Headwinds are sometimes what you need to rethink your business. For Ørsted, tough choices and a clear vision have driven our transformation from a fossil-intensive European utility to a leading global renewable energy company, says Jakob Askou Bøss, Head of Strategy and Communication

If you had told people ten years ago it was possible to take a state-owned, oil-and-coal-based utility and turn it into the world’s fifth largest commercial renewable energy company within a decade, they would have shaken their heads in disbelief. Yet, since 2006, Ørsted has reduced its greenhouse gas intensity by 72% and today its offshore wind farms bring clean power to more than 12 million people. Over the past decade, we have, together with partners, invested more than $25 billion in renewable energy. Towards 2025, we plan to invest an additional $30 billion in energy from renewable sources. By then, our power and heat production will be essentially carbon-free.

The decision was based on the desire to stay relevant and competitive

Winds of change
Ørsted, formerly DONG Energy, was formed in 2006 by the merger of six Danish energy companies. The firm operated combined heat and power stations in Denmark, drilled for oil and gas in the North Sea, and sold and distributed power and gas to end customers in Denmark. Power and heat production was based on coal, oil and natural gas, with only a few onshore and offshore wind farms in the company’s portfolio. But the winds of change were blowing. A growing societal focus on climate change, the launch of the EU 2020 energy policy goals and a growing consensus about the need to transform global energy systems led Ørsted in 2008 to formulate a radical vision of transforming its business model from black to green energy. The decision was based on the desire to stay relevant and competitive. Over the past decade, we have converted our coal-fired power stations to run on sustainable biomass, divested our upstream oil and gas business, and expanded our offshore wind business, previously a high-potential, but high-cost, niche production technology. Today, offshore wind is the fastest growing renewable energy technology globally. Ørsted has a 30% share of this market globally.

Our transformation from black to green energy has also driven the financial turnaround of our company

Offshore wind at industrial scale

When we began to expand our investments into offshore wind, it was not a new area for the company. In 1991, Ørsted built the world’s first offshore wind farm in Denmark. This comprised 11 turbines, each of 0.45 megawatts (MW), with 35-metre-wide rotors. Since then, the company has pioneered offshore technology and expanded its portfolio of offshore wind farms. For each new wind farm, we have focused on systematically driving down costs by developing larger sites and installing larger turbines, innovating design and installation processes, and helping to make the industry’s supply chain more mature. At the moment, we are building Hornsea 1 in the UK, which comprises 174 turbines (7 MW each) with 154-metre-wide rotors. When operational in 2020, Hornsea 1 will be the world’s biggest offshore wind farm, bringing clean power to one million people.

At Ørsted we have demonstrated that it is not only good for the planet to deploy renewable energy, it is also the rational choice from an economic point of view.

Refocus the portfolio
This development was a distant future in the early 2010s, when conventional power markets were being squeezed and Ørsted was coming under intense financial pressure from significant challenges in the global gas markets. Most European power producers found themselves in the same situation. To get back on track, we focused our portfolio on four business areas. Offshore wind and upstream oil and gas, attracting 90% of all new investment. Conventional power stations in Denmark and distribution grids, taking 10% of investment. Non-core businesses such as gas storage facilities, electric vehicles, hydro, liquified natural gas and waste-fired power plants were divested, raising $3.5 billion. Operating cost reductions shrank the cost base by more than 20% Large-scale divestment and profound cost reductions were, however, not enough to restore the required balance between operating cash flows and the level of debt in the company. More than $2 billion was raised through an equity injection, providing the financial foundation for the continued expansion of renewable energy. In 2016, the company went public with the largest IPO ever in Denmark, and the second largest in the world that year. In 2017, we divested our upstream oil and gas business, concluding our strategic transformation. As a consequence, we changed our name to Ørsted, in honour of the Danish scientist H. C. Ørsted. He discovered electromagnetism in 1820, laying the scientific foundations for how we produce power today and how societies around the world are powered.

Strong case for the energy transition

Our strategic transformation has been driven by a strong view that we need to transform global energy production from fossil fuels to renewables. Society must limit the global temperature rise to 1.5°C above pre-industrial levels to avoid uncontrolled climate impacts, which threaten conditions for life on Earth for current and future generations. The business case for transitioning to renewables is equally strong. Green energy is becoming significantly cheaper than conventional fossil fuel power stations. Since 2012, the levelised cost of electricity from offshore wind has fallen by 63%. It is now cheaper to build and operate offshore wind farms in Europe than new-built power stations running on coal, gas or nuclear. Costs are likely to decline further as the global build-out rate of offshore wind accelerates. At Ørsted we have demonstrated that it is not only good for the planet to deploy renewable energy, it is also the rational choice from an economic point of view. Our transformation from black to green energy has also driven the financial turnaround of our company. Red bottom line figures from a few years ago have been turned into solid earnings. In 2018, we reported our all-time high financial result delivering $2.3 billion in operation profit, out of which $1.7 billion was delivered by our operating offshore wind farms. We realised a further $2.3 billion when we divested 50% of the Hornsea 1 offshore wind farm, again demonstrating the attractiveness of investing in renewable energy assets. The need to transform global energy systems from black to green will drive significant growth in the years to come, in global energy markets and for Ørsted. By 2030, our aim is to install 30 gigawatts of renewable energy, bringing clean energy to more than 50 million people. A tangible step towards our vision of a world that runs entirely on green energy.

Ørsted sustainability

• 75% of our total energy generation in 2018 was from renewable sources. This will rise to 99% in 2025.
• The carbon intensity of our energy generation decreased by 72% in 2018 compared with 2006 levels. Our target is 98% by 2025.
• We have reduced our coal consumption by 81% since 2006 and will exit coal completely by 2023.
• Our investments in offshore wind further progress towards the UN Sustainable Development Goals (SDG) on clean and affordable energy (SDG 7), decent work and economic growth (SDG 8) and climate action (SDG 13) by:
  • Bringing green energy to more than 12 million people a year
  • Creating more than 180,000 job years
  • Avoiding 6.3 million tonnes carbon emissions annually
• In January 2019, Ørsted was named the world’s most sustainable energy company by the Canadian NGO Corporate Knights, and the fourth most sustainable company in the world, among companies with an annual turnover of more than $1 billion.

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