Ørsted has a bold company vision: a world that runs on entirely green energy. It is aiming to be close to zero carbon by 2025, well ahead of the IPCC’s recommended targets for a 1.5C pathway. SustainAbility Director, Denise Delaney, talks to Rasmus Skov, Head of Sustainability, about the nature of this transformation, what has enabled it and what more needs to be done.
By 2025 Ørsted’s heat and power generation will essentially be carbon-free. What instigated this transformation?
A decade ago, Ørsted was quite a different company with a large portfolio of coal and gas. At the same time, society was growing more concerned about the impacts of climate change, and there was an emerging consensus on the need to decarbonise the global energy system.
That led Ørsted in 2008 to formulate a radical vision of transforming its business model from black to green energy to stay competitive and relevant. Since then, Ørsted has divested its upstream oil and gas business, converted its coal-fired power stations to run on sustainable biomass, and greatly expanded its offshore wind business.
When we began our company transformation offshore wind had potential but was a niche product with a relatively high cost. With each wind farm we have built, we have systematically driven down costs by developing larger sites with larger wind turbines and by innovating design and maturing the industry supply chain. Visionary policy makers have also realised the need to transform energy systems and provided us with the long-term frameworks to invest in offshore wind.
Visionary policy makers have also realised the need to transform energy systems and provided us with the long-term frameworks to invest in offshore wind.
The price of offshore wind has dropped by 63% since 2012, and it is now cheaper to build offshore wind farms than coal- and gas- fired power plants in northwest Europe. Countries that were previously reliant on fossil-fired capacity are now being convinced to invest in offshore wind.
Ørsted’s vision is of a world that runs entirely on clean energy. We have invested more than $25 billion in renewable energy together with our partners in past decade. We will invest another $30 billion in renewable energy towards 2025.
Ørsted’s vision is of a world that runs entirely on clean energy.
In practical terms how have you decarbonised the business?
Decarbonisation of our energy production has taken place by removing carbon from our production and by diluting our CO2 per kilowatt metric by installing more offshore wind.
We are in the process of converting all our combined heat-and-power stations to run on sustainable biomass, or shutting them down. This is a quick way to eradicate fossil based production from our portfolio. Society needs stable production of heat and power and we consider our power stations as a stepping stone, a way to get to a society that runs on other, renewable technologies such as wind and solar.
You went so far as to rename your company from DONG Energy to Ørsted as part of this transformation. Why did you decide to do that?
DONG, stood for Danish Oil and Natural Gas, and it made no sense to retain as a name after the divestment of our oil and gas business. We have one of the biggest green energy investment plans anywhere on the planet – 200 billion Danish Kroner, or about 30 billion US dollars, towards 2025 – and the name no longer represented who we are. Almost 200 years ago, the Danish scientist Hans Christian Ørsted discovered electromagnetism, which helped lay the foundations for the way we produce power today. His discovery was driven by curiosity, dedication and interest in nature. We share these values and find them essential in order to continue our journey from black to green energy – and changed our company name in his honour.
What have been the biggest enablers for your transformation?
In 2012, our current CEO, Henrik Poulsen, really accelerated the company’s transformation towards renewables. He focused the business on core growth areas, raising significant funds to continue the investment programme. You can’t make a transformation in such a cost intensive business as energy without significant funds.
Offshore wind is the best example of a UNGC ‘ambition loop’ – a positive feedback loop where bold government policy and private sector leadership reinforce each other to take climate action to the next level. Stable policy has allowed us to develop a financing model where we invite investors to purchase 50 percent of a windfarm, which, in turn, allows us to free up capital and continue our investment programme. Access to capital has been a crucial enabler of success, and of bringing the price of offshore wind down to a point where it’s cheaper than new coal- or gas- fired power stations and is now a mature and competitive green energy technology.
Access to capital has been a crucial enabler of success, and of bringing the price of offshore wind down to a point where it’s cheaper than new coal- or gas- fired power stations
How have the SDGs become such a strong framework for the company?
In the words of Unilever CEO Paul Polman “the SDGs are the business plan for the world”. You can’t just build green energy, you have to do it in a sustainable manner. We have 20 sustainability programs of which 15 programs help to progress action on the Goals.
Many businesses – and large businesses in particular – are really driving this agenda. It gives me hope that these things can be achieved. Business taking the lead in solving society’s most pressing challenges, while being financially sustainable, is a very healthy sign.
Sustainability is also a motivating factor. Many job applicants directly reference the purpose of our business as a reason for applying to Ørsted. At business schools and technical universities, more and more students now want to learn about sustainability and about how sustainability is embedded in a company’s business and operations.
Many job applicants directly reference the purpose of our business as a reason for applying to Ørsted.
With a vision for a world that runs entirely on clean energy what is needed to accelerate the entire transformation?
The world needs businesses that dare to be front and centre of the climate change agenda, whether that is Unilever on sustainable living, IKEA on circular economy, or Ørsted on clean energy. This will inspire others and show that it is possible to change your company’s business model and become more sustainable, while performing well financially.
The world needs businesses that dare to be in front and centre of the climate change agenda.
We are beginning to see the effects of climate change, whether it’s more frequent droughts and wildfires or a fiercer North Atlantic hurricane season. Young people are increasingly concerned about how these changes will affect their livelihoods and the planet. They are establishing powerful movements to combat climate change, and I am curious to see how this will impact climate policy. Policymakers will need to step up and keep up.