Climate and Energy Benchmark - Electric Utilities (2024)

The pathway set out by Ørsted’s 2025 science-based target is more ambitious than its well-below 2-degree pathway. Ørsted is on track to meet this ambitious target, demonstrating its commitment to decarbonisation. The company has also set a scope 3 science-based target (verified by the Science Based Targets initiative, SBTi), which is beyond the scope of this assessment but demonstrates a commitment to the decarbonisation of the entire electricity system.

The historic and projected trends in Ørsted’s emissions from electricity generation are aligned with its well-below 2-degree pathway. Ørsted’s historic emissions intensity – that is, the amount of greenhouse gas emissions produced for every unit of electricity – has decreased at a faster rate than is required by its low-carbon pathway. Its future emissions intensity is projected to continue decreasing at a low-carbon-aligned rate, driven by the scheduled closure of fossil fuel assets and the launch of several wind assets with significant capacity. Ørsted’s locked-in emissions – all of the emissions from the company’s installed and planned electric power plants up to 2033 – remain within the company’s decarbonisation pathway emissions budget.

Over the past decade, Ørsted has successfully repositioned itself from a conventional electricity generator to a predominantly low-carbon electricity generator. This was achieved through the strategic divestment of its upstream oil and gas activities, decommissioning of coal plants and strategic low-carbon investments. The company’s success in renewables demonstrates the viability of this low-carbon business model going forward. In 2019, approximately 90% of Ørsted’s earnings before interest, taxes, depreciation and amortisation was derived from offshore wind. Ørsted has a clear way forward to continue to expand its renewable electricity generation capacity.

Ørsted publicly supports relevant climate policies in Europe, its principle area of operation. It should also develop a transparent policy governing actions to be taken if industry associations of which it is a member oppose climate-friendly policies. Establishing such a policy will be important for Ørsted going forward, particularly when it comes to its plans for installing new renewable capacity in regions that have less developed regulatory frameworks for renewables, such as the USA and Taiwan.

Ørsted has used scenario analysis out to 2100 to test the resilience of its offshore wind business under temperature increases of 3-4 degrees and 1.5-2 degrees. While this analysis considers a long-term time frame and a range of changing conditions together, it should be extended to cover the entire scope of Ørsted’s business (onshore and bioenergy segments were not included). Ørsted has an opportunity to increase the robustness of its scenario analysis by expanding the scope of its coverage and expressing the results in value-at-risk terms.

While Ørsted invests significantly in large-scale commercial deployment of renewable technologies, it does not report its R&D expenditure on technologies with significant potential to mitigate climate change; the International Energy Agency’s well-below 2-degree scenario requires further advancements in the efficiencies of renewable technologies. Reporting transparently on its development expenditure would demonstrate Ørsted’s commitment to bringing the most efficient and innovative technologies to the market to drive the low-carbon energy transition.

Ørsted has set a science-based target to reduce the emissions intensity of its electricity generation to 10 gCO2e/kWh by 2025, which corresponds to a 98% reduction from the base year of 2006. Beyond that, Ørsted has committed to achieving net zero for its total carbon footprint by 2040.

Decarbonisation is core to Ørsted’s strategy. To drive the necessary emissions reductions, Ørsted will phase out all coal-fired generation by 2023 while expanding its installed renewable electricity capacity, increasing this to 20 GW by 2025 and 30 GW by 2030. By 2025, 99% of Ørsted’s electricity generation will come from renewable sources.

Ørsted’s investment strategy is clearly focused on driving its renewable expansion. Over 90% of Ørsted’s capital expenditure in 2018 went towards the deployment of onshore and offshore wind projects. Expenditure over the 2019-2025 period is set to follow the same trend.

Ørsted has undergone a rapid transformation from the traditional fossil fuel-based company it was a decade ago. Over the past five years, it has reduced its emissions intensity at a faster rate than required by its low-carbon pathway, driven by a strategic shift away from coal and towards renewable electricity generation.

Ørsted’s legacy activity demonstrates that the company is capable of rapid and ambitious change. The projected pathway set out in Ørsted’s transition plan, targets and investment strategy indicates that the company is committed to continuing to drive change towards the low-carbon economy.