From oil to offshore wind Orsted transformed

NEW YORK – Over a decade ago, Ørsted, an energy company with a history of relying on fossil fuels, underwent a complete transformation by heavily investing in offshore wind power.
The company, formerly known as DONG Energy, aggressively built wind farms off the coast of Denmark, the U.K. and Germany in 2008, a time when offshore wind energy was still relatively new.

To shift its focus towards clean energy, Ørsted sold off its North Sea oil and gas assets and rebranded itself as Ørsted.

Today, Ørsted is one of the biggest offshore wind power developers in the world, with wind power projects under construction or already operational in China, the U.K., Germany, the Netherlands, Taiwan, and Denmark, equivalent to the combined output of 62 nuclear plants.

According to CEO Mads Nipper, Ørsted is often referred to as the “Tesla of offshore wind” because, similar to Tesla’s approach to electric cars, it has scaled wind energy solutions that already existed, including wind turbines, copper cables, and substations.

Currently, Ørsted is working on building offshore wind farms along the East Coast of the U.S., Europe, and Taiwan. The company is also actively creating a market for green hydrogen and hydrogen-based fuels and has set a goal of building 50 gigawatts of clean energy generation by 2030.

Nipper recently had an interview with The Associated Press regarding the offshore wind industry. The following transcript has been edited for length and clarity.

Q: There is a belief that in the near future, we will witness the emergence of clean energy supermajors, similar to the oil majors we have today. What is your opinion on whether Ørsted qualifies as a clean energy supermajor?
A: At present, there are no clean energy supermajors, including Ørsted. However, Ørsted aims to become one in the future. It would be presumptuous to claim that Ørsted is already a supermajor. Nevertheless, Ørsted is one of the major players in the renewable energy sector, investing around $6 to $7 billion annually in this area, which places the company among the top contenders.
Q: What impact has the conflict in Ukraine had on the operations of Ørsted and the offshore wind industry as a whole?
A: I would say that the war in Ukraine has not had a direct impact on our offshore business. However, it may have had an indirect impact that is tragically or ironically positive. This is because the conflict has made it clear to Europe that energy independence and security are not just matters of climate policy, but also security policy. As a result, European governments are highly motivated to achieve their renewable energy goals. We are currently exploring ways to assist Ukraine in developing a stable power supply and have engaged in discussions with the Danish foreign ministry on the matter.

Q: Would Ørsted be the most suitable company to assist the United States in transitioning to renewable energy?

A: I have no doubts about our offshore capabilities, and based on the traction we’ve gained and the opportunities we’ve observed onshore, I believe we are well-positioned to excel. While I hesitate to claim that we are the best positioned specifically for onshore projects, we have already been awarded 5 gigawatts of capacity in offshore and we’re not finished yet. Our focus on the U.S. market as a key growth priority remains steadfast, and we are ready to invest significant capital to aid in its transformation

Q: What are some ways to take advantage of the green energy incentives provided by the Inflation Reduction Act in the United States?

A: Given recent industry headwinds, including higher interest rates leading to increased capital costs and inflation in capital expenditures due to both supply chain bottlenecks and material costs, the Inflation Reduction Act is a crucial tool for addressing these challenges. In a global market where competition for capital is fierce, the U.S. has emerged as a leader in promoting clean energy through both onshore and offshore projects. Additionally, the up to $3 tax credit for green hydrogen is a revolutionary step forward. This credit likely makes the U.S. the most affordable market for green hydrogen production, which can be used to create liquid fuels that are more transportable than electricity.

Q: You previously mentioned that green hydrogen is a crucial aspect of the green transition and represents a significant growth opportunity for Ørsted. Could you provide further insight on this topic?

A: Ørsted has established a robust portfolio of green hydrogen opportunities, primarily in Europe but also in the U.S. One such opportunity is a memorandum of understanding with Maersk, the world’s largest container shipper, for the production of up to 300,000 tons of e-methanol per year using renewable hydrogen and biogenic CO2. Ørsted has also made its first utility-scale green hydrogen investment decision in Sweden, where it will produce 50,000 tons of methanol per year from biogenic CO2 and sell it to the maritime sector. While Ørsted may not be the largest green hydrogen producer, the company aims to be a catalyst for change and demonstrate the viability of the technology. The demand for green molecules in hard-to-abate sectors such as heavy transport, maritime, refineries, and cement is substantial, and Ørsted is actively working to help create this market.

Q: In your opinion, at what point are we currently on the trajectory of offshore wind development?

A: We have reached a critical point where we need to take the scaling of our industry to a whole new level. While we have made progress in scaling and sustainability, we need to accelerate this process, particularly in the supply chain. This will require significant investment and support, not necessarily in the form of subsidies, but in the form of increased capital availability. Despite the challenges we have faced in the past year, we cannot afford to slow down. As an industry, and as a company, we must find ways to leverage these difficulties to propel ourselves forward. We are at the end of the beginning, but the road ahead will be challenging.

Q: Last year, you expressed optimism that it was still achievable to limit global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit), which is the internationally agreed-upon goal. Do you maintain that belief?

A: While I still believe that limiting global warming to 1.5 degrees Celsius is possible, it has certainly become more challenging. Unfortunately, the impact of past actions on the environment cannot be undone, and the current energy crisis has led to increased burning of fossil fuels, including coal and lignite. Additionally, some oil companies may be redirecting funds back to fossil fuels, which is concerning. Despite these challenges, it is important for us to remain optimistic as a society. Personally, I still believe that we can keep temperature increases within manageable levels to avoid catastrophic consequences. However, reaching the 1.5-degree target may be difficult to achieve, but we should strive for it nonetheless.