Renewable Energy: Transition Phase and Sustainable Profitability


Renewable Energy: Transition Phase and Sustainable Profitability

Published: February 2, 2023

– Many different reports and estimates have been made about Norway's need for power in the coming years. The consensus is that we have a massive need for the development of renewable energy in a very short period.

The words are from Wilhelm Kiil Rød, responsible for government relations at St1. He emphasizes that time is running out if we are to reach the climate goals and have enough power to transition from fossil to renewable energy, a point underscored by a recent report from THEMA Consulting Group, commissioned by the Confederation of Norwegian Enterprise (NHO).

The report shows that we will need an additional 57 TWh of electricity by 2030. To put it in perspective, it has taken over 150 years to build the slightly more than 150 TWh of Norwegian electricity production we have today. So there is no doubt that this is a formidable challenge

Wilhelm Kiil Rød
Responsible authority contact, St1


Within the next seven years, Norwegian electricity production needs to increase significantly. This is where the importance of wind power becomes increasingly prominent.

– Land-based wind farms are the most mature renewable energy technology for Norway right now. It's a well-known and tested technology with ready projects. Primarily, these projects can realize large-scale power development during this period, says Rød.

He uses Davvi wind farm as an example, a facility that can produce just over 4 TWh per year.

– Davvi is a large project that can make a significant contribution. Furthermore, Davvi can be realized quickly, it can be up and running to produce renewable energy well before 2030, says Kiil Rød.

A few years back, the purpose of land-based wind power was more diffuse for many. Now, however, the need is much clearer.

Statnett announced just before Christmas that with the expected increase in power consumption, we are heading for a power deficit in Norway as early as 2027. That's dramatic.


While there is a need for wind power in the near future, it is also important to consider profitability.

– When comparing the costs of different ways of producing energy, land-based wind power is the cheapest way to produce new, renewable electricity. At least in Norway. There are several reasons for this, but primarily it is due to technological advancements. You get far more energy for each dollar invested now than ten years ago, says Kiil Rød.

Another central element contributing to the growing profitability of wind power is the demand for renewable energy.

– The demand is high now and will only increase in the future. The demand will be almost insatiable, predicts the St1 representative.


To illustrate the increasing demand, as well as political measures that enhance profitability, Kiil Rød uses the transport sector and sales requirements as an example.

– In the transport sector, there are areas where it is not as easy to introduce battery-electric drivetrains, such as for ships, aircraft, heavy freight trains, and trucks. This leads us to solutions like biofuels, he begins.

Biofuels, however, are a limited resource. Therefore, the production of hydrogen is also necessary since it can be used to produce various types of fuels, known as synthetic fuels or e-fuels. To produce hydrogen, large amounts of electricity are needed.

– Especially in the EU, companies selling fuel, like us at St1, are required to blend a certain amount of hydrogen-based fuel into their products by 2030, 2035, 2040, etc. This requirement becomes stricter, and companies face fines for non-compliance, says Kiil Rød.
Sales requirements are one concrete factor that drives up profitability for renewable energy. Another is carbon credits.

– For instance, the quota system is a specific instrument for industries. Some sectors are required to purchase quotas for their CO2 emissions. As the number of available quotas decreases, the price goes up. It is becoming costly enough that companies are seeing the financial benefit of replacing fossil fuels with renewables, Kiil Rød explains.


So, who benefits from the energy production that Kiil Rød describes? Do the power plant developers get rich, while society as a whole gets only crumbs?

– I would argue that the greatest value is created through the ripple effects of getting more renewable energy into the market. The power has to be used for something; it is a valuable resource that for example, enables industrial projects, he says.

Kiil Rød uses Davvi as a specific case.

– What Davvi does is unlock a very competitive energy resource in a region that needs jobs. For example, through hydrogen production – something that represents jobs and substantial values that benefit the local community and the entire region.

I would argue that the greatest values are created as a result of the ripple effects that occur when you introduce more renewable energy into the market.

Wilhelm Kiil Rød
Responsible authority contact, St1


At the same time, he is clear about the obvious fact that it is naturally profitable for the developers themselves.

– To draw a parallel with what is referred to as the Norwegian oil adventure. It has been and is an energy resource that some manage on behalf of the community. Of course, extraction companies make money from this, much more than the power industry does from wind power. Nevertheless, most people would probably agree that these values have also benefited Norwegian society, says Kiil Rød.

With an increasingly demanding phase-out of fossil energy, he believes that Norway has once again been fortunate in terms of its natural resources. Especially in the north of the country.

– Northern Norway has some of the world's best wind resources, with strong and consistent winds. There are few places in the world where you can produce onshore wind power, and thus renewable electricity, as cheaply as you can there. The competitive advantage is substantial, concludes Wilhelm Kiil Rød.


Find out more about Davvi wind farm

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