|Ørsted's Tahoka wind farm in Texas. The utility set a 5-GW development target by 2025 in the U.S. but does not have plans to enter the European onshore market.
➤ U.S. offshore wind progress hinges on regulatory impact assessment, Ørsted CEO Henrik Poulsen says.
➤ Corporate off-take market set to evolve from big deals to smaller tickets; potential buyers still out there.
➤ Green hydrogen development "may come much faster than we had imagined."
Henrik Poulsen, CEO of Denmark's Ørsted A/S, the world's largest offshore wind developer, spoke with S&P Global Market Intelligence on the sidelines of the Handelsblatt Energy Summit in Berlin about the company's ambitions in new markets and new technologies, his outlook for corporate power purchase agreements, or PPAs, and the hunt for scale in the wind turbine market. The following is an edited transcript of the conversation.
S&P Global Market Intelligence: Things have taken a bit longer in U.S. offshore wind. What has your experience been in that market compared to Europe, and when will we see the first major wind farm in the water?
Henrik Poulsen: When you go into a new market like the U.S., where things have progressed very rapidly … the regulatory environment is still underdeveloped, it's quite immature. The regulatory stakeholders are still working through exactly how we are going to deal with [the 20-GW development target]. That's why the [U.S. Bureau of Ocean Energy Management, or BOEM] has taken a bit of time out to do this so-called cumulative impact assessment where they review more broadly the entire buildout of offshore wind along the East Coast. I think that's quite normal. … We saw the same happening in Europe if you go back 10 years.
The same can be said about the supply chain: there is no local supply chain today, it needs to be shaped bottom-up. As we begin to construct projects over the coming years, we will gradually begin to also establish a local U.S. supply chain.
Right now, we are waiting for BOEM to come back with an announcement from this cumulative impact assessment. That will obviously play into the timelines. … But we certainly expect to be constructing the first large-scale offshore wind farms in the next couple of years.
Ørsted CEO Henrik Poulsen.
You recently revised down your offshore wind production forecasts, yet your competition has largely rejected the idea that it is an industrywide issue. Were you surprised by the reaction, and what will it mean for your competitiveness in auctions?
That's probably not an unexpected dynamic. We spent a lot of resources over half a year to dig deep into these issues. We have more offshore wind production data than any other company in the world.
Our competitors have indicated that they don't see an issue. … I can only say we certainly got smarter. At the end of the day, when … you submit a bid [in an auction] there are literally dozens of factors … where you make assumptions about the future. … Whether this particular item will make a big difference in our future competitiveness, time will show. I'm not sure.
Following Ørsted's acquisition of U.S. onshore wind developer Lincoln Clean Energy, do you have plans to do onshore wind in Europe?
At this point, no. We have our hands full expanding and accelerating Lincoln. ... We have now set a target to reach 5 GW by 2025, which takes quite a bit of capital. That's not to say we would never move into Europe. … At the appropriate point in time and [with] the appropriate entry vehicle by means of a meaningful acquisition, we would probably consider it. … It's not a must, so I don't want to rush it. … If we don't get it done, I think the company will be fine without it.
Both offshore and onshore, turbine manufacturers are going for bigger and bigger machines. Are you concerned about the risk of taking on that new technology?
You do assume some risk when you are a first mover on new technology. On the other hand, we were the first mover on [other large new platforms], and now we're the first mover on the [General Electric Co.] Haliade. … Sometimes, that will give you some risk, maybe even a few gray hairs.
But do I believe … it has served us well to be an early adopter, because it's given us access to new technology with better performance, faster than the competition. Yes, it comes with risk, but that's the trade-off you need to make.
Ørsted signed the world's largest offshore wind corporate PPA last year, but how deep is the pool of large off-takers looking for renewable power?
You can segment the corporate PPA market: You'll have the tech giants all the way up in the top-tier … and you would have some of the heavy industry companies.
But when you move down, there will be other tiers. ... Companies that also will have a significant need for power, those contracts will be smaller. Over time, there will probably be a market for such small or medium-sized PPAs … potentially also a more liquid and bigger market.
The market is still evolving. Many corporations today do not buy green power, and the question is, for how long is that going to last. We see some big food and beverage [and] big pharma companies now beginning to lean into green power. We are talking to one of them right now in the U.K.
Ørsted has launched several green hydrogen projects recently. Why is it an attractive venture in Europe now, considering that projections only see it becoming competitive with fossil-based hydrogen in the fairly distant future?
Take Germany, [which] has some of the best conditions for offshore wind production in the world, which means you could produce green electricity from offshore wind at very competitive prices. That input factor is one of the biggest cost ingredients in electrolysis.
When it comes to the electrolysis process and subsequent conversion into electro-fuels, that part of the value chain needs to be mature [and] needs to be scaled in order to bring the cost down. I am optimistic that that's going to happen over the next five to 10 years.
Once an industry puts its mind to it and the whole value chain mobilizes, innovation and cost-out efforts tend to accelerate the journey beyond what people had imagined was possible. I hope the same will happen with green hydrogen. … I wouldn't place too much emphasis on current long-term projections. I think we should get things moving, and we should push it, and progress may come much faster than we had imagined.