Turning green energy into a viable business
The energy supply crisis of 2022 made evident that Europe needs to reduce its dependency on imported energy. Investing heavily in renewable energy is an important part of the solution, and companies such as Danske Commodities play a vital part in turning investments in renewable energy into a viable business for developers and investors, say Head of European Origination, Jens Tang, and Renewables Development Origination Manager, Dirk Kaiser.
Energy trading companies such as Danske Commodities play an increasingly important role in the transition towards a greener energy system. Ramping up renewable energy is not only vital for reducing CO2 emissions and achieving Europe’s ambitious climate targets, it is now also an important component in reducing Europe’s dependency on imported energy.
At Danske Commodities, we have built our business on a deep understanding of the energy markets and broad market access. And indeed knowledge and access are exactly what you are looking for if you are an investor or developer putting millions of euros into new renewable energy sources.
Power production from renewable energy sources naturally fluctuates with the weather, but companies like Danske Commodities have specialised in handling fluctuating energy-producing assets, integrating the output into the power grid without wasting energy in the process.
Covering the cost of establishing renewable energy
Though wind and sun provide free fuel for wind turbines and solar panels, building the actual assets requires huge investments. Costs for a possible land lease, development and the purchasing of turbines or solar panels must be met by an income that makes the investment feasible, and the only income an asset owner has is selling the power produced by the farm or park. So, in order to get the bank loans required to build the asset – and to generate a return on the investment – asset owners need to secure a future income stream.
They do that by signing a so-called power purchase agreement (PPA) with an energy trading company like Danske Commodities. A PPA can be as simple as an agreement under which Danske Commodities brings the power produced by a wind farm or solar park to market for a certain period of time – usually several years. But it can also be a more complex agreement under which Danske Commodities helps the asset owners protect themselves from a wide range of short- and long-term risks like balancing risk, volume risk or price risk, to name just a few.
Now, asset owners have the added option of using the energy produced to power up a battery – saving the power for later – or turning the power into hydrogen via a Power-to‑X plant.
A brighter – and more complex – future
As Power-to-X solutions and large-scale power storage options like batteries gain more ground, the role of Danske Commodities in relation to asset owners is also evolving. Making the most out of the energy produced by wind turbines and solar parks is not only a matter of selling it to the market at the right time and having a big market footprint. Now, asset owners have the added option of using the energy produced to power up a battery – saving the power for later – or turning the power into hydrogen via a Power-to-X plant. Again, a company like Danske Commodities can deliver hybrid solutions, using its market understanding to determine when it makes sense to power up a battery, and when the power should be sold to the grid. This benefits the asset owners, consumers, the climate and society.
About Jens Tang
- Position: Head of European Origination
- Employed since: March 2022
- Educational background: Diploma in Meteorology
About Dirk Kaiser
- Position: Renewables Development Origination Manager
- Employed since: March 2022
- Educational background: Financial Diploma