28 Jan Leader in sustainability challenges others to follow suit
Mads Nipper, Group President and CEO, Ørsted, recounts the energy company’s successful efforts to counter climate change by implementing new technologies and act as a role model for other global entities in transforming their practices to further the green transition.
Can you give us an overview of Ørsted’s efforts to help the world lower carbon emissions and fight climate change?
Back in 2008, the reaction to ramp up renewable production to reach 85 percent of the energy mix by 2040 was considered insane by almost all stakeholders. Accomplishing it 21 years ahead of time is incredible. Ørsted’s role in the renewables space is comparable to what Tesla did for the automotive sector. While electric vehicles would have happened despite their efforts, it would not have happened anywhere near as fast if Tesla had not proven it was possible to make them technologically safe, affordable and of high quality. Ørsted has done more or less the same in the offshore wind segment. Offshore wind technology already existed, but it was more of a curiosity than a plausible solution; nobody believed offshore wind could truly be a scalable technology. Ørsted made the decision to prove the world wrong and began building one wind farm after the other—each bigger than the next—in partnership with countries like Denmark and the U.K. where these types of investments were possible. Now, we build several thousand megawatts of new renewable capacity every year.
Ørsted has repeatedly built the largest wind farms in existence. We built the first one 30 years ago, we have the biggest one currently in operation and next year we will again open the world’s largest wind farm. We have proven that it is not only technologically possible, but that offshore wind farms are a scalable part of transforming the world’s energy systems. They are something developers and the value chain can profit from and therefore continue to invest in. While we cannot claim to have been a catalyst in the movement from black energy to renewable energy due to onshore wind and solar power generation segments, we can make this claim for offshore wind technology. We have accelerated investment in the sector, which has created additional competition. As a CEO of a corporation, I dislike competition, but as a leader that wants a world run entirely on green energy, I am overjoyed that everyone is mirroring our efforts. Our vision is a world that runs entirely on green energy.
What hurdles has the energy industry faced in 2021, and how has your company reacted to these challenges?
It has been an unusual year in the following ways: we had a Texas arctic blast in January, winds have been relatively low compared to normal years and there was an energy crunch with exorbitant gas and energy prices. However, our industry and company consistently take a long-term view. A wind farm typically lives for more than 25 years. We always try to keep a strategic perspective on what needs to happen. Despite the COVID-19 pandemic and everything else, we continued constructing our two major offshore wind farms. We made an acquisition in Europe in onshore wind to scale our efforts in this segment and entered several new countries. In 2021 we joined seabed auctions in Scotland for the first time; we developed sites in Sweden, Estonia and the Baltic states; we delivered our first 2.5-GW asset in Poland; and we opened a new office and are developing sites in Vietnam. Many new partnerships were announced for green hydrogen. For example, we are working with Korea’s POSCO, and we have won another major U.S. auction in New Jersey through a large offshore wind solicitation. 2021 has been a hugely important year for us, despite external challenges. Strategically, the company has never had a more busy and impactful year.
What is Ørsted doing internally to lower its carbon footprint?
We have many internal programs to promote sustainability. One of the most impactful ones is decarbonizing our own value chain. We work with our 25 biggest suppliers on a targeted decarbonization plan that ensures they only use green power and push to decarbonize themselves. We want our entire supplier base to decarbonize, and we have down well on this front. We use hundreds of thousands of tons of steel every year; the steel sector is an example of an important sector we are helping. Our other sustainability programs concern everything from governance and human rights to decarbonizing our value chain and not accepting to put turbine blades in landfills when a wind farm needs to be taken down. I am personally excited about our biodiversity programs. Green power requires a lot of seabed and land. Many cables go through both water and land. We need to ensure that this massive buildout of renewable energy has a positive impact on nature. Ørsted must not only be biodiversity neutral, but biodiversity positive; we can ensure that we not only limit damage but build artificial reefs at our wind farms to ensure fish species thrive better, for example. When you mount an offshore wind turbine, you hammer it into the seabed. We need to find ways that are more environmentally friendly and noiseless to not harm marine life.
