- Mar 24, 2021 1:51 pm GMT
Most Successful Business Model for Managing Transition & Transformation: What Danish Oil & Gas Company (DONG) managed is an envy and model for the major oil companies around the world. Today, DONG has rebranded itself as Ørsted, the world leader in renewable, moving from 15% renewable to 85% renewable portfolio in less than ten years, a remarkable transition & transformation in the business model of oil & gas company.
Here are key insights, that oil & gas and energy companies can learn from this:
- They are the biggest wind producer in the world.
- They are the only utility company that grew their renewable portfolio while shrinking oil & gas.
- Denmark is about size of Maryland, yet it competes with China in wind turbine manufacturing
- It comes down to government policy (feed-in tariffs, subsidies, carbon tax etc.) and far-sighted civil servants
- Company didn't get in the way, they went all along with society's desire, changing investors priority and government policies.
- The company generated more than $10 billion in revenues last year and accounted more 50% reduction CO2 emissions.
- The culture of innovation at Ørsted, its ability attract best people supply-chain makes it very competitive in the markets and expand globally
- Main learnings for energy companies; "it doesn’t have to be a choice between sustainability, on the one hand, or profits on the other hand."
ADDITIONAL INSIGHTS NOT COVERED IN THE ARTICLE
- In terms of investment attractiveness, US offshore wind market is ranked considerably low despite long favorable coast line, primarily due to poor policies and un-streamlined regulations.
- Difficulties in obtaining permits/licenses, uncertainty around incentives (FIT , subsidies, etc.) and instability around legislation/regulations is still the main concern in US
- European oil & gas companies have smaller reserves base compared to US majors (CVX & XOM), therefore will to transition is easier in light of incentives
- A recent US survey showed that 86% of fund manager want their portfolios to completely align with Paris climate targets
- In NY, a group of fund managers (FM) with $20 trillion in AUM, have decided to move totally away from fossil fuel portfolio, another group of FM with $17.0 trillion AUM, have decided to screen oil & gas companies for their credible efforts towards cleaner transition plans to qualify them to be in portfolio.
- Bottom-line: Ørsted offers an example to governments, regulators, investors and energy companies with a credible and profitable model for energy transition.
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