Chapter 21
Achieving Energy Independence
The Story of Samsø Island
It’s 8:10 p.m. Samsø Time, Thursday, February 23, 2006, when the ferry pulls into dock at Kolby Kas after a two-hour trip from Kalundborg. It’s dark . . . and dusty. And cold.
There are no streetlights between cities, and one has to follow the car ahead to the center of the 20-mile-by-6-mile island, to Tranebjerg and Flinch’s Hotel—one of the few hotels open during the off season.
The island feels deserted, and it is in a way. February is Denmark’s coldest month, and many of Samsø’s 4,300 residents are burrowed snugly in their warm homes—a stark contrast to when an influx of several tens of thousands visit the island during the tourist season. Many come in July for the popular music festival, the beautiful beaches, and sailing. But of late, Samsø has been invaded by a different kind of tourist; an eco-tourist.
In 1997, Denmark held a national competition. The selected winner would be home to a one-of-a-kind experiment: The winner would be expected to convert all its energy supply to 100 percent renewable energy (RE) within 10 years. The small island of Samsø was given the nod. Because it is an island that has no conventional energy resources of its own, Samsø was an ideal choice for such a controlled experiment. In 1998, Samsø began converting its energy into renewable energy, and has been so successful that 100 percent of its electricity comes from wind power, and 100 percent of its heat comes from solar power and biomass energy.
That’s a massive eco-revolution. But it gets better. Here’s how they did it. . . .
Wind Power: The New Danish Currency
Think of how long wind turbines have been around, and multiply that by 40. Wind turbines and windmills have been a part of the northern European landscape for centuries. Now, wind power makes up approximately 25 percent of Denmark’s power consumption, and that figure will grow to 30 percent before 2012 and possibly to 50 percent by 2025, according to the Danish Wind Industry Association.1
But Denmark’s wind industry isn’t just big—and growing—at home. Denmark is globally renowned for its wind power technology and innovations. That’s helped Danish manufacturers maintain 30 percent of the world market for wind turbines.2 This percentage equates to over DKK34.9 billion, or more than $6.54 billion—about 6.5 percent of Denmark’s total exports. That’s 10 times what it was in 1997!3 With power like that, wind is like Denmark’s new currency.
Beautiful, enormous wind turbines provide the island of Samsø with more than enough electricity to power residences and businesses. These wind farms generate so much electricity that sometimes, the island can’t use it all.4 So they sell it back to the mainland. Individuals, cooperatives, and the Samsø municipality have all invested in wind power. A land turbine costs just over a million dollars, but through subsidies, guaranteed rates, and the absolute efficiency of the technology, a turbine can pay back that amount in approximately 10 years.5
Samsø wanted to use whatever technology was currently available on a worldwide scale, and as wind power has been pioneered by the Danes, they had the best to choose from. The island’s turbines were manufactured by a company named Bonus Energy A/S, which was acquired by Siemens A/G on December 1, 2004, thereby becoming a strong competitor in the wind energy market. Vestas Wind Systems (VWS:Copenhagen) is the main wind turbine producer in Denmark, and the world.6 It holds the lion’s share of the world market.
The most interesting part of the story involves the offshore wind turbines. There are 10 of them off the southern tip of the island, and they are even bigger than their land-bound brothers. That means they cost more—around $1.95 million each.7 Over 1,500 people invested in this offshore wind farm,8 one of them Samsø Energy and Environment Office Director Søren Hermansen.
What Samsø’s done with wind power is extraordinary, and the communities around the island have embraced the turbines with a strong sense of pride in their independence and ownership. This community support was desirable. Samsø didn’t want large companies or corporations coming in just for the business and the profits. The island wanted wind power to not only provide a better environment through renewable energy, but also to save the island’s economy, introduce jobs, and prove to the world that they could do this themselves.9
And they have. Samsø has picked up the torch and has shown the world what wind power can do. With the completion of an offshore wind farm comprised of 10 beautiful turbines, Samsø has become carbon neutral. The energy produced by these wind turbines compensates for the island’s transportation emissions, including the ferries, and all other non-renewable energy sources.10
But wind power isn’t the only thing that’s super-charging Samsø’s eco-revolution.
Solar and Biomass Power: The Market’s Heating Up
On Samsø, it’s much more effective to use solar power for heating rather than electricity. Because of the expense of solar modules, the island has put them to use in a “collective” environment. Instead of installing solar arrays on individual homes for electricity, Samsø uses solar power for heat at its district heating plants.
District heating plants pump hot water to nearby homes for individual heating purposes. The water is heated using a combination of solar panels and renewable wood pellet or straw-furnaces. When we visited, about 250 homes had installed solar cells for heating their water tanks, and these were in instances in which the homes were too far from the district heating plant to use the central source.
