Large energy companies should take opportunity to invest in transition: Orsted

The energy transition should be seen as an investment and not a cost, the CEO of Danish multinational power company Orsted said.

State investment and strong regulatory frameworks were needed to kick-start the opportunity, Mads Nipper said.

"What the Danish government did back in the '90s of creating a regulatory framework that allowed the wind sector to grow has paid back tens of times," Nipper said. "Even for those who are purely financially driven -- which I believe fewer and fewer of us are -- those investments are right to do now."

Nipper was one of several energy company executives speaking June 22 at Reuters' Global Energy Transition 2021 event to stress the opportunities ahead, urging their peers to raise their game and not limit their ambitions.

Orsted transitioned from a medium-size fossil fuel-based company to one based almost entirely on renewables in the space of a decade. Last year it reached the targets it had set for 2040, with a 90%-plus share of renewables in its generation mix.

"We did not think that was possible," Nipper said. "If we start to talk ourselves into a narrative that it has to take that much time, I think we are at risk of convincing ourselves that it is actually true."

RWE CEO Markus Krebber agreed, but said the transition carried a price tag.

"We should not ask customers for patience," he said, adding they must be asked about their "willingness to pay for a green product, because it will be a bit more expensive".

The energy transition to date had been driven by a few large companies. "But if you really want to go to net-zero as an economy, everybody needs to change. And I think that is a discussion we, as an industry, but also together with politicians, need to take to the people," Krebber said.

BP CEO Bernard Looney said the company planned to remain invested in oil and gas for decades, reducing its output whilst diversifying into offshore wind and electric vehicle charging infrastructure.

"If it were a light switch, all of these companies would have done this already," Looney said. "It is not. It is a transition. It is complex, it is difficult and it is going to take time."

Commenting on suggestions that BP paid over the odds for offshore wind concessions in the Irish Sea, Looney said the price was a good one. "We did not pay a premium. We paid a good price for a good asset."

The Irish Sea was a better wind resource than the North Sea, he said, with shallower water allowing cheaper engineering solutions, a site closer to shore, easier permitting with fewer issues around migratory bird routes, and synergies from adjacent blocks.

Barriers and enablers

Norwegian state-controlled energy company Equinor's CEO, Anders Opedal, said there could be no energy transition without carbon capture and storage and low-carbon hydrogen.

"Without CCS and hydrogen, there is no viable path to net-zero and realizing the goals of the Paris Agreement," Opedal said.

Carbon Trust CEO Tom Delay said UK government policy should allow technology applications that are still developing and uncertain to compete, such as nascent renewable and low-carbon hydrogen production.

While natural gas-based hydrogen production with CCS may be in a position to ramp up volumes faster than renewable hydrogen from electrolysis, regulators should not rule in favor of one or the other while both technologies were developing, Delay said.

RWE's Krebber, meanwhile, noted resistance to new electricity transmission lines, as well as opposition from some quarters to new onshore and offshore wind developments.

"People need to accept that something is going to be built at a large scale close to their homes, otherwise it does not work," he said.

On supporting European climate efforts via policy, EDP Producao executive board member Joana Freitas welcomed the EU's proposed carbon border adjustment mechanism, which sent a "very strong political message", even if it was "not without its complexity".

"You need to define which products will be subject to the tax, you need to estimate the carbon content of the product," Freitas said. "And of course, supply chains are divided across the globe. You need to make it compatible with WTO rules and the existing [EU] ETS system."

She noted the European Commission wanted to be on the "right side of history" with its net-zero ambitions and carbon tax, and wanted to protect its industry, ensuring a level playing field with competition from imported goods and energy, but said there were economic dangers.

"You can trigger a trade war with something like this," Freitas said.

Sincere commitments

Responding to accusations against some large energy companies that they were making empty promises announcing distant, unachievable targets to reduce CO2 emissions, Delay said the difference between ambitions and goals on the one hand and sincerity and credibility on the other was transparency.

Companies might have to get used to sharing more of their corporate strategies than they are used to, in order to convince shareholders their pledges are meaningful.

"If you are prepared to say, 'this is what our plan says, these are the assumptions that we have made', even if they are a stretch, you will get credit for the fact that you have made them transparent."