Ørsted’s decision to divest from its liquefied natural gas business in December came as no surprise to observers tracking the company's progress in offshore wind. The Danish developer has so much offshore wind business in motion that experts predict it will lead the market for at least half a decade.
Although Ørsted faces competition from companies such as RWE, Iberdrola, Vattenfall and Shell, “Looking five years ahead, I don’t think other developers can beat them for the ‘first’ title,” said Feng Zhao, strategy director at the Global Wind Energy Council, an industry group based in Brussels.
Ørsted, which started out as a state-owned oil and gas company called Dansk Olie og Naturgas, or Dong, had 9.9 gigawatts of offshore wind installed or past a final investment decision, according to a 2019 company report issued at the end of January.
Ørsted expects to have around 15 gigawatts of capacity commissioned by 2025. That’s more than Europe’s six next-largest offshore wind developers combined, based on a Goldman Sachs forecast published in The Economist in August.
The Danish offshore wind powerhouse is gunning for 30 gigawatts by 2030. “If they can materialize their 2030 target, they can hold the throne for sure,” the Global Wind Energy Council's Zhao said in an interview.
At the moment, the only offshore wind developer that even comes close to Ørsted is Germany’s RWE Renewables, which reported 2.5 gigawatts of turbine capacity in the water as of the end of August 2019.
But even though RWE is gearing up for growth, with a development pipeline of more than 5 gigawatts of offshore wind, the sheer scale of Ørsted’s build-out means the German company will likely lose ground to the market leader over the coming years.
Emerging market risk
Ørsted’s growth prospects come with two significant caveats. The first is that much of the company’s expansion in the next half-decade is expected to come from markets that are still emerging and therefore might be subject to delays and regulatory risks.
In the U.S., for example, Ørsted is hoping to develop more than 2.9 gigawatts of capacity in two East Coast clusters that will include the South Fork, Revolution Wind and Sunrise Wind projects in the Northeast and Skipjack and Ocean Wind in the mid-Atlantic.
Ørsted expects to commission the projects between 2022 and 2024. But getting offshore wind plants built in the U.S. has so far proven to be tricky.
Progress at the first large-scale project in the country, Vineyard Wind, unexpectedly stalled in August after the federal Bureau of Ocean Energy Management postponed approving a final environmental impact statement.
It's also notable that Ørsted has so far refused to consider a move into floating wind platforms. These could ultimately offer access to much larger markets than are currently accessible with fixed-bottom turbines of the kind that Ørsted specializes in installing.
Neither of these issues appears to pose much of a threat to Ørsted’s dominance in offshore wind, however. As it stands, most developers are too exposed to the vagaries of emerging markets, so slow adoption in regions such as North America or Asia won’t affect Ørsted alone.
And as for floating offshore wind, there is widespread speculation that Ørsted is simply waiting for the right moment to make its move. “We don’t currently have plans to actively enter floating wind," confirmed Tom Lehn-Christiansen, head of media relations at Ørsted Offshore, in December.
But "we always monitor new technologies and incorporate them in our wind farms," Lehn-Christiansen added. "More than anyone, we’re aware of how fast technologies can mature, and the costs come down, so we’re following the development of floating foundation technologies closely.”
Erik Rijkers, director of market development and strategy at the specialist consultancy Quest Floating Wind Energy, said: “I am convinced they will include floating in their portfolio once the projects get too big and the shallow water space runs out.”
The rise of Equinor
In the long term, said Zhao, perhaps the only company that could give Ørsted a run for its money is Equinor, another Nordic oil and gas firm that is pivoting toward offshore wind.
Equinor was the biggest winner in the U.K.’s third offshore wind round, picking up 3.6 gigawatts of capacity, and has a 1.5-gigawatt pipeline in Poland, Zhao said. It also has a presence in the key offshore wind growth markets of U.S., Japan, South Korea and China (via a memorandum of understanding with the State Power Investment Corporation).
There's also the fact that Equinor is the world leader in floating wind.
Ørsted isn’t resting on its laurels, though. In January it established a new operating model for its offshore business, focusing efforts on a regional basis targeting the U.K., continental Europe, North America and Asia-Pacific.
It “creates a more scalable organization for Ørsted’s international expansion, which combines market proximity with global scale and efficiency,” said the company in a press release.
“The global market opportunities in renewables continue to expand and present significant opportunities for growth.”