Reguly: Ørsted’s ‘Black-to-Green Transformation’ Shows Benefits of Rapid Decarbonization
The success of Denmark’s rapid transition off fossil fuels over the last 10 years could point the way for “naysayers” whose “failure of the imagination” is holding off a similar shift in Canada, Globe and Mail European Bureau Chief Eric Reguly writes in a recent opinion piece.
“Going quickly from black to green in, say, electricity generation seems a megaproject too far, an unfathomable exercise in science fiction, theoretically possible but about as easy as building a colony on Mars,” Reguly writes, citing Ontario Premier and “Fossil-in-chief” Doug Ford’s evidence-free opposition to renewable electricity generation.
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“The trouble for the naysayers such as Mr. Ford is that greening up the economy in a hurry is no longer an option,” he explains. “It has to be done to prevent catastrophic climate change. The cost of business-as-usual as the Arctic ice cap melts, sea levels rise, deadly floods and droughts become commonplace, and animal species go extinct en masse is far worse than making the bold decision to put the green evolution into overdrive.”
Reguly cites Denmark as an example of what’s possible, recalling his own observations in Copenhagen when it hosted the 2009 United Nations climate conference.
At the time, “the country had one of the dirtiest electricity systems in Europe. How ironic that this grubby city, and country, had the nerve to host a climate summit, the international press covering the event thought (I was at the summit and wrote exactly that).”
But Danish officials heard the critiques and “cleaned up their act in a hurry by focusing their green effort on Ørsted, the state-controlled energy company that was then known as Dong, short for Danish Oil and Natural Gas. At the time, Ørsted emitted fully one-third of Denmark’s planet-warming carbon dioxide emissions. Since 2006, it has reduced those emissions by an astonishing 83%.”
Along the way, Ørsted “turned into a stock market star and transformed itself into the world’s largest developer of offshore wind power,” delivering 41% higher share value over the last year and a 160% increase since an initial public offering in 2016. “Not bad for a once-obscure company in a country that could be sunk in one of Canada’s bigger lakes,” Reguly writes. “Mighty Suncor, Canada’s top oil company and the biggest name in the Alberta oil sands, is worth only $9 billion more than Ørsted and has lost 5.4% in the last year.”
Reguly reviews the drastic greenhouse gas reductions that will be needed to meet the IPCC’s targets to avert runaway climate change, noting that 31% of the cuts, the largest single share, must come from electricity and heating. “The good news is that Ørsted proved that rapid decarbonization is not a fantasy. The company almost made it look easy.”
As recently as the mid-2000s, the company “was still investing heavily in coal and blackening the skies over Denmark. It even intended to build an enormous coal-fired plant in northeast Germany, at Greifswald,” he recalls. Then in 2008, Ørsted “decided to reverse its coal strategy virtually overnight,” replacing the dirtiest of fossil fuels with offshore wind power.
“It wasn’t promising miracles. It expected the transformation to take decades and meet all sorts of internal and political resistance, given the risky nature of the overhaul.” But after weathering the 2008 economic crash, the business was coming on strong by 2014, and the IPO in 2016 was ultimately Denmark’s biggest ever. Last year, the company’s net profit hit $3.8 billion, its return on capital came in at 32%, and “its wind business is vast and global” and includes the first offshore wind farm in the United States.
“Ørsted’s black-to-green transformation in less than a decade is unique among big electricity producers, but it shouldn’t be,” Reguly concludes. “It’s proof that embracing clean energy is not just necessary for the fight against climate change; it can create a lot of value too. Who’s next?”