Interview with Søren Dyck-Madsen, senior expert of the Danish Ecological Council 1, for

Transcription

1 Interview with Søren Dyck-Madsen, senior expert of the Danish Ecological Council 1, for Interview Part 1 There are two months left before the end of the Danish EU Presidency. It is a key moment for the negotiations on the new Energy Efficiency Directive (EED), which enter their final stage. EED has been a top priority for the Danish Presidency for months. It is understandable because Denmark has a long and successful experience in the field of energy efficiency and many EED articles are based on the Danish example. Today I am asking Soren Dyck-Madsen, senior expert of the Danish Ecological Council, to share information about Danish best practices in energy efficiency. This is the first of three interviews that we will publish in the coming weeks. This first interview focuses primarily on the benefits of energy efficiency for businesses. The second interview will be devoted to the exemplary role of the public sector while the final one will talk about benefits for the society and consumers. Agnieszka Tomaszewska (AT): One can be proud that his motherland has been so pro-active in energy efficiency. How did Denmark become the European leader in energy efficiency? How much time did it take? Søren Dyck-Madsen (SD-M): The best starting point to take must be the oil crisis in the 70s. Following a political disagreement with Saudi Arabia, Denmark was faced with threats by Saudi Arabia to reduce its oil exports, which nearly forced Denmark to back off its critics. This led Denmark to realise three things: First, it could not continue to be dependent on oil; second if Denmark was to shift from oil to coal, it needed to reduce consumption of energy as much as possible; third, it needed to use the coal as efficiently as possible by introducing co-generation and district heating systems. In order to enhance energy efficiency, requirements on new buildings were strengthened by the building codes and a tax on energy was introduced. Hence, energy prices remained relatively high for Danish households, even after the oil crisis. The energy tax created an economic incentive for energy savings, as did the use of (part of) the revenues of the energy tax to invest in thermal renovation of buildings. It has changed attitudes too. Since then, Danes value energy efficient buildings as pleasant living and working places; they support the introduction of ambitious requirements in the building codes in order to get best possible energy performance of buildings. Several subsidy schemes for renovating buildings were introduced during these years. Altogether this created a market for energy efficient products, which opened up great opportunities for Danish companies like Danfoss, Grundfos, VELUX and Rockwool. These companies improved the energy performance of their products to respond to the domestic demand, and as a result developed competitive products that they were able to increasingly export to other countries. 1 The Danish Ecological Council is a non-profit environmental organization. The DEC works on a high knowledge based and partly academic basis in order to influence and take part in the Danish and international debate about the environment. The DEC cooperates as much as possible with partner, and with the political, ministerial, industry and national organizational level. Søren Dyck-Madsen works with energy efficiency, with the introduction of renewables, with financial effective market based instruments such as trading systems and taxes, and the overall climate issue in Denmark, at the EU level and globally. Having worked with the EU buildings directive, etc. Mr. Dyck-Madsen is currently working with the EU Energy Efficiency Directive and the EU Energy Tax Directive. He has a seat in the National Energy Savings Council, has been a member of the national energy research fund board. He also has a seat in the national partnership for the Danish building codes and the introduction of a very low energy 2020 code. Moreover he has participated in national working groups for the introduction of smart meters, for electric cars, for improvement of market based instruments for smart grid, and the certification of electricity with a real climate impact.