By combining solar power with local, renewable biofuel, Samsø has custom-tailored a renewable energy program that is simple and highly effective. Solar panels are so efficient that on a cloudy winter day, they can heat the water to 25 degrees Fahrenheit above freezing on their own.
One of the most difficult steps is heating your home or business while respecting the environment. Samsø has found a unique way of solving this problem that is both cheaper than conventional heating means, and more productive for this island. On Samsø, a large number of homes and businesses get their heat from a district heating plant. There are four on the island: Nordby-Mårup in the north, Onsbjerg in the west, Ballen Brundby in the southeast, and Tranebjerg in the middle of the bottom half of the island.11
The heating plants consist of the following:
- A large water tank
- Arrays of solar panels
- A secondary heating source—wood pellets or straw
Water is pumped through pipes attached to the solar panels, and water travels through them becoming hotter and hotter, the more cells it passes through. If the water needs to be heated further, it makes its way into the plant to be heated by a wood pellet or straw furnace. Once the water is hot enough, it is pumped via pipes to individual homes and businesses.
The heating plant in Nordby had 2,500 square meters of solar panels that can heat water sufficiently without the help of the furnaces in warmer months, and then in the winter, the furnaces have to lend a hand. The Nordby plant had 800 cubic meters of chip capacity, and was so fully automated that only a regular check-up was required to keep the plant running.
This is probably the most interesting thing about the heating plants, though: Individuals who don’t live close to the district heating plant have their own system. These systems are like mini-district plants. Individuals have a water tank on their property, and solar panels and wood pellet furnaces to heat the water before it’s pumped to the home for heat.
That’s an important point—the heated water is not consumed. Instead it’s used to heat the home by running through pipes below the floor, or to heat water by heating an internal tank. It was interesting to visit a toasty home and be able to take off one’s shoes in the middle of February, Denmark’s coldest month of the year.
Because all their sources are renewable, this heating process is effective, and now, all heating is generated in this renewable fashion. Not only that, this manner of heating has provided Samsø with two harvestable crops: straw and wood.
There’s only one sector left to tackle, and it might prove to be the most difficult.
The Transformation of Transportation
Transportation was by far the biggest impediment to Samsø’s quest for 100 percent renewable status. It will probably be the biggest impediment for any country or city wanting to go totally carbon free. But here again, Samsø has shown remarkable ingenuity and self-reliance.
To this day, the largest amount of oil on Samsø goes to transportation. The folks at the Samsø Energy and Environment Office admit it’s a huge hurdle to jump, but they want to eventually ban all traditional combustion engines from the island once alternative fuels are in place. And they’ve got a plan—several plans, actually.
Currently, the 10 offshore wind turbines compensate for all the fossil energy used by the vehicles on the island, and the ferries to and from the island. Effectively, Samsø is carbon neutral. But that’s not good enough, and some interesting things have happened to rectify the situation.
One major project that could be in Samsø’s future is hydrogen power plants. Using the excess electricity from the wind farms, the island would generate hydrogen to fuel vehicles on the island.12
The island’s Energy Academy has a hydrogen filling station and hydrogen-powered truck on display. These were provided by H2 Logic in mid-May, 2007.13 H2 Logic is a Danish company that’s making strides in the international market. In fact, in early 2010, the company inaugurated Greenland’s first hydrogen plant for renewable energy storage.14 The truck is available for demonstrations to the community in order to promote its technology at Samsø’s new Energy Academy. But in the meantime, another big project to reduce conventional vehicle fuel is taking root: rapeseed oil.
Rapeseed oil is a biofuel made from rapeseeds. The seeds are cold-pressed, not unlike olives for olive oil. Oil is extracted from the seeds and is filtered and stored for use in vehicles and tractors. The remaining pressed seeds are then fed to cows as a source of protein. Samsø can support approximately 600 hectares of rapeseed a year. That’s not enough to totally eliminate the demand for gasoline or diesel, but it is an attractive notion for this island’s farmers.
Tractors use an astounding amount of diesel, and by replacing their diesel with homemade fuel, farmers can save a lot of money—and sell another crop. For about $1,000, a mechanic can add two small parts to a tractor’s engine (for a car, raise the price to $2,000). What’s being added is a small heater, and a small pump. Once that update is made, your tractor is ready for rapeseed.
Because this fuel relies on a number of components within the community to contribute to its “harvesting,” the community backs projects like these. But there’s a kink in the system. Rapeseed is subject to the same taxes as diesel fuel. This made it hard for large-scale production. One company, DLG Samsø, a feed company, had the capacity to press and produce rapeseed oil for the local market, with the rapeseed “cake” going to feed for cows. But every attempt to remove that fuel tax for rapeseed oil met with disappointment, so rapeseed is only produced by individual farmers for their own personal use.15
Even though this project has not gotten off the ground in a commercial way, the community strongly supports it, and that says a lot for the whole Samsø project. Generating community interest has been a key way of developing projects and increasing investors. Samsø’s Energy and Environment Office was successful because it offered more than just a great chance at a return on investments.
