts of fluctuating wind and solar production are prevalent. By sharing expertise and solutions, we aim to pioneer advancements in managing and integrating renewables into the grid.

Our collaboration with Evida in hydrogen and Power-to-X research also reflects our commitment to exploring new opportunities in this high-potential segment. These efforts contribute to the ongoing evolution of our energy system, fostering innovation and sustainable practices in partnership with key stakeholders across the renewable energy landscape.

Expanding on your efforts to develop green fields in Denmark, could you elaborate on the opportunities you envision to unlock the potential of hydrogen?

Certainly, our strong interest in hydrogen development over the past few years is rooted in the recognition that to decarbonize challenging sectors like aviation, shipping, heavy transportation, and specific industries, we need not only green electrons but also green molecules. These applications require a different form of energy, where hydrogen becomes crucial. Through hydrogen and Power-to-X technologies, we can convert green electrons into green molecules.

With its abundant renewable energy resources and significant offshore wind potential, Denmark is well-positioned to capitalize on the synergy between hydrogen and wind energy. The strategic advantage lies in the flexibility offered by hydrogen production. As a large-scale electricity producer from wind, you can either sell green electrons directly or convert surplus electricity into hydrogen when market conditions are favorable. This flexibility becomes particularly valuable when low or negative electricity prices, enabling us to balance the entire energy system more effectively.

When people inquire about the drawbacks of green hydrogen from electricity, I often highlight that it may be more expensive per energy unit due to the conversion process. However, the advantages, such as lower transportation costs and storing hydrogen more efficiently than electricity, outweigh this downside. We can create a more robust and efficient energy system by optimizing the entire system, incorporating both renewables and green hydrogen.

In terms of growth and expansion for Energinet, investing in hydrogen infrastructure on behalf of the Danish society, opens up significant potential. While we will establish hydrogen infrastructure, the real benefit lies in leveraging it to maximize the utilization of our offshore wind resources. With ample offshore wind potential in Denmark, having both green electricity and the option to convert some of it into hydrogen for export, mainly to hydrogen-importing countries like Germany, enhances overall green electricity production in Denmark. This synergy represents a substantial opportunity for growth and a pivotal step toward a more sustainable and integrated energy future.

Given the strong calls during COP28 to triple renewable energy output by 2030, what do you perceive as the outcomes of this conference for the renewable energy industry? Did you participate, and if so, how?

I did not participate in COP28 but have engaged in previous COP conferences. The urgent need for a rapid transition to green energy is apparent, driven by environmental and climate considerations. The calls to triple renewable energy output by 2030 align with the existing high ambitions of Danish politicians and our strategic goals.

However, addressing the climate challenge requires substantial international cooperation. While ministers play a significant role, I have observed a growing role for institutions like ours in international collaboration. Our longstanding cooperation with neighboring Nordic countries is a historical foundation, and we actively engage in cross-country projects to enhance our systems. At the European level, cooperation is robust, and we have extended collaboration to countries like Australia in recent years.

In our international collaborations, including those with developing economies like Indonesia and Vietnam, we contribute by sharing our experience managing systems with high shares of fluctuating renewables. While we assist, it is noteworthy that some middle-income countries are rapidly gaining valuable experience and, sometimes, leapfrogging to the latest technologies and high shares of renewables. For them, the national security aspect of domestically produced resources often drives this transition. Our role is to collaborate and share knowhow with these countries in their journey toward a green energy transformation, recognizing the dual drivers of security of supply and climate considerations.

Could you share your final thoughts or a concluding message for USA Today regarding the collaboration opportunities and contributions to the growth of the green economy when working alongside innovative Danish enterprises?

Denmark is a compelling showcase for the transformation of the green economy, positioned at the forefront of innovation. Our collaborative and open approach makes Denmark an ideal partner for businesses looking to engage in the green transition. American companies, in particular, have found a welcoming environment here, with a shared work ethic akin to Ireland.

This report is timely as it emphasizes collaborations between Denmark and the US, fostering new opportunities. The business potential in the green transition is vast, presenting numerous challenges and opportunities as the world transitions from fossils to renewables, mainly wind and solar. It is an exciting journey with substantial business activity on the horizon; do not hesitate to explore the possibilities and be part of our efforts towards a sustainable future.