Stanley Reed

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 <a id="3058eccc-02d1-3f98-a2a5-edfe5802460f" href="https://www.nytimes.com/2019/05/09/climate/orsted-offshore-wind-power-climate-change.html">The New York Times</a>.

Can a Leader in Offshore Wind Power Succeed in the United States?

LONDON — A little-known Danish company may have some of the answers for tackling climate change.

Can a leader in offshore wind power succeed in the United States?

Making that statement involved a complex journey. In recent years, Budweiser’s owner, now known as Anheuser-Busch InBev, had decided that the copious amounts of electric power that it bought for its breweries and other facilities, like malt houses, should come from green sources — not pollution-belching power plants.

After weighing options, the company in 2017 contracted with Enel Green Power, the renewable energy arm of a large Italian utility, to purchase enough power to meet Budweiser’s needs for 15 years from a wind farm that Enel was planning at a place called Thunder Ranch in Oklahoma.

The wind power, which has now been flowing for more than a year, produces multiple benefits, according to Angie Slaughter, vice president of sustainability procurement at Anheuser-Busch.

Consumers and investors approve of the green energy, and burnishing the company’s environmental credentials helps attract potential employees, she said. Locking up large supplies of power for years also provides a hedge against price increases. “We are doing the right thing and doing the right thing for the business as well,” Slaughter said.

Deals like this, in which big corporations agree to purchase large blocks of power, are becoming increasingly crucial to financing the building of new wind and solar farms. These contracts give developers the assurance of a stream of future revenue, lowering the risk for projects, which can cost hundreds of millions of dollars.

These arrangements are “becoming more and more important, year after year,” said Antonello Cammisecra, who leads Enel Green Power, which has also worked with a variety of companies including Facebook and Starbucks.

The contracts buffer investors’ exposure to the rise and fall of electricity prices, “making the investment more attractive to a wider base of investors,” said Steve Hunter, Europe leader for commercial partnering and development at G.E. Renewable Energy, another developer.

In the Thunder Ranch deal, for instance, Budweiser agreed to take roughly half the electricity from the $435 million wind farm during its 15-year contract.

Overall, Thunder Ranch produces enough electricity to power nearly 90,000 homes, according to the companies.

In these kinds of deals, corporations are assuming roles that used to be played by governments, whose hefty subsidies helped start renewable industries. In many countries, these subsidies are being pared back both to save money and because the technologies no longer require them.

Knowing that a customer will buy electricity for years on predetermined terms eases uncertainty, “making the investment more attractive to a wider base of investors,” Hunter said.

A few years ago, the major tech companies like Amazon and Google led the way in sponsoring the construction of wind farms and other renewable energy plants.

But the costs of wind and solar have come down so drastically that they are increasingly competitive with fossil fuels like natural gas and coal. Lower costs are drawing in different types of companies. Large consumer businesses want to be able to say that what they sell to eat and drink or wear is made in ways that aren’t damaging to the environment, Cammisecra said. For example, he said, Budweiser is saying, “Look at me, I am brewing beer with wind power.”

To corporations, taking action against climate change through purchasing renewable energy now often looks like the right thing to do. Nike, the sports equipment maker, for instance, has become a sizable player in renewables. Among Nike’s recent deals: an agreement with Iberdrola, a large Spanish utility, to take power from a wind farm being built in Spain that will offset the electricity used in its European operations.

Noel Kinder, chief sustainability officer at Nike, explained that the company saw climate change as not only an “existential threat” to humanity but also a potential wrecker of the company’s sales of goods like shoes and sweatshirts. Focusing the company’s resources to strike a blow against this problem makes sense on many levels. If extreme weather and pollution increases, he explained, “people can’t do sports, and they can’t buy our products.”

These corporate arrangements now account for 22% of the large renewable deals signed last year in the United States, according to Wood Mackenzie, a market research firm. Economics is spurring the growth, said Colin Smith, a senior company analyst. Wind and solar are able to compete with fossil fuels, and it is easier to build modular renewable plants tailored to a company’s needs.

“It is a lot easier to pursue green initiatives when they save you money,” Smith said.

Technology companies are still among the largest and most sophisticated corporate energy players. According to Wood Mackenzie data, Facebook, Google and Amazon are the top three in the United States in cumulative corporate power purchase agreements.

Huge data centers make these web businesses possible. Packed with computers, these installations consume enormous amounts of electricity, potentially creating a noxious spew of substantial emissions. The leaders of these companies want not only to reduce their emissions of greenhouse gases blamed for climate change but also to gain control over what are substantial electricity costs.

When Google, for instance, was building a new data center in Eemshaven in the northern Netherlands, it arranged deals, partly through Eneco, a Dutch utility that has bet big on renewable energy, to purchase enough wind and solar power to run the 600 million euro (about $670 million) facility, which opened in 2016.

“Signing long-term contracts to purchase large quantities of power enables the creation of new and additional renewable generation” that would not otherwise have been built, said Marc Oman, Google’s senior energy lead in Europe.

These big players are attracted to markets where hefty government subsidies for renewables are not available. They don’t see any point in competing with governments. That is a good thing for the renewable business because governments in countries like Germany and the Netherlands are moving to a no-subsidy regime in at least some areas like offshore wind.

Developers also favor the Nordic countries like Sweden, Finland and Norway, which have low subsidies and otherwise favorable regulation as well as the United States. GE Renewable Energy is constructing a very large wind farm called Markbydgen in northern Sweden, bolstered by a 19-year contract, considered the largest of its kind, by Norsk Hydro, a Norwegian aluminum maker. Smelting aluminum requires enormous amounts of electric power.

“The Nordic countries are where we see it happening,” said Hunter of GE. Developers say they prefer a commercial market to the government subsidy regimes of previous years. For one thing, deals agreed on a market basis and for a business purpose are less vulnerable to tinkering by governments. No matter what government is in power, said Cammisecra of Enel, “renewables are coming to stay forever.”

This article originally appeared in <a id="a041c435-4f21-322b-a99e-479d36958071" href="https://www.nytimes.com/2019/05/12/climate/renewable-wind-solar-energy.html">The New York Times</a>.

Could Beer Brewed With Wind Power Help Save the Planet?

During the Super Bowl in February, a commercial showed a Budweiser beer wagon drawn by eight Clydesdale horses rambling down a dreamy country lane past the whirling blades of a wind farm. With Bob Dylan’s 1960s anthem “Blowin’ in the Wind” playing in the background, the message was hard to miss. Your six-pack is now green or, at least, “brewed with wind power.”

Could beer brewed with wind power help save the planet?

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Stanley Reed

Articles written by the author

Can a leader in offshore wind power succeed in the United States?

Could beer brewed with wind power help save the planet?