Radical Green

By exceeding regulations, two "dirty" companies gained competitive advantage

By Stacy Perman/Copenhagen Monday, Apr. 12, 2010
    • Arne Weychardt

    At Dong's Inbicon plant, ethanol is produced from bio-feedstocks such as straw.

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    Lost in the raging debate over the implications of global warming is the fact that one way or another, all companies are going to have to get greener, but companies like Dong and Aurubis are quickly positioning themselves as market leaders. Under the plan Dong announced in September, it expects to increase its proportion of energy production from renewable sources from 15% now to 85% by 2040. At the time of the announcement, the company inaugurated Horns Rev 2, the world's largest offshore wind farm. Some 30 km off the coast of mainland Denmark in the North Sea, 91 turbines generate 209 MW — enough electricity to power 200,000 Danish households.

    Within 10 years, Dong plans to triple its production of renewable energy. In 2009 it invested $3.32 billion in development — nearly half of which was marked for renewables. Underscoring its commitment to a green transformation, Dong is in the process of shutting down 25% of its coal-fired power plants and switching to straw-based and other renewable fuels. "We're taking the big steps now," says Eldrup. "This is different from politicians who make big promises to do something in the future. We want to show that you must have a big vision and be ready to deliver."

    In February, Dong signed a licensing agreement with Japan's Mitsui Engineering & Shipbuilding for Inbicon's biomass-refinery technology to convert waste products from palm oil into ethanol. "In our view, being on the edge of new green technologies is a great opportunity," says Eldrup. "It gives us an advantage in reducing CO[subscript 2], but it also gives us technological advantages as well as business opportunities. The U.S. has very high ambitions to increase its ethanol production, and we think this might be a great opportunity in years to come."

    Dong is leveraging its position as the front runner in wind power to put it ahead in another potentially lucrative market: electric cars. Partnering with Shai Agassi's A Better Place, Dong is involved in a plan to store volatile wind power from turbines for electric-car batteries. Today the consumption and production of electricity from wind occur concurrently. Dong is working on a system in which batteries can be charged when cars are used least and when turbine generation is at its highest — at night.

    Eldrup says Denmark makes a good test case for the large-scale production of electric cars. For starters, the country does not have an auto industry. Second, Danes pay a 180% tax for new-car registration, while there is no such fee imposed on electric autos, an attractive incentive for consumers. "If we are successful, that gives us a lot of learning and new development in new technology and businesses in Denmark," says Eldrup. He adds, "It also gives us value in exporting."

    That's a perspective shared by Aurubis. According to Drouven, his company's recycling technology provides potentially lucrative opportunities, particularly in a market like the U.S. that has no such facility. But he notes the company has its eye on a bigger picture. "The climate issue is not only a question of CO[subscript 2] emissions but is one of resources, whether it is oil or energy or raw materials," he says. "It is independent of the current status of the U.S. or Europe or China. I'm convinced that in the long run, society will not accept waste." Drouven says people's awareness about environmental protection will continue to increase as the energy crisis deepens. He adds, "When that happens, we are a company that has already invested in conservation of energy. We have a head start."

    The big-picture, long-term-payoff approach is what helps companies weather short-term vagaries. Dong recently reported a tumble in revenue from $11 billion in 2008 to $9.1 billion in 2009 — in large measure because of the global financial crisis and drop in energy prices. While the company said it expects higher sales in 2010, Eldrup looks beyond the quarterly reports. "This is the way the energy business is," he says. "We are working on a long-term horizon."

    It is a sentiment echoed by Aurubis' Drouven. His company also took a hit last year but reported first-quarter operating earnings were $64.6 million, up 50% from the whole previous fiscal year and 2½ times those of the first quarter of 2009. "Our investors want to receive good dividends," he explains. "But our investors are more interested in long-term, stable, reliable returns than in the fast buck."

    This long-term approach to business and global warming will ultimately effect profits and climate change. Companies that act now will likely be the market leaders in the future. As Denmark's Minister of Climate and Energy, Lykke Friis, explains, "Business, like climate change, is a global challenge and an opportunity. We are in an energy race that will determine international relations. On the one hand, there will be energy exporters, and on the other, those that rely on them."

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