Sweden sees red over Google and Ikea’s Green Goals
According to Bloomberg the quest to supply everything from data server halls, insurance companies to large furniture stores with green electricity has flooded the Nordic region with wind power and crashed a $100 million renewable-certificates market.
While that’s good for the environment and the image of companies from Google Inc. to Ikea Group, the growth in renewable energy has been faster than Sweden and Norway expected. That’s pushed certificate prices down 45 percent this year, undermining the incentive to invest in new wind power projects. It’s a case of too much, too soon for the Swedish Energy Agency, the market regulator, which never really planned for expansion at this rate. Taking into account a typical wind turbine’s life of about 20 years, its preference was always for a major build-out by the end of next decade, just before state-owned utility Vattenfall AB starts to close six 1980s-era nuclear reactors. With renewable capacity needed to meet a 2020 target either already in place or under construction, every additional investment will just add to a surplus, according to Nena AS, an industry consultant in Oslo.
“It’s like watching a python dying from starvation after devouring a pig that is too large for it to digest”, said Fredrik Bodecker, chairman of Bodecker Partners AB, an energy markets adviser in Malmo, Sweden. By way of comparison, Germany had a total of 4,308 wind turbines with a nominal output of 46,247 MW at the end of 2015, while 865 power plants with 5,410 MW were installed in Sweden.
Sweden and Norway plan to add 28.4 terawatt-hours of renewable generation by 2020, or enough to meet 10 percent of their joint annual power demand. In the renewable-certificates market, green energy producers receive securities that suppliers must buy to match customer demand. The surge in capacity hasn’t been met by increases in consumption, hence the surplus and plunging prices.Google, which operates a data server hall in Finland, has signed at least six deals in the past two years to buy power at a fixed price directly from wind parks in Sweden and Norway. The company didn’t respond to a request for comment.
“There is just such an insane amount of wind power projects that should not really be built”, said Joachim Jernas, a senior analyst at Nena. “During 2016, decisions to build 7.1 terawatt-hours of wind power in Norway and Sweden were made.”
After spending an undisclosed sum on 46 wind-power plants in Sweden between 2011 and 2015, Ikea now generates enough to supply its 20 department stores with green electricity. There are no plans for further expansion in the Nordic region, according to Jonas Carlehed, a sustainability manager at the retailer. While Norway has decided to phase out its involvement in the certificate system by 2020, Sweden is extending its participation for 10 years and will add another 18 terawatt-hours of renewable generation by 2030. The additional capacity will further expand a regional glut as investors have pledged to build at least three new wind farms in Norway able to generate 3 terawatt-hours a year, according to Nena. A terawatt-hour can supply 200,000 homes for a year.
To slow down wind power development after 2020, the Swedish Energy Agency proposes to keep subsidy levels low until the end of the next decade by adjusting demand in the system, said Roger Ostberg, an analyst at the regulator. Such a plan could discourage investors seeking stable, long-term returns, according to Paul Stormoen, the managing director of OX2’s wind power development.
”It is not just something you can switch off and on, there is a long process behind every investment” Stormoen said.
Interview with Puneet Trehan, Materials Innovation Leader, IKEA
It can not be denied that consumer and industrial brands are increasingly critical to the dynamics of, and commercial opportunities within the bio-economy at large. To find out what drives Ikea’s bio-based strategy, how they overcome prominent challenges and how they expect to continue with bio-based activities, World Bio Markets (WBM) recently caught up with Puneet Trehan, Materials Innovation Leader at IKEA and one of the speakers at World Bio Markets 2017. Here's what he had to say.
IKEA have been something of a pioneer in the pursuit of bio-based alternatives to fossil-based material, what drives this strategy?
For IKEA, every strategy & everything that we do, is driven from our simple vision ”A better Everyday Life for the Many People” as a starting point. Then if we look ahead,
- Will sustainable products be creating a better everyday life for our millions of customers?
- Will circularity as an approach create more resource efficiency?
- Do we need to take our responsibility in consuming resources in a more efficient manner especially focusing more on renewable resources?
The answer to all these questions is a big YES. And hence the focus on bio based agenda since we are convinced that as a down-stream responsible player, brand owner and retailer, we along with our strategic partners can make the difference!
What do you view as the key challenges to developing bio-based value chains and how have Ikea and its partners been successful in navigating these?
The key challenges that we have experienced so far:
- Really setting up the value chain which is built on “win – win “ for the partners involved
- Getting a customer / application development focus instead of only the technology focus
from the beginning
- Value chain partners need to “really believe in the direction” and also that this is not a short term focus, rather a long term direction which will need perseverance and consistent
How do you expect consumer brands to evolve their bio-based strategy in the coming years, can wider uptake be realized?
We expect more and more brands to take up these initiatives as core part of their strategy, something which we believe will happen over the coming years. The question though is: what are the investments that the brands are willing to make to get this to fly, rather soar!
As a pioneering bio-based brand what would you most like to see from other parts of the value chain to help the commercialization of bio-based materials at scale?
- Align to the same goal where the end consumers on a mass scale are the main beneficiaries
- Have long term directions and not short term capitalization approach
Source: Bloomberg & World Bio Markets