Denmark punches far above its weight in global clean energy rankings. Vestas Wind Systems A/S, headquartered in Aarhus, is the world’s largest wind turbine maker. Ørsted A/S, based in the coastal city of Fredericia, has built more offshore wind capacity than any other developer.
Ørsted’s acquisition of the Rhode Island-based offshore wind developer Deepwater Wind, announced Monday, marks an escalation in the Danish energy company’s commitment to the U.S. market, as well as its aggressive global expansion. In hindsight, the deal may also be remembered for heralding Ørsted’s emergence as the world’s first clean energy major.
As Anthony Logan, an analyst with Wood Mackenzie Power & Renewables, told Greentech Media’s Jeff St. John, the deal not only cements the hold of European players on the U.S. offshore wind market: “Ørsted is now the clear leader in terms of scale, which is crucial at this stage in the sector’s development.”
According to Stephanie McClellan, director of the special initiative on offshore wind at the University of Delaware, the Ørsted-Deepwater Wind deal is also a sign of a rapidly maturing U.S. offshore wind market.
“The U.S. industry is definitely moving to bigger, lower-cost offshore wind farms,” she wrote in an email. “The two companies had very different approaches — Ørsted focusing on large projects with economies of scale, to drive standardization and lower costs, while Deepwater Wind focused on small projects.”
She went on, “This type of consolidation is what was seen in the European offshore wind industry. Primarily on the component manufacturing side of the industry, but also with bigger developers with bigger balance sheets gaining the benefit of companies with early project development experience.”
“This is big news because it shows how quickly the U.S. offshore wind industry is maturing and driving toward low-cost, sizable projects,” she concluded.
What’s coming, McClellan said, is a clash between large, experienced, well-capitalized project developers. “We are moving from small and large companies competing against each other to larger companies competing with other large companies,” she said. “As we saw in Massachusetts this year, that dynamic leads to very competitive bidding and to very low prices.”
She added that other large developers are already in the U.S. offshore wind market (Equinor) or likely to enter the market soon (Shell Wind Energy, EDF Renewables) with new leasing opportunities pending off the coasts of Massachusetts and New York.
The world’s first clean energy major?
Ørsted’s Deepwater Wind play is the latest move by the company to bolster its position in the United States. Last year, Ørsted opened a solar and battery storage development office in Austin, Texas. In August, Ørsted acquired Lincoln Clean Energy, a Chicago-based solar and onshore wind developer with a 1.5 gigawatt project pipeline.
If the Ørsted-Deepwater Wind deal is approved by U.S. regulators, the combined company, Ørsted US Offshore Wind, will hold a portfolio of offshore wind projects with a potential capacity of 8.8 gigawatts.
When the deal was announced, Martin Neubert, CEO of Offshore Wind, Ørsted, said it “consolidates Ørsted’s position as the global market leader in offshore wind with a strong foothold across Europe, North America and Asia-Pacific.”
As the statement makes clear, Ørsted’s ambitions extend well beyond its roots in Denmark. In addition to the United States and Europe, where Ørsted has 3.8 gigawatts of offshore wind under construction, the company is developing gigawatt-scale offshore wind capacity at the Formosa 1 and Greater Changhua projects in Taiwan. In all, Ørsted aims to have installed up to 12 gigawatts of offshore wind capacity worldwide by 2025.
By that year, Ørsted, formerly DONG Energy (short for Danish Oil and Natural Gas), should have completed its transition from so-called black energy to green energy, too. The company divested its oil and gas business in May 2017 and is expected to end the use of coal in its Danish power plants by 2023.
Ørsted’s company credo is “a world that runs entirely on green energy.” With its expanding global reach, the company appears intent on doing its part to make that vision a reality.
In February of this year, Ørsted said it would pursue renewable energy opportunities beyond its core strength in offshore wind if the projects could deliver shareholder returns. The share of the company’s operating profit coming from international projects has increased by more than five times since 2006.
At least one globe-spanning clean energy colossus will emerge by mid-century. To be sure, Ørsted and its global competitors — including Iberdrola’s Avangrid Renewables, EDF Renewables, and Enel Green Power —– have a long way to go to match the scale of today’s oil majors. In 2017, Ørsted had 5,700 employees and DKK 59.5 billion (USD $9.2 billion) in revenue; ExxonMobil, meanwhile, employed 70,000 people and amassed $237 billion in revenue in the same year.
But, by seizing a dominant position in the burgeoning U.S. offshore wind market, Ørsted is poised to become the world’s first clean energy major.
Listen to our conversation on The Energy Gang about Ørsted's acquisition. (Conversation begins at 32:58.)
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