In order for the renewable energy project to survive, the Samsø project needed strong backing from the community. In that way, Samsø’s success goes way beyond the “greening” of energy consumption. This eco-revolution was not only an environmental change.
Samsø’s residents embraced a way to save their economy and improve their way of life. Through investing in co-ops that financed wind power and district heating plants, islanders took personal control over their quality of life. By introducing these renewable energy projects, Samsø has created new, better-paying jobs, increased tourism, and improved its economy.16 “The community is more inclined to support the project because they see it as something that is done locally by local people. As such, people participate not because they are forced by the authorities but because they want to,” says Søren Hermansen, director of the Samsø Energy and Environment Office.17
Community commitment is necessary for the advancement of any project, which is why Samsø uses many local resources like straw and wood pellets for the district heating plants. Soon rapeseed could be added to that list.
Residents want to see Samsø succeed, and understand that by participating in the island’s renewable energy projects the whole island benefits. Some might argue that the only reason Samsø’s renewable energy projects are succeeding is because of government subsidies. We would argue that the island’s eco-revolution is flourishing because its participants believe in what they’re doing. Monetary gain is only half the incentive.
Samsø is a unique place. This renewable energy project wasn’t initiated just to prove that it could be done; it saved the island. The renewable energy project has created higher-paying jobs, and used local resources that have boosted the standard of living for its residents. Approximately 100 people in Samsø had been unemployed due to the closure of a slaughterhouse on the island, so Hermansen has gotten whole communities involved.18
Samsø also has a new breed of tourists: eco-tourists. Experts from around the world have visited the island to study its renewable energy success. New eco-tourists have been visiting the island to take back ideas for their own eco-revolutions. Industry experts from Thailand, Japan, Nepal, Indonesia, to name a few, are all interested in Samsø. “The first year, 400 to 500 Japanese visited the RE-island project,” noted the 10-year evaluation of the island’s progress, titled “Samsø: A Renewable Energy Island.” “In the next couple of years Samsø entered several EU initiatives and joined the organization ISLENET. Europeans began to visit the island. Since then, visitors have come from almost everywhere.”19
When we visited him, Jesper Kjems of the Energy and Environment Office gave this advice on how to get your community involved:
Well, a general “how to” would be great, but it’s hard to come up with. I would rather give you some of our advice from experiences with building up this 100 percent renewable energy society. Public projects and public engagement:
1. Hold open meetings
2. Establish co-operatives
3. Get local business involved in building and maintaining
4. Work in cooperation with municipality
Use known technology—let universities do the research. Keep it a good deal for the consumers. It’s easier to be good to the environment, when you also save money. Convince the local companies and workmen to sell RE-solutions—they are often asked what to choose. See if you can get guaranties from government, municipality, or others to minimize the risk when local farmers, businesses, or consumers must invest lots of money in a new RE-project.
These tips are just as useful today as they were 12 years ago when Samsø started this project. Major western countries are just starting to catch on but the investment community is certainly offering your portfolio ways to take on an eco-revolution.
Eco-Revolution: The New Danish Currency Investment Solutions
By far, wind power is the foremost renewable source of energy in Denmark and on Samsø. According to the Danish Wind Industry Association, “growth expectations for the wind industry are greater than growth expectations for the Chinese economy.” A Reuters article published March 7, 2006 ran with the following headline: “Global Wind Energy Capacity Seen Tripling by 2014.”20 And guess who will be leading the charge? The United States.
Companies are scrambling to get in on this untouched market, and those already involved have already seen massive gains! And they’re all coming here, to the United States, to reap billions of dollars in profits from our wind market. For as rich as we are, for as advanced as our technology is, the United States is one of the worst countries when it comes to this industry. In fact, countries like New Zealand, Morocco, and India all trump the United States. But that’s about to change.
Nine different companies have entered this massive market here in the United States, and their contracts are worth billions. The U.S. government has just given the green light to boost this industry by 513 percent by 2030!
That figure is not a typo, and it’s not an exaggeration. Now, this industry has a measly 3.26 percent market penetration. The market is nearly untouched—pristine. But thanks to this government green light, the industry could grow to 20 percent by 2030.21 That’s 25.8 percent growth a year for the next 20 years.
It’s going to take some serious cash. More than $15 billion has already been shelled out, and that’s just the beginning. Over the next decade that figure could soar 10 times as high, and certain companies could climb 1,000 percent as massive contracts roll in.
