Nakskov factory closure leaves 1.5bn-kroner gas bill

Denmark’s 1.5 billion-kroner gas pipeline to Lolland-Falster is losing its biggest customer as the sugar factory in Nakskov prepares to close, DR reports.

When the pipeline was approved in 2021, the aim was to give businesses access to gas while reducing carbon dioxide emissions. Five years later, the financial outlook has changed significantly.

Nordzucker plans to stop production at the Nakskov factory after the 2026-27 sugar campaign, which is expected to end in January 2027. The closure removes one of the most important users of the pipeline and raises questions about how expensive infrastructure should be paid for as the technology it supports is phased out.

Warnings against choosing gas

Hans Henrik Lindboe, a partner at consulting firm Ea Energianalyse, warned against choosing gas over electricity when the project was being considered.

“We warned at the time against switching from oil to gas instead of switching from oil to electricity,” Lindboe said.

The pipeline initially cost substantially less than one billion kroner. The war in Ukraine and rising construction costs, among other factors, pushed the final bill to about 1.5 billion kroner.

According to Lindboe, the investment will now be increasingly difficult to finance because forecasts point to falling gas consumption and greater electrification of businesses.

“There is an investment of 1.5 billion kroner that has to be paid for by fewer and fewer gas customers,” he said.

In autumn 2024, Jyllands-Posten reported that Nordic Sugar was the only company connected to the pipeline at that time. The Ministry of Climate, Energy and Utilities had previously told Ritzau that 15 to 20 other companies had expressed interest in connecting.

Why the Nakskov factory is closing

Nordzucker says persistent overcapacity in the European sugar industry is putting pressure on the market. Two years of large sugar beet harvests have also led to large stocks and lower prices.

The company estimates that the Nakskov factory would require significantly greater investment than its other factories to remain efficient and profitable in the long term.

Nordzucker plans to concentrate Danish sugar production at its factory in Nykøbing Falster to make better use of production capacity.

Up to 150 jobs will be affected. The factory will not close entirely, however, as Nordzucker plans to continue operating a sugar packing and service centre at the Nakskov location.

Costs will be covered by gas users

Lindboe said the case also showed the difficulty of choosing technologies and supporting businesses with public funds.

He said many parties had hoped Nordic Sugar would choose a solution based on electrification, and that the Danish state and the European Union would support it. Instead, he described the gas pipeline as a “poisoned gift” from the Danish state to businesses.

Brian Vad Mathiesen, a professor of energy planning at Aalborg University, has previously criticised the project. He said the investment should have been used to convert the sugar factories to green electricity and called the gas pipeline a major project that would create a loss for society.

Climate Minister Samira Nawa of the Social Liberal Party has also criticised the decision. Speaking to Ritzau, she called the pipeline an expression of “outdated thinking” and said society fundamentally needs to use less gas and more electricity.

The closure will also remove about 150 jobs in Nakskov.

Lindboe said the closure should prompt a discussion about how the state supports businesses in the future.

“If you are going to support businesses, you should preferably move in the right direction, so that we can make them stronger rather than more vulnerable,” he said.

The costs of the gas infrastructure will not be sent directly to the state. Instead, they are covered through charges paid by gas consumers across Denmark.

Lindboe therefore fears that the bill could ultimately fall on the companies that continue to use large amounts of gas.