Ørsted was once one of the most coal-intensive energy companies in Europe. Today, we’re one of the world’s most sustainable energy companies, and a global leader in the transition to green energy.
Our business transformation is a story of technological innovation, steep learning curves and difficult strategic choices that have led to long-term gains. We want to share what we’ve learnt, from our decision to move away from an unsustainable business model based on fossil fuels, to the action we took to build a truly green business – and the benefits and opportunities it's created for us.
Part of something much bigger
Our own green transformation took a decade. Our fundamental objective was to transform our business from one based on fossil fuels to one based on renewable energy, and to find a business model that is both environmentally and financially sustainable.
We hope that the story of our transformation will inspire other companies and countries to take the steps necessary to limit the temperature increases that are causing climate change, and having detrimental effects on our global ecosystems. As our story shows, green transformation is possible. And it comes with huge opportunities for businesses, economies and local communities.
Let’s work together to create a world that runs entirely on green energy.
The timeline of a transformation
A carbon-neutral future in sight
Ørsted’s operations and energy production (scope 1 and 2) are on track to be carbon neutral by 2025, putting us way ahead of the science-based targets for meeting the goals of the Paris Agreement.
By 2040, it’s our ambition that our entire value chain (scope 3) should be carbon-neutral too. We’re working closely with our strategic suppliers to achieve this ambition, which, among other things, includes finding new solutions to decarbonise areas like steel and vessels.
We’re the global market leader in offshore wind, and one of the largest renewable energy companies in the world. In onshore wind, solar and energy storage we have a regional position in the US which is growing rapidly, and we’re pursuing new renewables technologies like hydrogen. We’re among the most valuable energy companies in Europe, with a market capitalisation that has more than quadrupled since our IPO in 2016.
A 30-year goal achieved in a decade
In 2008, we defined the vision to transform our company from fossil fuels to green energy, and in 2009, we set the target of reversing the ratio of fossil fuels to renewables in our heat and power mix, so that our energy production would be 85% renewable by 2040. We achieved it in 2019, a full 21 years ahead of schedule.
Having opened our first offices outside Europe – in Taipei in 2016 and in Boston in 2017 – we acquired a US-based renewables developer in 2018, specialising in onshore wind and solar power.
The end of a fossil fuel era
In 2017, we set a target to end the use of coal in our heat and power generation by 2023* by continuing to close down some of our power stations and converting the remaining ones to run on sustainable biomass.
2017 was also the year when we completed the divestment of our oil and gas production business, marking the end of an era for what was once Denmark’s state oil company. We rebranded as Ørsted, guided by the vision of a world that runs entirely on green energy.
Ready to go public
In 2016, our capital expenditure was weighted decisively towards renewables. Institutional investments in our existing wind farms was unlocking capital to invest in new ones, including in new markets like the Netherlands, and in record-breaking projects like Hornsea 1, the world’s first gigawatt-scale wind farm.
In that year, we went public in the world’s second-biggest initial public offering (IPO), with an equity story focused on investing in offshore wind and the opportunities presented by the green energy transformation.
Offshore wind now cheaper than fossil power
In 2016, we succeeded in making offshore wind competitive with power production from coal- and gas-fired power stations for the first time. That is, the cost of newly built offshore wind power per MWh fell below the equivalent cost for power from newly-built coal- and gas-fired power plants.
Driving down costs
Offshore wind used to be much more expensive than it is today. In 2013, we decided to lead the way by systemically driving down cost through scale and innovation, developing larger sites with bigger wind turbines, and optimising costs related to all components, construction, operations, and maintenance.
Our goal was to reduce the cost of each MW of electricity from offshore wind by 35-40 % to EUR 100 per megawatt-hour by 2020. This was highly ambitious at the time, but we reached the target in 2016.
Offshore wind expansion
The energy sector in Europe suffered a downturn from 2008 to 2012, due among other things to the financial crisis and falling gas prices. While some energy companies responded by scaling back their offshore wind investment, we took a different path.
Buoyed by long-term price support regimes in the UK and Germany, we expanded our investment in new offshore wind farms here, signing a bulk deal with Siemens for 300 6 MW wind turbines.
Fossil business becomes a liability
As a company that relied heavily on income from gas sales, we were hit hard in 2012 by a downturn in gas prices. Our credit rating was downgraded, and the outlook was grim.
But recently appointed CEO Henrik Poulsen announced a plan, involving significant cost reductions, the divestment of non-core assets, and an equity injection. The direction of travel from now on would be to expand renewables and ultimately dismantle our fossil fuel and utilities businesses.
First steps towards competitive offshore wind
One thing that used to make offshore wind so expensive was the lack of infrastructure or any economy of scale. In 2009, we took the decisive step of placing a bulk order for 500 3.6 MW wind turbines from Siemens – more wind turbines than were in operation offshore in the entire world at that point, and enough to secure a strategic supply chain for the more cost-effective construction of a number of new offshore wind farms.
Seeing potential in an emerging technology
When DONG Energy was formed in a merger in 2006, our portfolio included the world’s very first offshore wind farm, Vindeby, built in Denmark in 1991.
As the technology matured and projects grew bigger, we could see that offshore wind had potential: an almost unlimited source of power with no direct carbon emissions, free from the land use constraints of onshore wind. It was worth trying to make it a viable business.
Long-term green ambition
In 2008, 85 % of our heat and power production was based on fossil fuels and only 15 % on renewables. We committed to reversing this ratio in 40 years – something that turned out to be achievable in ten.
While this was not a universally popular decision in what was a leading fossil fuel company, we got started right away. We abandoned new coal projects and closed some existing ones, and started looking to build a financially viable renewables business.
Birth as a fossil fuel giant
Ørsted was formed as DONG Energy in 2006 out of a merger between Denmark’s state-owned oil and natural gas company and five Danish energy companies. We were one of the most coal-intensive companies in Europe, responsible for one third of Denmark’s carbon emissions.
But even then, change was in the air. Countries and regions like the EU were starting to set carbon reduction and renewable energy targets, the renewable energy sector was growing, and our own carbon-intensive activities were facing public opposition. It was time to think about how we could become part of the solution.
* Following orders from the Danish authorities, Ørsted must delay its target to stop using coal one year to 2024. Ørsted maintains its goal of becoming carbon-neutral by 2025.
To ensure the security of the electricity supply in Denmark, the Danish authorities have decided to order Ørsted to continue and resume operations of three of its Danish power station units. This applies to two units which use coal as their primary source of fuel, and one which uses oil as fuel. One of these is Ørsted’s last coal-fired powerplant in operation, scheduled to be decommissioned on 31 March 2023, and the two other units have already been decommissioned.
The Danish authorities have ordered Ørsted to keep the three units in operation until 30 June 2024.