Insider Q&A: From oil to offshore wind, Ørsted transformed

NEW YORK (AP) — One of Europe’s most fossil fuel-intensive energy companies transformed completely in little more than a decade by doubling down on offshore wind.

Ørsted, formerly DONG Energy, for Danish Oil and Natural Gas, started aggressively building wind farms off the coast of Denmark, the U.K. and Germany in 2008 — a time when offshore wind was a curiosity.

The company sold off the North Sea oil and gas assets on which it had built its identity to focus on clean energy, becoming Ørsted.

Fast forward 15 years and China, the U.K., Germany, the Netherlands, Taiwan and Denmark have some 62 nuclear plants’ worth of wind power spinning or under construction offshore. Ørsted is one of the biggest developers.

CEO Mads Nipper called Ørsted the “Tesla of offshore wind” because it didn’t invent wind turbines or copper cable or substations, just like the electric car company didn’t invent batteries or electric motors. But they both proved something was scalable when few believed it.

Currently Ørsted is building offshore wind farms along the East Coast of the U.S., in Europe and Taiwan. It’s trying to create a market globally for green hydrogen and hydrogen-based fuels. And it aims to build 50 gigawatts of clean energy generation by 2030.

Nipper spoke with The Associated Press about the industry. The interview has been edited for clarity and length.

Q: They say soon we’ll have clean energy supermajors, the way we’ve had oil majors. Do you consider Ørsted to be a clean energy supermajor?

A: Not yet. But we will be. There are no clean energy supermajors. If there was one, it’s us. But there aren’t any yet. It would be arrogant to say that we are a supermajor yet… We invest, depending on the year, $6, $7 billion a year purely into renewable energy, which makes us comfortably one of the top players.

Q: How has the war in Ukraine affected Ørsted’s business and the offshore wind sector in general?

A: It has not affected our offshore business, I would say. If indirectly, then tragically or ironically, actually positively, because it’s dawning very clearly to Europe that energy independence, and therefore energy security, and not being dependent on Russia for energy supplies, is not just a matter of climate policy — it’s very much security policy as well. So if anything, especially European governments are extremely determined to make renewable energy ambitions come through… We are looking at Ukraine. We are actually in dialog with the Danish foreign ministry to see what can we do to help Ukraine establish a reliable power supply.

Q: Is Ørsted best positioned to help the U.S. transition to green energy?

A: On offshore, I have no doubt. And onshore, given the traction we have and given also what we are seeing of opportunities, I think, we would be amongst the best positioned. I think it would be leaning out to say that in onshore specifically we would be best positioned. But with already 5 gigawatts of awarded capacity in offshore, we are not done. The U.S. is a major growth priority market for us globally. Our preparedness to invest significant capital in the U.S. market to help that transformation is intact.

Q: How can you use the incentives offered for green energy in the U.S. through the Inflation Reduction Act?

A: Given some of the headwinds of the industry recently and especially higher cost of capital through interest rates and significant capital expenditure inflation due to both materials but also supply chain bottlenecks, the Inflation Reduction Act is a vital part of addressing that challenge. And quite honestly, also in a world where there is going to be competition to attract capital both for offshore and renewable energy, but also for the manufacturing jobs that follow that, that is where the U.S. has clearly set a benchmark globally for what I call a wholehearted push to really advance clean energy. That’s both for offshore but also for onshore, and maybe most revolutionary also with the up to $3 tax credit for green hydrogen. Overnight, that very likely made the U.S. the cheapest market to produce green hydrogen, which as opposed to electricity can travel well if you make liquid fuels from green hydrogen.

Q: You have said that green hydrogen is a key component of the green transition and a major growth area for Ørsted. Can you talk about that?

A: We’ve built up a strong portfolio of tangible opportunities, most in Europe, but also in the U.S., where we have a MOU with Maersk, the world’s largest container shipper who is very committed to decarbonizing ocean transport, for up to 300,000 tons of e-methanol a year, which would be purely based on renewable hydrogen and biogenic CO2. We took final investment decision on our first utility-scale green hydrogen project in Sweden, which is where we would also make methanol from biogenic CO2 and sell that to the maritime sector. That’s 50,000 tons a year. So not huge, but big enough to matter. It will fuel a couple of ships. And by doing that, we don’t think we will be necessarily the biggest producer of green hydrogen. We hope and believe that also the big oil majors will have this as a strategic bet. But we want to be a catalyst for change, that we prove that it is possible… We know that all the hard-to-abate sectors of the world, be it heavy transport, maritime, refineries, cement, everyone needs green molecules. So we know the market will be there and we are trying to help create that.

Q: Where do you see us on the trajectory of offshore wind?

A: We are at the end of the beginning… We are ready for a totally different level of scaling. The industry has scaled, but we need to accelerate that scaling, including the supply chain, with even more sustainable approaches but also significant support and investment. And I don’t necessarily mean sort of subsidy, but significant capital availability to scale an industry that needs to go much faster. So we are at the end of the beginning and also now in a reality where, especially over the last 12 months, it just became harder. But instead of saying, ‘oh, then we need to slow down,’ we would ask ourselves as an industry and we will definitely as a company, ‘how do we leverage a difficult situation?’

Q: You said a year ago that it’s still possible to stay within the 1.5 degrees Celsius (2.7 degrees Fahrenheit) scenario, the elusive international goal. Do you still feel that way?

A: I still don’t think it’s impossible, but it has become more difficult. It has become more difficult because unfortunately, the planet doesn’t forget. And unfortunately, the current energy crisis means that we are burning more fossil fuels than we did before. In Europe, lignite and coal is being burnt to ensure that there is energy. And unfortunately I also think that right now, if anything, the large oil companies are probably, at least some of them, redirecting funds back to fossil fuels. We must as humanity remain optimistic. I will say I am still optimistic we will manage temperature increases to be at a level where we can avoid the biggest disasters. But 1.5 degrees is a stretch. ________

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