
Orsted, the global green energy major and world-leading offshore wind developer, has undergone significant transformation under the leadership of Mads Nipper.
Nipper’s vision is to create a world that runs entirely on green energy. He has set ambitious goals for Ørsted, including installing 50 GW of renewable capacity by 2030 and establishing global leadership in renewable hydrogen and green fuels.
According to research, global installed offshore wind capacity is expected to reach 630 gigawatts (GW) by 2050, up from 40 GW in 2020, with an upside potential of 1,000 GW in a 1.5° pathway scenario.
In March 2021, US President Joe Biden issued an executive order calling for 30 GW of offshore wind capacity to be installed by 2030.
However, soaring costs have compelled some offshore wind projects to be delayed or halted. More than $30 billion in investment has been put on hold due to delays in at least 10 offshore wind projects in the US and Europe.
The wind industry faces challenges due to soaring inflation, supply chain disruptions, and high interest rates. Furthermore, there have been lengthy waiting times for permits and grid connections add to the complexity.
Orsted’ shares have fallen more than 70% from their 2021 peak. Last year they suffered an impairment of USD 4 billion due to exiting projects off the coast of New Jersey US. Orsted is also exiting offshore markets of Norway, Spain and Portugal as well.
Orsted is re-focusing. Earnings from their offshore sites more than doubled compared to last year, and in 2023, they advanced three large offshore wind projects with a total capacity of 4.5 GW to final investment decision, one in the UK, the US, and Taiwan, respectively.
Going forwards, Orsted needs to focus on the those markets where it can achieve a minimum required rate of return, better manage its supply chain, improve the way in which it is shielded against increases in interest rates and not rely on unrealistic assumptions on government support.
With more discipline, Orsted still has the opportunity to regain its valuation and net profits because its underlying business is still strong and results were mainly affected by impairments due to a few poor investment decisions.