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Tina Casey headshot

After Moving From Coal to Wind, Ørsted's Next Step is Carbon Neutrality

After transitioning from fossil fuels to renewables, Danish energy company Ørsted is eyeing a carbon-neutral supply chain — and it says carbon offsets won't cut it.
By Tina Casey
Wind Energy

Amazon’s Jeff Bezos recently pledged $10 billion of his personal fortune to address the climate crisis through a new grantmaking fund. But if he were really serious about cutting carbon emissions, he would take a cue from Ørsted. The Danish energy company announced an ambitious net-zero carbon emission goal in January, and earlier this month it spelled out the steps to achieving that goal.

Spoiler alert: The Ørsted plan involves a deep transformation within the company, and outside of it as well.

The Ørsted goal, wind energy and the bottom line

Soon after Bezos announced his new $10 billion Earth Fund, critics pointed out the obvious conflict with Amazon’s pursuit of oil and gas business.

Ørsted has charted a different course. Previously known as an oil, gas and coal-dependent energy company, Ørsted began transitioning to renewable energy in 2010.

In just 10 years, the transformation of its own portfolio is largely complete, as Ørsted ratchets down its fossil business to focus on wind energy and other renewables.

On January 30, Ørsted CEO Henrik Poulsen announced the company’s goal of achieving carbon neutral status by 2025. He emphasized that the company’s progress so far puts it in position to realize that goal — while achieving bottom line benefits.

"We've transformed from producing energy based on fossil fuels to producing carbon neutral energy. We've seen a real strengthening of our business and shown that a rapid green turnaround is possible,” Poulsen explained in a press statement.

Poulsen also noted that just 10 years ago, Ørsted was known as one of the most coal-dependent energy companies in Europe.

The Ørsted difference: Carbon offsets don’t cut it

In the January announcement, Ørsted referred to its earlier pledge of almost $30 billion to invest in renewables between 2019 and 2025. The aim was to push its carbon footprint down by 98 percent or more — and it wasn’t going to stop there.

Ørsted cited transitioning its fleet to electric vehicles by 2025 and winding down its natural gas trading activities as chief among the next steps. According to the company, carbon offsets will come into play only where necessary.

That de-emphasis on carbon offsets is an important one. Other energy companies, notably BP and Repsol among others, have announced climate plans that appear to lean heavily on offsets while continuing to produce oil and gas.

In that context, the new Bezos Earth Fund appears to be an elaborate offset that enables Amazon Web Services (AWS) to continue promoting its oil and gas business.

As of this writing, AWS still offers oil and gas services aimed at accelerating, not reducing, fossil fuel production.

On its oil and gas page, AWS promised that “explorers can extract deep insights faster to improve field planning, geoscientists can run more demanding HPC workflows and identify potential reservoirs faster and cheaper…”

Getting to net-zero carbon emissions: pushing the supply chain envelope

The AWS oil and gas business model is a stark contrast with Ørsted’s 2040 goal.

Ørsted described its 2040 net zero carbon plan in detail earlier this month. In doing so, it laid out a roadmap for companies like Amazon to follow.

With Ørsted already on track to achieve carbon neutral operations by 2025, the 2040 plan focuses on decarbonizing secondary activities. That means shedding its gas trading business as well as leaning on its supply chain to decarbonize.

If that seems rather ambitious, it is. The plan calls for achieving net zero 10 years before the widely accepted decarbonization goal of 2050.

The company is confident that it can meet that goal, partly through its buying power. By setting a course of rapid action for itself, Ørsted anticipates that it will drive new clean technology into the marketplace more rapidly.

“Many of the green technologies to be used to decarbonize our supply chain exist but they're not yet cost competitive. With the 2040 target, we want to help drive the necessary innovation forward to mature the green technologies in the industries that supply to us,” Poulsen explained.

The secret ingredient: hydrogen

Of interest to hydrogen fans, those innovations could refer specifically to renewable hydrogen.

Industrial manufacturers are just beginning to explore renewable hydrogen as an alternative fuel and power source, but the cost of producing renewable hydrogen in bulk has yet to come down.

If and when it does, Ørsted will be able to procure wind turbines, foundations, substations and cables with a smaller carbon footprint.

To that end, Ørsted has joined the U.K.’s “Gigastack” project aimed at demonstrating an industrial scale system for producing cost-competitive renewable hydrogen.

The hydrogen project also benefits Ørsted directly because it would provide a significant new market for electricity sourced from renewable energy, namely, from the company’s wind farms. The Gigastack project involves electrolysis, in which an electrical current is deployed to “split’ hydrogen from water.

If you want it done right…

Over and above the additional market benefit, Ørsted’s hands-on involvement in supply chain decarbonization indicates another important milestone in corporate climate action.

Instead of waiting for its supply chain to come around, Ørsted is investing in the supply chain decarbonization toolkit.

A similar approach is under way at UPS, which recently invested in the electric vehicle company Arrival.

UPS is already working with outside firms to decarbonize its fleet, and the hands-on approach is aimed at accelerating the transition. The investment provides UPS with the opportunity to bulk-order electric vehicles that are tailor made for its operations.

As a ripple effect, the large orders could promote economies of scale that help bring down costs for other Arrival customers.

To its credit, Amazon has also taken steps to begin decarbonizing its delivery fleet, and last month the company raised its ambitions up a notch by joining the newly formed Corporate Electric Vehicle Alliance.

The aim of CEVA is to bring down EV costs for all car buyers, by deploying the buying power of large-scale fleet managers to push economies of scale.

That effort presents a clear conflict with AWS’s oil and gas business, but as other leading corporations become more adept at accelerating decarbonization, such a collision course is all but inevitable.

If initiatives like Gigastack, CEVA and UPS’ investment in Arrival prove effective, AWS will find itself fighting for a rapidly shrinking slice of the oil and gas pie.

Image credit: Ørsted

Tina Casey headshot

Tina writes frequently for TriplePundit and other websites, with a focus on military, government and corporate sustainability, clean tech research and emerging energy technologies. She is a former Deputy Director of Public Affairs of the New York City Department of Environmental Protection, and author of books and articles on recycling and other conservation themes.

Read more stories by Tina Casey