Whether it has the impact it hopes will depend in part on its ability to compete with some of the biggest energy companies on the planet.
Over the past three decades, the company, Orsted, has figured out how to build giant wind farms powered by turbines the size of jumbo jets in the shallow waters around northern Europe. These installations generate large streams of clean energy. The electricity they produce also comes at a cost similar to that of new natural-gas fired plants, according to Deepa Venkateswaran, an analyst at Bernstein, a market research firm. Venkateswaran said that with many new offshore wind plants expected in the coming years, the cost of building them was likely to continue to fall.
Orsted has captured about 30 percent of the global offshore wind market, which has been largely in Europe, according to Bernstein. That is more than double that of its closest competitor, RWE, the German utility. Orsted estimates that its spinning machines already provide power for the needs of more than 12 million people.
Henrik Poulsen, the company’s chief executive, said in an interview that in the next few years he planned to invest about $30 billion to extend the company’s reach from its current stronghold in Europe into Asia and North America. Poulsen also envisions building up other businesses like solar power and energy storage.
“We are very much driven by a vision of creating a world that runs entirely on green energy,” he said.
But stepping up the pace of investment and moving away from its comfort zone will bring risks for what is now a modest-sized company with about 6,200 employees. And it reflects the challenges that abound in the future of green power
Orsted, based in Copenhagen, will need to master the political and business environment of other countries, particularly the United States, which is shaping up as a big new market for offshore wind — but one that presents many perils and unknowns.
Entrants into the U.S. market, for instance, will need to formulate bids on projects costing hundreds of millions of dollars while navigating the regulatory regimes of different states and figuring out how to tap into their often aging power grids. Would-be developers are also being pushed by state governments to help local economies by setting up facilities and using local suppliers, who may lack experience in the new industry. “The complexities of the process are significant,” said R.J. Arsenault, managing director for clean energy at FTI Consulting.
Orsted and other companies with big renewable ambitions are also likely to find themselves up against oil giants like Royal Dutch Shell and BP, which are investing in renewable energy and have the firepower to push their way into markets.
Analysts say that if Orsted is successful, it could be a prototype of a new form of energy company built for the renewable age with the scale needed to make a significant contribution to reducing the greenhouse gas emissions blamed for climate change.
“Because of their head start,” Orsted “managed to get into a model that is a future model for all these companies,” said Sam Arie, a utility analyst at the investment bank UBS in London. “Give this trend a couple of years, and you can see the potential for an entirely new class of company to emerge — the very large global wind and solar majors.”
When Poulsen, who had worked in various fields, including private equity, and at Lego, the Danish toymaker, took over at Orsted in 2012, the company was financially troubled because of bad bets on fossil fuels. It was then known as Dong Energy, an acronym for Danish oil and gas that reflected its focus on petroleum production and coal-fired power plants.
Trying to figure a way out of a corporate crisis, management decided to focus on offshore wind, which was then a new and relatively unproven technology but one in which Dong had experience.
A unit of the company had built the first offshore wind farm at a place called Vindeby off Denmark in the early 1990s, and Dong was busy populating the shallow shoals of the North Sea with turbines.
Other European utilities that are also betting on clean energy include Italy’s Enel, whose Enel Green Power is a global player in wind, solar and other technologies, and Spain’s Iberdrola, which also has global ambitions.
Orsted, though, has made the most radical shift, perhaps because it was the most troubled. Since Poulsen took over, the company has sold off a long list of businesses, including its oil and gas unit, to shore up the company’s finances and to fund new investment in renewables, mostly offshore wind.
Over the past decade or so, the company said, it has shifted to having more than 80 percent of its capital invested in renewables, up from around 16 percent. The company says it has cut its emissions per unit of power by about two-thirds.
Orsted is building what will be the world’s largest wind farm off the east coast of England. Known as Hornsea 1, this array of more than 170 turbines will be capable of lighting 1 million homes, according to the company. In an indication of the expected earning power of the project, Orsted sold a 50 percent stake to a financial investor, Global Infrastructure Partners, last year for 4.5 billion pounds (about $5.8 billion). The company finances future growth in this way while continuing to operate the wind farms.
Orsted’s green shift has proved a moneymaker. Profits for 2018 rose by about a third to 19.5 billion Danish kroner (about $2.9 billion). After a public listing three years ago, Orsted’s market value has more than doubled to about 214 billion Danish kroner (about $32 billion). The Danish government retains a controlling stake.
Orsted is making a strong effort to win offshore deals in the United States. Several East Coast states, including New York, New Jersey and Massachusetts, are eyeing big wind farms at sea as way of replacing aging nuclear and fossil fuel power plants with clean energy.
The region offers the wind industry shallow waters suitable for today’s turbines that are within easy transmission reach of large cities like New York and Boston. Orsted has also said that it was moving ahead on a very large offshore wind project called Greater Changhua in Taiwan.
In the auctions in the Eastern United States, Orsted will be butting heads with big oil companies like Shell and Norway’s Equinor, which have acquired sea bottom leases to bolster their green energy efforts.
So far Orsted’s most formidable competition has come from people who left the company during its time of trouble earlier in this decade. Orsted stumbled last year when the company lost out on the first large scale offshore auction in the United States, held by Massachusetts. The winner was a company called Vineyard Wind backed by Iberdrola and a Danish financial firm called Copenhagen Infrastructure Partners headed by Jakob Baruel Poulsen (no relation to Henrik Poulsen), a former deputy chief executive of Dong’s renewable energy unit.
Orsted struck back by spending $500 million to buy Deepwater Wind, a Providence, Rhode Island-based company with a large offshore portfolio of leases and projects including a small wind farm off Block Island that was the first offshore facility in the United States.
Orsted also hopes the firm brings the political savvy to win business in the United States. While Orsted will not necessarily dominate in the United States as it has in Europe, Venkateswaran said, “they should get their fair share.”
This article originally appeared in The New York Times.