In addition to our programs, we need to be a role model in decarbonizing our own value chain. We have committed to being carbon neutral in four years. By 2025 our scope one and scope two energy production will be carbon neutral, and by 2040 our entire value chain. We will be net zero 10 years ahead of the target. Moreover, we are one of only seven companies in the world to have been approved by a certain science-based target initiative. We also sell corporate power purchase agreements. For example, we are building a large gigawatt-sized offshore wind farm in Germany and are selling green power to large corporations such as Amazon, Covestro, Google, BP and REWE Group to lower their carbon footprints. We are also working with some of the hard-to-abate sectors such as shipping and steel to use green power to make green hydrogen or green fuels. We are strategically engaging with some of the world’s largest companies—even when they cannot electrify—to help them through electrolysis and make green hydrogen from our power. We want to explore every viable way we can help these entities on their journey. In summary, we are taking a dose of our own medicine and showing it is possible by selling green power to those who need it and engaging in strategic partnerships with some of the most challenged sectors.
What renewables segments does the company see the most opportunity in?
The inner core of our business will remain offshore wind. We are currently the clear leader in this area, and we want to remain the leader in the next decade; we aim to be the biggest and the best. However, the world does not only need offshore wind. When it is windy, the sun does not shine as much, and on a very sunny day, the wind often does not often blow as much. We are adding significant scale on onshore wind assets, not just in the U.S. but in Europe. We are building solar wind farms, including in many cases battery storage. Opportunities are everywhere. Currently, the most key area is green hydrogen. Many sectors can decarbonize by using this type of green power. Additionally, many things that we use today such as cars are still burning fuel and can easily be replaced by electric vehicles. However, it will be many years before you can fly an electric airplane across the Atlantic. We can also make heat pumps to bolster heating of buildings. Electricity is extremely viable for heating one’s home. Additionally, if you operate a giant container ship, you cannot send it from China to New York on this type of power. The same can be said in the steel industry where the product needs to be heated to 1,800 degrees Celsius. These sectors need millions of tons of renewable fuels and hydrogen to decarbonize them, and we want to prove this can be done technologically, at scale and at a competitive price. We would be happy to stay a leader in offshore wind while building a sizable and complementary onshore solar and wind business and being a catalyst for scaling up green hydrogen and renewable fuels. We will help both existing sectors and new sectors accelerate their carbon emissions reduction.
What impact did this year’s UN Climate Change Conference (COP26) have on furthering global decarbonization?
The following good things happened at COP26: many countries further increased their national contributions to the decarbonization movement; the deforestation deal was struck; for the first time there was an explicit agreement regarding methane; and the phasing out of coal was mentioned for the first time. Unfortunately, the latter agreement was changed at the last minute from phasing out to phasing down, which is a big disappointment. Coal should be phased out completely. The world’s largest emitters, such as China, Russia and India, still need to increase their contributions. We need to make more explicit commitments. It is possible and even profitable to do so as it is no longer a competitive technology. In addition, we need to see more companies committing to science-based targeted reductions. While it is thrilling that so many large corporations around the world are beginning to mobilize their decarbonization efforts, we still need many more companies to have decarbonization plans with scientifically based targets.
Regarding the Glasgow Climate Pact, we have managed to keep the 1.5-degrees-Celsius target by 2050 alive, but it is not alive and kicking. We still predict significant emissions happening nearing 2030. Unfortunately, the world is still building coal-fired power plants, and that is something we urgently need to find alternatives to lest we lose time rather than gain it in meeting our 2030 goals. Striking an agreement is enough to get us where we need to go. I agree regarding the 2-degree-Celsius scenario, but our ambitions should still be for 1.5 degrees Celsius. At COP27 we need to see tangible policy action. In offshore wind, we need to see countries making more seabed and faster consent in making seabed available to companies. We are ready to build, but in many cases the process is simply too slow.
How does the company go about improving research and development of renewable energy products and systems?
