History and transformation

Ørsted was formed as DONG Energy in 2006, through a merger of Denmark’s state-owned oil and gas company, DONG, and five other Danish energy companies: Elsam, Energi E2, Nesa, Københavns Energi, and Frederiksberg Forsyning.

DONG Energy’s portfolio included the state oil and gas operation previously known as DONG (Dansk Olie og Naturgas, or Danish Oil and Natural Gas). This had been established by the Danish government in 1973 to reduce the country’s reliance on oil imports by extracting oil and gas from the North Sea.

The portfolio also included the world’s first offshore wind farm, Vindeby, built in 1991. This pioneering 11-turbine project was a product of Denmark’s broader efforts to ensure energy independence by developing a national wind energy industry – one which is still thriving today.

An end in sight for the fossil fuel legacy

Nonetheless, when DONG Energy was formed, it was one of Europe’s most coal-intensive companies, responsible for a third of Denmark’s carbon emissions. But change was in the air. Countries and regions like the EU were starting to set carbon reduction and renewable energy targets, the renewable energy sector was growing, and our own carbon-intensive activities were facing public opposition. It was time to think about how we could become part of the solution.

In 2008, 85 % of our heat and power production was based on fossil fuels, and only 15 % was based on renewables. We committed to reversing this ratio in 40 years – something that turned out to be achievable in ten.

While this was not a universally popular decision in what was a leading fossil fuel company, we got started right away. We abandoned new coal projects, closed some existing ones, and started looking to build a financially viable renewables business.

As offshore wind technology matured and projects grew bigger, we could see that offshore wind had potential: an almost unlimited source of power with no direct carbon emissions, free from the land-use constraints of onshore wind. It was worth trying to make it a viable business.

Driving down costs and dismantling fossil fuels

One thing that used to make offshore wind so costly was the lack of infrastructure or any economy of scale. In 2009, we took the decisive step of placing a bulk order for 500 3.6 MW wind turbines from Siemens – more wind turbines than were in operation offshore in the entire world at that point, and enough to secure a strategic supply chain for the more cost-effective construction of a number of new offshore wind farms.

When revenues were hit by falling gas prices in 2012, the decision was taken to expand renewables and ultimately dismantle our fossil fuel and utilities businesses. We also decided to drive down the cost of offshore wind through scale and innovation, developing larger sites with bigger wind turbines and optimising costs related to all components, construction, operations, and maintenance.

In 2016, we succeeded in making offshore wind competitive with power production from coal- and gas-fired power stations for the first time. That is, the cost of newly built offshore wind power per MWh fell below the equivalent cost for power from newly built coal- and gas-fired power stations.

That year, we went public in the world’s second-biggest initial public offering (IPO), with an equity story focused on investing in offshore wind and the opportunities presented by the green energy transformation.