2 Proud might not be the right word, but we definitely see energy efficiency and Danish produced energy efficient products as an important part of the Danish economic future. AT: How can you explain that, contrary to what we see in many other countries, Danish companies closely co-operate with the government and support initiatives to improve energy efficiency? Do you have some special energy efficiency strategy that involves close co-operation between government and businesses? For many years the Danish Energy distribution companies have had an obligation to inform and campaign for energy efficiency in Denmark. About five years ago what was initially a voluntary agreement was turned into a real energy savings obligation for energy distribution companies in the electricity, district heating, natural gas for heating and heating oil sectors. This was of course preceded by a long debate as to whether we could reasonably ask energy companies to deliver savings on the product on which they earn money But it has turned out not to be a problem for the energy distribution companies. Rather the contrary actually, as some companies now earn more money from providing energy services like energy savings than they do by selling and transporting energy. And I have to add that the energy distribution companies were allowed to increase their distribution tariffs to cover their costs for the energy saving effort. The introduction of a carbon tax in Denmark also helped the understanding of how important energy efficiency measures were, in particular because the Danish government linked the possibility of benefiting from exemptions under the carbon tax with the commitment to deliver savings. In order to preserve the competitiveness of energy intensive companies competing with European firms not subject to carbon pricing, certain exemptions had to be introduced. This was done so that the energy intensive companies could get a rebate of 97 % of the carbon tax only if they entered an energy savings agreement with the Danish Energy Agency. This agreement actually proved very beneficial for those companies and naturally spread to other companies. The Danish obligation for energy distribution companies to make energy savings is a very flexible one. Companies are free to choose the sector in which they deliver savings, e.g. in private households, in public buildings, in industrial sectors or in transmission improvements in the energy grid. As a result many companies and especially electricity companies that have by far the largest savings obligations - made lots of savings in the industry sector, where the cheapest and easiest energy savings were to be made. Even though energy savings in the industry sector must have a pay-back time of less than 3 years to be interesting thus competing with other investments in production etc. There are so many positive examples of energy savings that have benefited companies, enhanced the economy and the country s competitiveness, that it has now become evident to everybody in Denmark that energy savings obligation schemes have been extremely positive. It has clearly contributed to enhance the energy independence of Denmark, decrease our overall energy costs, create lots of jobs and provide business possibilities for the Danish economy. AT: Can you give examples of recent initiatives showing how business and government help each other in promoting energy efficiency? The Danish focus at the moment is on the adoption of an ambitious EED. In order to try and overcome resistance from other countries in the Council, we really focus on telling the Danish success stories wherever we find it possible. The Danish Ecological Council together with WWF Germany and the Danish Energy Association held an event at the Danish Embassy in Germany where NGOs, s energy companies and business companies

3 from Denmark told their success stories to German business companies, German civil society and highlevel German officials. The Danish EU Presidency together with the Danish Confederation of Industries held an event open to energy ministers on the occasion of the informal EU Energy Council, which took place in Horsens on April. About twenty major Danish business companies told their success stories with energy savings saving money in the companies and improving their competitiveness. So actually it is not only the business and the government working together it is also academics/science, NGOs, trade unions, etc. that are really keen to explain the many positive effects of a stronger Danish effort for energy savings everywhere including for business companies. AT: What, in your view, are the main benefits of energy efficiency improvement in industries? There are several benefits. First of all the industries do save money not having to pay for the energy that is saved. This has proved to be a very good business case for many industries. Secondly we see a market that increasingly demands more and more energy efficient products. And by focusing on energy savings in production the energy efficiency way of thinking will influence every part of production and products. Energy efficiency and energy savings are also seen as giving a very positive signal from the industry to take the global climate change situation and the energy shortage and rising costs very seriously. Hence, in addition to saving money and improving competitiveness these companies also gain recognition from the Danish consumers. And this is becoming more and more important as the demand for corporate social responsibility is growing fast in Denmark. This also has an effect on the export markets, where energy efficiency and caring for the environment has become an increasingly important factor in consumer choices. The energy performance of Danish products means that they are perceived as quality products by the consumers. Lastly, it is noticeable that industry and companies with good environmental and energy efficiency records seem to attract the best work force. AT: We have heard that article 6 of the EED (on energy saving obligation) is based on Danish legislation and practice. Meanwhile in many Member States companies are worried that this article could harm their operational activities and deteriorate their financial situation. How come do Danish companies perceive it completely differently? First of all, I think it is important to remember that we in Denmark have had this system for quite some years by now. The system has proven to work, it has proven to generate economic benefits for Danish companies as the introduction of mandatory energy savings obligations on energy distribution utilities helped Danish companies realising cost-effective energy savings. There are still some debates on the cost recovery of energy savings via tariffs. The argument is that cost recovery is based on a small extra tariff or each kwh used, and that this payment will hit the energy intensive companies harder than other companies. The energy intensive companies are already rather energy efficient since they have been forced to do energy savings for many years in order to keep up their competitiveness. The argument is partly correct, but it seems, nevertheless, that even these energy intensive companies also have the potential for making more energy savings thereby helping their own economy. Secondly, we try to implement other measures that would reduce the costs incurred by these companies such as the before mentioned rebate for paying the carbon tax if entering into an energy savings agreement with the Danish Energy Agency. Many European countries have not been dealing with energy savings for years up until now which means that they will need to adapt very quickly to a very different thinking of how to improve the