Ørsted does not manufacture anything, rather we buy everything we use from wind turbines to cables, substations and steel platforms; everything is sourced from our partners. We are the ones who develop it and make it fit together, reliable, cost efficient and stable. We are very good at protecting biodiversity, working with local stakeholders, ensuring we build out ports and make new factories with our partners. However, we still put a lot of effort into innovation. The previously mentioned noiseless foundations are a fitting example. The hammering is so noisy that it could almost kill a whale if it were nearby. We invented a technology to solve this problem. Our German wind farm that will begin construction in 2022 will incorporate a noiseless foundation. It will provide a major opportunity to protect marine life. Another example is how we improved measurements. We have more than 1,500 wind turbines at sea that are already spinning. A key challenge is accurately taking measurements. We enhanced this using artificial intelligence and digital technologies to optimize annual energy production. We share our data with competitors because it is important the world knows the amount of energy produced from these farms.
Our innovation spans from technical innovation—working with turbine manufacturers to improve their technology—to using high-voltage, direct-current or current cables to having noiseless foundations and using unmanned vessels to measure winds. We are innovating for the greater good. We use our deep technical expertise to collaborate with partners in an ecosystemic way to continuously improve all of us.
What kind of digital technologies is Ørsted leveraging on to improve its offerings?
Transitioning all wind measurement data into what it means for production is quite complex. We use advanced statistical and data-driven modeling to find out exactly how much energy is produced under certain wind conditions. Here we are deploying exceptionally advanced digital modeling. Additionally, we operate thousands of turbines and require predictive maintenance. If something is not right, our equipment will sound alarms and send us messages about what is wrong. On an offshore wind turbine if something is wrong, it is very expensive to sail out, crawl into the wind turbine, check what is wrong and sail back again. Having this predictive maintenance system saves time, downtime and money. We do a great deal to optimize operations of our fleet of turbines. We also employ a digital twin system when doing our engineering, production and procurement. Additionally, we use digital technologies to optimize some of our workflows, which most companies do nowadays.
What markets is the company targeting to have the most impact on global decarbonization?
The offshore segment is a bumpy road; there is no linear growth. We are bidding on major projects that take time to develop. Next year we will launch the world’s largest wind farm called Hornsea Two in the U.K., which we are building now. We are completing our first large-scale offshore wind farm in Asia that will go live in Taiwan. We are hoping to enter Japan; we have been up for three projects, and we believe we have good chances of winning a first award in the market. The results of the auction will come out around 2022. We are also continuing advancing into Korea, but these projects will not be awarded in 2022. There will be exciting auctions in the U.K. We have a strong project there that would be the world’s next largest wind farm if we win it. We will also continue our bids in the U.S. market where there will be new and exciting areas.
What kind of efforts does Ørsted do in terms of marketing the company and its vision?
We do not do a lot of broad branding campaigns. We typically target politicians, regulators and corporations to whom we are selling green power purchase agreements. We are proud to be one of the world’s most sustainable companies. We were the most sustainable energy company in the world three years in a row and in 2020 we were the most sustainable company in any sector. We share this with the public in digital communications, on social media and in employer branding. Who doesn’t want to work for the world’s most sustainable company? We use every opportunity to do employer branding in universities and on our digital platforms. We also do quite a bit of white paper publications to share our experience and expertise so others can learn from what we have done. It is our wish that everyone succeeds in the green transformation.
What are your expectations for 2022 and what do we need to do to change the world for the better?
I am hoping that the world normalizes a bit despite the Omicron variant, including global mobility and sectors hardest hit by the pandemic. I want to see green renewable energy deployment accelerate. I hope and believe 2022 will be a year of big breakthroughs for green hydrogen. Ørsted alone has more than 10 hydrogen projects, and we are in the process of constructing one of them. I am hoping to see green hydrogen and renewable fuels projects accelerate. In 2022 we will see corporations accelerate their commitment to decarbonize their business. I am encouraged when speaking to other CEOs to hear about their decarbonization commitments, and this will continue to gain momentum. Whether you are a politician, a citizen or a business or organization leader, now is the time to step up and shape the world. We need to fight climate change, and everybody can take part. While many have told me that it was easy for Ørsted to fight climate change, it was not. None of this is easy. However, if any of us are ever going to tell our grandchildren something we can be proud of, now is the time to take that responsibility—this goes for everyone. We are happy to share our experiences at Ørsted because we have p