Don’t think it can happen? Guess again. As we said, the United States is in bad shape compared to the rest of the world. Some of the world’s leaders in wind power, like Spain, Denmark, and Germany, generate a significant percentage of electricity from wind. But the whole of the European Union generates a larger percentage of electricity from wind than the United States.
All 27 members of the Union’s electrical capacity see 4.2 percent of its power from wind. The United States gets 3.26 percent from wind,22 and that’s after a $15 billion upgrade. It’s no wonder that the talking heads are drumming up support for a tenfold increase in that investment.
In 2008, the United States had 25,000 megawatt wind (MW) in operation.23 Turbines stand in more than two-thirds of all the states in the nation, and a record 8,358 MW of capacity was installed, more than in any other country in the world. Those 8,358 MW were a $15 billion investment.24 And get this: At the end of 2009, after one of the roughest economic recessions in generations, installed capacity reached 35,000 MW of wind power!25 That’s a fantastic leap considering the economic conditions.
Now imagine a $150 billion investment. That’s the future of energy here in the U.S. President Barack Obama is calling for a $150 billion investment26 in new energy over the next 10 years. On May 12, 2008, the Department of Energy released a 248-page report showing that the United States could generate 20 percent of its electricity from wind power by 2030.27 That’s an increase of 513 percent from current wind generation and means that thousands of additional turbines a year will need to be installed.
We’re already seeing demand spike here in the States. . . .
So, wind power is the next emerging market right here in our own backyard. To prove it, consider this: Western Wind Energy, a Canadian small-cap company, turned down the development rights to a project called the Windstar.28 This contract would have given Western Wind royalties for the next 30 years. Why in the world would a small-cap company turn down easy money? Well, $228 million pales in comparison to the $1.7 billion it can make going with the Windstar Project alone.29 That’s a huge difference, and it’s just a drop in the bucket when it comes to wind energy investments in the United States.
One company, Iberdrola Renewables (IBR:Madrid), is ready and willing to jump into the U.S. wind energy market. In fact, it’s already completed projects and has several new projects under construction here in the States. This company could easily become the next U.S. market leader:
Since the [American Recovery and Reinvestment Act’s] reimbursement program was enacted in February 2009, thirteen Iberdrola Renewables projects received funding, creating or supporting 9,000 jobs. These projects are capable of generating 1,795 MW of clean renewable wind energy. By re-packaging the long-standing tax credit, the Recovery Act allowed Iberdrola Renewables to leverage $975 million worth of grant money into as much as $6 billion worth of investment in U.S. renewable energy projects through 2012.30
As of the third quarter of 2010, Iberdrola Renewables has another 1,200 MW of wind power under construction in the United States.31 Indeed, the first nine months of 2010 saw this company increase its operating capacity by nearly 53 percent year-over-year in the United States.32 The company already has 41 percent of its wind production in the United States.33
This company is a must-buy for wind energy investors. Scratch that—it’s a must-buy for any investor. In the first nine months of 2010, IBR increased its operating capacity by 16.1 percent to 11,434 MW, and its production by 20.2 percent to 18,091 GWh (gigawatt hours). These are outstanding numbers considering the world was just starting to recover from the Great Recession!34 And the United States accounted for 52.8 percent of those increases!35 More than any other market, the United States has the most market growth potential in IBR’s basket of projects. The company also showed a 29.6 percent jump in U.S. production and a 27 percent jump in projects in the pipeline over that timeframe.36
IBR has operations in over 20 countries and is expanding rapidly to places major investors have targeted for growth: Brazil, Morocco, and China, just to name a few.37 But this is the reason to focus on IBR’s presence here in the United States:
Iberdrola Renewables plans to invest €9 billion over the 2010–2012 period to bolster its position as the global leader in wind power and drive international expansion, focusing on more profitable markets.
The company’s growth in this three-year period will come mainly from the US, where it will invest €4.9 billion, 55 percent of its total investment.38
That means the world leader in wind power is gobbling up U.S. market share, and that the company’s investments are paying off, big time. Such potential doesn’t come around that often in today’s financial situation. It’s the perfect storm of high energy prices, high demand for alternative energy, and a brand-new investment opportunity.
The gales of this storm could blow IBR as high as 23 euros. That’s what happened to Denmark’s Vestas Wind Systems (VWS:Copenhagen). On December 6, 2004, VWS was worth 62.25 Danish kroner (US$13.13). By July 7, 2008, VWS was trading for 627 Danish kroner (US$132.27).39
Will IBR reach 23 euros, a gain of nearly 1,000 percent? To be honest, it’s not guaranteed. It may only climb to 15 euros when all is said and done. Or it could climb to 40 or 45 euros, as when REPower Systems (RPW:XETRA) jumped from 12.08 euros on December 14, 2004 to 211 euros on July 7, 2008.40
Now is your best chance to grab an energy company that could climb tenfold in the next couple years. To be blunt, it may be your only chance.