4 competitiveness of their industries. And this is difficult not so much to convince negotiators of the EED and other academics, but to get politicians, businesses and the general public to understand the topic, to see the benefits of energy savings, and to see energy saving obligations as a way to increase competitiveness. This takes time. Unfortunately we no longer have time. We should recall - and this should be said more often- that the EU s costs for importing fossil fuels are larger than the EU overall budget trade deficit. On the positive side, the paper produced by the European Commission ahead of the informal Energy ministers meeting in Denmark on 18 and 19 April showed that an achievement of 20% of EU s savings target would allow the EU to save 20 billion Euros annually (net amount) and to create 400,000 new jobs at the same time. AT: Can Polish companies learn from the Danish experience? Which solutions are the most effective (i.e. cost effective)? Is there any repository of best practice examples that you would recommend to them, a database? Yes, the Polish companies could definitely learn from Danish experience and Danish attitudes. One can hardly say a-priori which solution would be the most profitable since it very much depends on the industry and production concerned. Many energy savings potentials lie in the production chain. But looking at energy efficient motors and pumps would be a good starting point since much has happened here, and cost effective energy savings from shifting from old technology to new technology in this area are really huge. There is no such database of best practices. However, Danish authorities are very open and helpful in guiding interested companies to get the best possible information from companies working in similar sectors and production chain. ISD: Do you have dedicated programs, support mechanisms or funds for industries to help them improve their energy efficiency? If so, how do they work? I have already mentioned some support mechanisms, in particular the 97 % rebate on the carbon tax for industries that have signed an energy savings agreement with the Danish Energy Agency. The obligation for energy distribution companies to save energy has put a lot of focus on cost effective energy savings in industry and also provided a small financial support to the industry paid by energy companies for getting the right to report the energy savings as their achievement. The adoption of a recent legislation in Parliament to spend 500 million DKK (67 million Euros) annually to support industries to shift from fossil fuels to renewable energy will also give incentives for energy savings. Lastly the general public and political support to energy efficient industries is a very strong means for selling more products and for helping Denmark to keep up its competitiveness in the future. This is a cost-free support. AT: What arguments would you use to convince Polish companies that it is worthwhile to improve their energy efficiency? I would use several arguments: First of all, I would emphasize that energy saving potentials even in a rather energy efficient country like Denmark has proven to be very large, and that the investment for making energy savings are rather small compared to the subsequent savings from the reduced energy demand. So the potential for business cases in energy savings for Polish companies simply must be larger than for Danish companies, which has proven to be large. Start looking at energy efficient motors and pumps.

5 Secondly, I would point out that some of Poland s neighboring countries and export markets are actually supporting energy efficiency and that consumers in those countries will be more and more focused on the energy use over the lifetime of products rather than only looking at the selling price. Thirdly, I would stress that Polish construction workers who wish to have a continued possibility to work abroad will need to gain skills in the field of energy efficient construction and renovation of buildings, since many countries will require this know-how increasingly. And the best way to get these skills is in a domestic market, where the government or the energy companies push for energy renovations of buildings. Lastly, I would advise to look abroad and to observe that the days when a relatively cheap labor force was Poland s main competitive advantage are likely to be over. The focus on resource effectiveness and energy effectiveness and the skills of the work force to achieve smarter and more intelligent products will be increasingly important. The interview was conducted by Agnieszka Tomaszewska, energy efficiency expert of the Institute for Sustainable Development Institute for Sustainable Development Economicly beneficial energy savings at Grundfos The Danish company Grundfos is world famous for its energy efficient pumps and motors, and the large Danish pump group has for years talked enthusiastically about how energy savings can pay off. But it was only in 2009, the company seriously tackled the energy savings potential in its own production. Grundfos had many old production bands with chain drives, where the band just runs no matter if the need is there or not. Many of them have now been replaced with new frequency regulated motors and direct drives. The new motors will slow down when there is no need for the effect. The savings on the individual motor installation has been in the range of 25 to 70 percent. The investment in the first replacements of motors has been paid back in less than two years. Grundfos also replaced their first generation laser welders that used 90 kw to give the power of about 3 kw. The new ones only use 14 kw to achieve the same effect, which represents a saving of 84 percent. On top of that comes the reduction in reduced cooling of the new laser welders. Besides, compressed air system were checked to identify leaks, which led to high energy savings and marked financial savings as the investment was paid back in less than a year. As a result, the carbon emissions of Grundfos eight factories at Bjerringbro have fallen from 61,000 to 55,000 tons, i.e. by ten percent. In the existing production lines, Grundfos picked the low hanging fruit. As for the new production lines, they re-thought them all over again. Often it is not expensive to create an energy efficient facility, if the focus on energy efficiency has been integrated in the thinking from the start. On the new constructions that Grundfos installs, among other things, a 'master switch' will be installed that can put the equipment in sleeping mode when staff working on the production line takes a break.