Meet the company that singlehandedly halved one country's CO2 emissions
Something is right in the state of Denmark.
We all know that the private sector, and heavy emitting companies in particular, have a critical role to play in helping countries deliver their national climate targets under the Paris Agreement. But when the actions of a single business cuts the emissions footprint of an entire country by more than half, you know companies are stepping up like never before.
Ørsted (formerly DONG Energy) has done just that. The company completely has transformed itself from its origins as Danish Oil and Natural Gas to a leading renewable-focused power utility with an installed offshore wind capacity of 3.9 GW. With operations across Denmark, Sweden, the United Kingdom, Germany and the Netherlands, Ørsted is also expanding its offshore wind business to the United States and Taiwan.
In the process of this transformation, Ørsted has reduced its CO2 emissions intensity by 67 percent since 2006, which accounts for over half of Denmark’s entire CO2 reduction over the same period. What’s more, it has done this while delivering strong growth and great value for shareholders. In fact, Ørsted’s net profit jumped 53 percent to $3.37 billion in 2017, from the previous year.
Their strategy has been simple but effective. Firstly, Ørsted aggressively has cut its coal consumption by switching power stations to use sustainable biomass. So far it has reduced coal use by 82 percent since 2006 and are due to be completely rid of coal by 2023. The company also has divested its upstream oil and gas business.
Secondly, it rapidly has scaled up its renewable capacity. Ørsted has installed more than 1,000 offshore wind turbines, more than any other company in the world. The company’s installed offshore wind capacity of 3.9 GW could meet more than 10 million people’s annual power consumption — significantly more than the entire population of Denmark. And that trend is continuing — Ørsted’s electricity generation from offshore wind power rose 42 percent last year to 8.5 TWh in 2017.The company has completely transformed itself from its origins as Danish Oil and Natural Gas to a leading renewable-focused power utility.
"Ørsted has managed to seize the opportunities of the low-carbon transition, but a failure to act could have spelled dire consequences for the company," Filip Engel, senior director of sustainability, public affairs and branding at Ørsted, told We Mean Business.
"We’ve been able to turn climate risk into a business opportunity. Ultimately, we wouldn’t exist as the company we are today if we hadn’t decided to make this transition when we did. Instead, investors now see us as an interesting company. Many are looking for companies with a good green profile and they can certainly look to us for that — both investors with a strong low-carbon agenda and increasingly mainstream investors."
By being market leader in offshore wind energy, Ørsted has played a key role in cutting the cost of the technology by 60 percent in just five years and is continuing to drive costs down in the offshore wind energy space. This is allowing the company to win offshore wind projects in mature markets with zero-subsidy bids, such as the two the company won in Germany in 2017. Ørsted also participated in the first offshore wind auction in Massachusetts, together with its partner Eversource Energy, with results pending.
The decision to completely transform its business model to become a renewable energy company is reflected in the company’s science-based target, according to Engel.Ultimately, we wouldn’t exist as the company we are today if we hadn’t decided to make this transition when we did.
"We need to take climate action and reduce CO2 emissions for the sake of future generations and we are proud to be among the first energy companies globally to have a greenhouse gas (GHG) reduction target approved as science-based," Engel added.
Ørsted has committed to reduce its GHG emission intensity from energy production by 96 percent by 2023, using a 2006 base year. This is equivalent to generating electricity with a carbon intensity of 20g CO2e/KWh by 2023. This target officially was approved by the Science Based Target initiative (SBTi).
Ørsted estimates that its target is 27 years ahead of schedule compared to the 2 degrees Celsius scenario for the energy sector as projected by the International Energy Agency.
"Being aligned with climate science aligns us with the Paris Agreement and Sustainable Development Goal (SDG) 13 on climate action. It also allows us to help our customers to transition to renewable electricity and grow the overall market for clean energy," Engel pointed out. "More than one-third of global CO2 emissions come from power generation.
"So, we and the entire energy industry have a responsibility to continuously raise our ambition on climate action. Green energy is the future. Companies who adopt a science-based target can contribute firmly to the Paris Agreement as well as SDG 13 on climate action by implementing a very tangible strategy to mitigate climate change."