Norway’s sovereign wealth fund has decided to invest in another wind farm, meaning the oil-fuelled trillion-dollar nest egg is starting to look greener and greener.
Norwegians have profited big time from their naturally-occurring fossil fuel reserves. As of 2024, the country’s sovereign wealth fund is worth around $1.8 trillion and holds assets in 1.5% of all the world’s listed companies.
It is the largest fund of its kind in the world and was set up to avoid the so-called ‘Dutch disease’, where an economy can be brought to its knees by pumping too much money into it, triggering crippling inflation. It has been used to fund pensions, infrastructure and other societal benefits.
Earlier this week, the fund announced that it would take a 49% stake in two large wind farms that are currently under construction off the coasts of Denmark and Germany. The projects have a combined planned capacity of 2.7 gigawatts, enough to power millions of homes.
Both are expected to be hooked up to the grid by 2029 and neither will be reliant on subsidies to turn a profit. It is easy to see why the fund has made this decision, given that RWE, a German energy company, will build and operate it.
It is not the first time the fund has turned to wind projects to grow its portfolio of assets. In 2021, it took a 50% share in two Dutch wind farms for a similar financial outlay and last year, it bought a smaller stake in a UK project.
This week’s announcement claimed that the projects will have “long-term contracted revenues that provide stable cash flows and reduce risk”, which is an interesting admission for a fund powered by fossil fuel sales to make. Renewables are suddenly the smart bet.
It also suggests that this will not be the last time Norway looks to make bank from renewable energy projects. The main driving reason behind that is of course financial wellbeing but there is also the potential matter of emissions guilt to consider.
Norway’s fossil fuel sales are primarily made on the international markets, as the Scandinavian nation itself is quickly approaching a fossil-free energy system. Hydro provides most of the power and electric vehicles are on track to replace the internal combustion engine. So there is an argument that Norway should be spending billions to provide clean energy to other countries, in order to make up for its oil and gas sales.
If Norway spent just 1% of the fund on clean energy rollout, both in Norway and around the world, then more than $20 billion could be spent every year on wind, solar, geothermal and other zero carbon projects. That is a huge sum of money that would undoubtedly accelerate the energy transition.
As the world’s largest fund of its kind, it might also inspire other funds to do the same. Whether that is Saudi Arabia, Qatar or even China.
That will be a discussion for the long-term. In the shorter-term, Danes and Germans will soon have access to even more clean energy, while Norway’s finances will benefit from a project that is nearly-guaranteed to provide a decent return on investment. As per usual, renewables are offering win-win outcomes.
Expect more examples of this in the not-so distant future.
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