Norway has become a cleantech hotbed. That sentence may seem paradoxical given how fossil fuel-dependent the Norwegian economy is. Oil and gas have been the cornerstones of the nation’s wealth for the past five decades. The Government Pension Fund Global, commonly referred to as the Norwegian Oil Fund, has ballooned to become the largest sovereign wealth fund in the world thanks to the natural resources pumped out of the North Sea.
And it’s not as if Norway’s reliance on crude oil will come to an end any time soon. Ahead of the parliamentary elections in September this year, none of the major parties wanted to wind down the oil industry, even if there were some grumblings towards that end from smaller ones.
So it may seem like an odd dichotomy that the same national leaders have actively championed initiatives that would see the Scandinavian kingdom spearhead the green revolution.
However, far from just being a greenwashing project on a national scale, there is something to the claim that Norway is leading the way when it comes to sustainability.
“Norway used to be known as a nation focused on the oil and gas industry,” Thomas Bostrøm Jørgensen, CEO at delivery technology company Appear, tells Verdict. “But like much of the world, the Norwegian parliament knew this was an unsustainable route for its nation’s economy and steps had to be taken to develop new technologies to support Norwegian economics develop over the upcoming decades based on greener and more sustainable technologies.”
These efforts have had an effect. The Environmental Performance Index ranked Norway as the ninth most sustainable nation in the world in 2020. Part of that reason is that it’s not using the mined fossil fuels domestically but exporting them instead; Norway supplies about 20 to 25% of the natural gas used in Europe.
Still, no matter if you cut it down to semantics or hypocrisy, the nation has been working on its green chops for some time.
“From the 90s there has always been a discussion in Norway around how sustainable our society is,” Eiliv Flakne, head of media relationships at Enova, the government-owned company supporting sustainable projects, tells Verdict. According to the insider, the debate about sustainability “is very much alive in Norway.”
The government’s stated ambition is for “Norway to play a pioneering role in the development of a green, circular economy that makes better, more efficient use of resources.”
The sentiment has been echoed from several political leaders over the years. Conservative prime minister Erna Solberg – who lost the election and is now waiting on Labour leader Jonas Gahr Støre to assemble a cabinet – has said: “Government and business must team up in new ways to drive innovation and create jobs.”
Elsewhere, Raymond Johansen, the mayor of Oslo, has described the adoption of sustainable initiatives as both an “ethical and a moral” obligation.
Despite the paradox between being a major fossil fuel exporter and its ambition of providing clean energy, the fact of the matter is that cleantech startups and other initiatives are rapidly popping up across Norway.
As world leaders are gearing up to gather in Glasgow for COP26, the question is if they can learn a thing or two from Norway on how to nurture sustainable technology.
Electric vehicles in the fast lane
It might seem a bit funny, but if you’re looking for a visible sign that the cleantech revolution is happening in Norway, you should look no further than the cars on the road. Foreign drivers would likely be surprised to see how commonplace Teslas are in Norway. Electric cars held a 54% market share in 2020 and that number is only set to grow.
The national goal is that all new cars sold should be zero-emission ones by 2025. Since the 1990s, consecutive governments have encouraged citizens to buy hydrogen and electric cars by offering them perks like tax cuts and access to bus lanes.
Another visible sign of the nation’s green intentions is the amount of money put towards sustainability. In May 2020, the government proposed a green transition fund worth 3.6bn Norwegian crowns ($369m) to help make the economy more sustainable. Of those, 2bn Norwegian crowns would be managed by Enova, the state-owned company that has supported and helped finance over 10,854 green projects since 2012. These include everything from supporting hotel renovations to making them more energy efficient, to installing charger points for electric vehicles.
Innovasjon Norge, the government-owned company set up to support Norwegian entrepreneurship, has also put dedicated funds towards cleantech, both domestically and abroad.
Together, these initiatives have also helped create a nurturing environment where sustainable startups can thrive.
“Wow, this is going to change the world”
Andreas Thorsheim is one of the entrepreneurs spearheading the Norwegian sustainable technology sector. After a former colleague had arranged a visiting a Tesla factory in California as the guest of Peter Carlsson – who went on to found Swedish car battery maker Northvolt – he started to read up on green energy and sustainability, ploughing through research papers and reports like there was no tomorrow.
“I realised that, wow, this is going to change the world,” he tells Verdict.
Not resting on his laurels, he and his three co-founders decided to launch Otovo, the marketplace for residential solar installations, in 2016. The startup listed in Norway earlier this year and is providing its services in Sweden, France, Spain, Poland and Italy. It is planning to launch in Germany later this year.
As the founder and CEO of the company, Thorsheim has had a front-row seat to the evolution of Norway’s cleantech sector, especially entrepreneurs’ access to funding.
“Now it’s great,” he says, “but three, four years ago it was super hard. The Norwegian tech scene was immature [and] the oil sector had this gravitational pool on talent and money. And there were [little examples of proof that you could] make money out of cleantech, both in Norway and internationally. And if you look four or five years back, the conventional wisdom was that cleantech was the one category in which you couldn’t make money as a venture capitalist.”
That has changed over the past few years as sustainability has become a priority for more companies. Investors are increasingly putting the screws on business leaders to ensure they stay environmentally friendly, cut emissions and protect the environment.
“The financial sector is adding more pressure for net-zero, warning that climate risk is financial risk,” analysts noted in a recent thematic research report from GlobalData. “Large asset managers are beginning to vote against the management of companies they believe are not adequately addressing climate risk in their business strategies.”
With COP26 around the corner, the focus on green alternatives is hardly going to disappear.
At the same time, cleantech startups around the world have proven their chops over the past few years by making profits and providing a return for investors.
“[Those] climate tech success stories [primed] investors for the next big thing in the [sector], Thorsheim says.
“So there were all these good things coming together for climate technologies. For our Series A we had over 300 investor meetings and only raised €6m. For the last one we had 40 meetings and everyone came with money. We raised €30m in a matter of days.”
Perks and challenges for Norway’s cleantech startups
Norwegian cleantech startups have benefited from the nation’s long-running policy of making the country greener. Thorsheim argues that the country’s investments in electric cars, sustainable technology and renewable hydrogen energy, which makes up for 99% of the nation’s electricity, could help startups like Otovo get a jump on their European rivals.
“People’s homes are already electrified with clean energy and super digital, and those things mean that we sort of operate in an environment (which) is what France, Germany and the UK are going to look like in maybe five years from now,” he says. “So you kind of get an advantage from having a sneak peek at the future.”
Nevertheless, there are challenges that cleantech startups face in Norway. For starters, labour is expensive in Norway. Engineers working in the petroleum sector could expect an annual salary of up to $99,010 per year, according to Statistics Norway. Engineers in other sectors on average take home $78,953 per annum.
Comparatively, engineers in Britain had an average salary of £47,896 ($64,485) in 2018, according to The Engineer.
The second hurdle to overcome is that, with a population of only 5.3 million people, the domestic market is quite small in Norway.
“That’s a bit of a double edged sword,” Thorsheim says. “It’s easy to become king at home, but it’s also a very small home market. So you are forced to go out. You can’t become a unicorn by only selling to Norwegians.”
In other words, Norway’s cleantech startups are aiming to go international, beating foreign competitors to the punch in their stride. Maybe that is something for other world leaders to consider as they gather in Glasgow for COP26.