Decarbonization and electrification: Offshore wind is the answer

Article written by Esben Hegnsholt , Managing Director & Partner at BCG in Denmark

Robert Hjorth , you led our comprehensive study on how the Nordics could achieve net zero. Could you summarize the findings?

Overall, getting to net zero is the largest obligation individual businesses and the economy have seen for decades. At the same time, it offers a massive green growth opportunity. In the study, we offer an affordable and achievable pathway to net zero where we have sequenced the emissions reduction levers in a way that optimizes both local abatement and global export potential.

Denmark, Norway, Sweden, and Finland are all in a position where they – if they take the right steps now – can build substantial competitive advantage within a wide range of green value chains. And with this follows great export potential.

But what will it take to achieve this?

In general, it is not that complex: We need a roadmap, massive development of renewable energy sources, substantial investments in the power grid, the right policies and frameworks to support, and specific plans for green growth. It is, of course, significantly more challenging when looking at the detailed pathways for each sector, as we have also done. But the good news is that we know how to get there, and it is much less expensive than one might think.

In a nutshell, we need to invest 900 billion euros to get to net zero across the Nordics. It may sound hefty, but when compared to state budgets over the next 25 years, it’s quite manageable. And many of the investments will pay off over time. So, the actual cost to Nordic societies is only around 120 billion euros combined.

The sooner we see action, the sooner we will see the economic benefits in the other end. The business case is clear, and it involves the potential to create over 350.000 jobs in the Nordics.

You mentioned renewables. What developments do you foresee in the sector in the Nordics?

Well, there’s no doubt that we need a massive buildout, and there are two reasons. Firstly, we are looking at an increase in electricity consumption by a factor of two or three in each Nordic country by 2040. So, we need all the power we can get. Secondly, we have incredibly good resources in hydropower, wind, and, in some places, solar. This leaves us with a large opportunity to export green power or end products such as hydrogen, sustainable fuels, steel, and the like that we can produce with relatively affordable, green power.

In the future, how will all this renewable power impact the energy systems in the Nordics?

It varies among the countries. Finland, Sweden, and Denmark will be flooded with renewable power from wind and solar. All three countries will experience a large oversupply of electricity and will need to think of measures to balance the grid and alternative use of the power when production is high and prices are low. Examples of this could be power-to-X and green steel, which are some of the export opportunities I mentioned earlier.

In Norway, the situation is a little different. Norwegian hydropower provides flexibility and the ability to balance the system, but it will not provide sufficient power. All other renewable development is happening too slowly, and there will be a power deficit in the medium term. This will cause higher prices and price volatility, which will be challenging to handle for the existing industry. However, on the other side of 2030, I also expect an oversupply of green power there, leaving room for green value chains and exports in Norway, too.

Can you explain what implications this volatility has on the industrial sectors?

Yes. If we don’t act soon, we will see a high degree of price volatility in all the Nordic power markets. For industries that consume power 24/7, it may not be a problem as long as the average power price remains stable. For other industries, it might be incredibly challenging, especially if they cannot adjust their production during high-price hours. This will unavoidably lead to shutdowns in some sectors. On the other hand, some industries could benefit from this volatility by being flexible with their production. If they can adjust their production to the times when prices are low, it not only helps them save money but also helps keep the overall power system balanced.

Now, from consumption back to power generation. You spend a lot of your time working in offshore wind. Is that an important part of the solution too?

Yes, I usually say that whatever the question is, the answer is offshore wind. We need all renewable technologies: Expansion of hydropower. More nuclear power, but that will take time. Solar where it makes sense. Onshore wind where there is little public resistance. Then, offshore wind will close the gap, even if it is currently more expensive than other technologies.

Denmark is already far in offshore wind, and the potential in Sweden and Finland is also large within bottom-fixed offshore wind due to lower water depths. Norway has deeper waters, so even bottom-fixed is expensive, and floating wind will make more sense. This is also the case for most of the rest of the world, which leaves Norway with a one-time opportunity to build a world-leading position in floating offshore wind. If done right, local jobs, export revenue, emissions reductions, and low power prices are all waiting. And all with minimal impact on nature and biodiversity.

Who do you believe will be leading in offshore wind?

Denmark will be leading for a long time with the well-established industry and plans for further large-scale buildout for power-to-X. Norway has the potential to lead when it comes to floating offshore wind. They have the best wind resources, a well-established supplier industry, offshore and maritime capabilities, and sufficient funding available should they choose to use it.

And beyond offshore wind, do you see the Nordics taking a continuous frontrunner position?

Yes, on the precondition that it takes a massive buildout of renewables and substantial investments in the grid infrastructure. If we do it right, the Nordics can take a leading role in the technologies and industries needed to decarbonize the world. I see this as an obligation in the Nordics, not only because we are frontrunners on the green transition – also because it is the right thing to do from a socioeconomic point of view.

Nordic net zero is the biggest challenge we have faced in decades, and it is also the largest growth opportunity. We have to take it.