In the last 10 years, an energy company in Denmark did something that few energy utilities in the world have been able to do: They completely changed their business model — flipping from fossil fuels to renewable energy.
They even changed their name, transforming from DONG — short for Danish Oil and Natural Gas — to Ørsted, the last name of Hans Christian Ørsted, an 18th-century Danish pioneer of energy science.
The company went from 15% renewables in 2009 to 85% last year. They account for nearly a third of the global offshore wind market, mostly in Europe.
“What [Ørsted] achieved is off the scale. … They’re the biggest wind producer in the world.”
“What they’ve achieved is off the scale,” said Dave Jones, electricity analyst with clean energy think tank Ember. “They’re the biggest wind producer in the world.”
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Ørsted is, in fact, one of the only energy utilities in the world that has been able to simultaneously grow its renewable portfolio while shrinking oil and gas production, according to a recent global study.
In many ways, Ørsted is ahead of the curve, as other major European oil and gas companies, such as Royal Dutch Shell and British Petroleum attempt to increase their renewable energy portfolios in the wake of the slow but undeniable decline in global oil markets, accelerated this year by the coronavirus shutdowns.
“It takes an awful lot of vision to have such an aggressive strategy like that, so what they’ve done is amazing,” Jones said. “It hasn’t been repeated many times.”
So, how did Ørsted pull it off?
Partly it comes down to government policy that started in the 1970s, which paved the way for a boom in wind energy innovation. Ørsted’s remarkable success can be traced to decades of progressive energy policy.
“My argument would be that we had some far-sighted governments and civil servants at the time who could see that there was a possibility to start focusing on wind.”
“My argument would be that we had some farsighted governments and civil servants at the time who could see that there was a possibility to start focusing on wind,” said Finn Mortensen, who leads State of Green, an organization that promotes Danish renewable energy.
The global oil shortage and OPEC embargo led to a massive energy shortage in the small country.
“We realized in Denmark back in the ’70s that we had our back against the wall,” Mortensen said. “I mean, we simply needed to start diversifying.”
Widespread protests by anti-nuclear activists caused the government to focus on wind.
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The government had around a dozen policies that encouraged wind: subsidies, state-backed research and development, carbon and pollution taxes, energy labels, and a feed-in tariff, which is a policy that offers long-term contracts to renewable energy producers.
“It really shows the right sequence of policies and the right basket of policy incentives can really work. … It takes a mix of policies rather than a silver bullet.”
“It really shows the right sequence of policies and the right basket of policy incentives can really work,” said Benjamin Sovacool, an energy policy professor at the University of Sussex. “It takes a mix of policies rather than a silver bullet.”
The energy transition was largely driven by local governments, the Danish banks, community groups and this smattering of policies.
The result was a country that leads the world in wind energy innovation.
“They had a faster transition to wind energy than any other country on earth,” Sovacool said. “Denmark is the size of Maryland, and yet, they compete with China for the No. 1 manufacturers of wind turbines.”
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So, it makes sense that Ørsted, one of the country’s biggest energy utilities, would eventually capitalize on wind, one of Denmark’s biggest innovations. Sovacool says Ørsted’s transformation came in the wake of its home country’s transition.
“[Ørsted] didn’t get in the way, but they certainly didn’t accelerate [Denmark’s energy transition] much either,” Sovacool said. “They kind of just went along with general trends that were being pushed politically and socially.”
Sovacool says Ørsted also has the benefit of the stable and reliable Danish energy market, but the company is also able to operate in energy markets around the world, expanding its offshore wind operations.
And it’s helped the company’s bottom line. Years of state-supported innovation have led to a massive decrease in the cost of wind in Denmark, and the company has expanded internationally.
They now produce around a third of the world’s offshore wind — mostly in Europe, but they have plans to expand on the East Coast of the US, Taiwan, Japan and Korea.
The company reported more than $10 billion in revenue last year, which has largely flowed toward the Danish government, who still owns half the company’s stock.
“Major utilities can learn from what has happened [with Ørsted] that it doesn’t have to be a choice between sustainability, on the one hand, or profits on the other hand,” Sovacool said.
In the first five years of its transition, Ørsted accounted for more than half of Denmark’s carbon emission reductions, helping the country get closer to the government-set goal of reducing emissions 70% from 1990 levels in the next 10 years.
Ørsted’s successful transition is a source of pride for many in Denmark.
“I think it just pushed the green agenda a lot more than if they would have kept [oil and gas] activities up until now,” said Glenda Napier, CEO of Energy Cluster Denmark, an energy innovation organization.
“I think it just pushed the green agenda a lot more than if they would have kept [oil and gas] activities up until now,” said Glenda Napier, CEO of Energy Cluster Denmark, an energy innovation organization.
Ørsted and other wind manufacturing companies in Denmark are now trying to push the technology further, Napier said, to develop new ways of storing wind energy and use it to power cars, trucks and even airplanes.
Those innovations can help Denmark companies stay competitive in the global market, and can help Ørsted expand even further internationally.
“Ørsted can attract the best people. They can attract the best sub-suppliers. They are very competitive in the market,” Napier said. “They’ve moved in the right direction at the right point of time.”
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