Welcome to zero. I'm kshatrati this week high winds, high seas, and the high price of paperwork. Windpower has seen explosive growth over the past couple of decades. What was once a fledgling industry with a few scattered turbines is now more than seven percent of global electricity supply, up from merely two percent in twenty ten. Just last week, the UK set its new wind energy record, with two thirds of the country's electricity coming from wind at one point. But if the world is to achieve net zero by twenty fifty, we're going to need a lot more wind turbines, both on land but more importantly out at sea. One company building that future is ORSTED, the world's largest developer of offshore wind power. Formerly known as Danish Oil and Natural Gas or DONG, the company has undergone a remarkable transition. A little more than a decade ago, it produced more than eighty five percent of its electricity from fossil fuels. Now almost all of that comes from wind power. It's a story of success, the kind of story we need more of, but it's one that could very well have not happened. Austered has become a case study of how to transform a fossil fuel company for the clean energy era. But it's actually not just a story of well timed forward thinking, but also of a lot of government intervention and many happy accidents. Despite all the success of Ousted, CEO Madsniper told us that the wind industry is in a strange position. There's clearly growing demand for clean energy as the world overcomes its addiction to fossil fuels, but the industry is struggling to make a decent profit as it reckons with permitting problems, supply chain issues, and increased competition. Until government buyers will realize that the price will have to be more realistic, which will still be significantly cheaper than any fossil fuel, there will be a risk that things will slow down and even some products potentially not built. This week on Zero, mad Nipper joins us to tell the real story of his company's transformation, the challenges Arested is facing, and the impact of fossil fuel companies now trying to get in on the wind game. Welcome to the show, mads Thank you so much. Now, Orsted is known today in the world as a giant in off your wind. It wasn't that very long ago. It was called DONG, which stood for Danish Oil and Natural Gas. What happened, okay, a brilliant question and a very important question, because TONG was born as a merger of a number of smaller Danish energy utilities and the oil and gas business essentially in Denmark. And what happened was that after a few years or some years of successful operation, the company found itself in increasing sort of financial challenged outlook, and at the same time the then management and board said, the path we're on is not future proof. Danish businesses and many businesses, successful businesses generally have attendency to say, is the business we're running is that fundamentally future proof if we think long term and already then this was essentially born with strength back in two thousand and eight. Already then it was painfully opposed that oil and gas and fossil future in general is not future proof. So that started with a vision of going from at that time fifteen percent renewables and eighty five percent fossil fuel generation, and the then CEO had a vision to say, let's turn it around and say eighty five percent renewables and fifteen percent fossil by twenty forty and then the rest of history. So we exceeded that. It actually more than twenty years ahead of the first five percent renewables and renewable wonderful. Now you also rebranded to Orsted at sometimes right in the middle. Why the change, Well, Danish all a natural gas. Obviously it's not a good name if you're the world's undisputed offshore wind leader. So at the time it was said, we need to ensure that we find a name that not only is different than tongue, but is something that signals the future. And Hans christ and Ousted was actually the man who discovered electromagnetism, by the way, which fewer people know. He was also the one who discovered aluminium and invented more than two thousand words in the Danish language, So a brilliant mind. But the contribution to inventing electromagnetism, which obvious is a foundation for so many things in society today, was why we picked that name. In terms of Orsted getting a rebrand, it also was the moment where you went from being fully publicly owned by the Danish state to majority owned by Danish state, and then you're listed on the stock exchange. Yes, and for a while you were twice thrice the size of BP. Yeah, I don't think we were twice a side quiet, but we had a larger market cap than BP, and I think that was a recognition from investors that the future is renewables, and no doubt that we need all possible renewable technologies, ideally offshore wind, onshore wind, solar, different storage solutions, and who knows, may be much better for you to prove nuclear technologies when we get ten twenty years further ahead. We need everything to fundamentally turn around the world's energy system. But investors saw that if a company like AUSTED can make a complete transformation from being one of Europe's most fossil fuel intensive utilities to being one of the strongest and then offshore the very strongest company in ten years, the almost limitless potential. Now I'm going to take a pin and prick a hole in this story because I'm going to give a little bit more context as to how Orsted happened, and you should correct me if I'm wrong. The story of Orsted isn't as simple as Mads is making out. To understand how ORSTED grew into one of the world's largest wind developers. You need to go back to the formation of DONG Danish Oil and Natural Gas. In nineteen seventy three, there was the Opeque oil crisis, and Denmark was among the worst hit in Europe. That forced the government to pause and come up with a strategy. It combined several Danish oil and gas companies to create DONG, and that entity became the state's route to produce oil and gas from the Nazi that it had recently found. DONG was just one of many state owned enterprises crucial to ensuring Denmark's energy security well into the nineties. However, by that time, the European Union started implementing rules to promote more competition in the energy market. This put the Danish government in a tricky position, as they were worried that DONG might not be able to compete with the likes of Germany's RWE or Sweden's battenfal. So, the Danish state decided to create a national energy champion and told DONG to go out and start buying power plants. Most of the power plants that existed at the time, if they were not running on gas, were running on coal, and so By the late two thousands, dong became Dong Energy. It had oil and gas and coal, and accidentally it had also acquired some offshore wind turbines as part of the utility companies it had bought. And then two thousand and nine was when the Copenhagen Climate Summit happened, and so the government said, Tong Energy, you cannot hold on to coal. Dong Energy said, yes, we realize the future is not coal. And they turned around and they said, oh, but we have these offshore wind turbines. Could we make something of it. Did I get anything wrong? Yeah, you got You did a very good piece of research, and almost everything you say is factually correct. I will say, though, the really important part of this is when is the transformation made from being essentially a utility and an oil and gas company and into a fully renewables company. That was not something that the government pushed in connection with CUP fifteen, which happened in two thousand and nine. That was something that happened essentially as part of a vision from the company CEO and the company management. So that is the main difference. And then the other really important thing was that Tongue at the time also really forcefully wanted to convert the cold fire power plants to being fired on sustainable biomass, which obviously, I mean, there are still opponents to biomass, but what everybody at least can agree is that it is better than cold. So those are the two nuances. And then the story from two thousand and eight when that vision was launched up until two thousand and twelve, which was essentially when the company said, now we make that choice. Now we get in capital from in this case Goldman Sex and later on a listing, which was what gave the financial opportunity to really accelerate offshore wind. Right, So you're right, we got those offshore wind turbines from what, by the way, was the world's first offshore wind from Binibu, which is now decommissioned. We got that, you could say, by accident, but it gave an inspiration to something where the choice into one key technology and making a whole hearted pair on that was something that was really transformation. And we can now just say Ousted has become the offshore wind giant, and that's where the story ends happily ever after. Yeah, but it's not the case. That is not the case. So right now, there are some serious challenges, unexpected as they may be. Europe is going through an energy crisis. It would speritly desperately want to get away from gas and coal, and yet wind power companies, not just developers but also suppliers of wind turbines are getting hammered in the market. Oil and gas giants are making tons and tons of profits. Why is that happening. Shouldn't this be the moment where renewable energy really shines. Yeah, the great companies and great societies in the world are those that keep a long term view and continue to do what is fundamentally right when things are difficult, and things are difficult on a super tragic background with the unacceptable warn Ukraine, it has become very obvious that we need to deliberate ourselves from energy imports from that part of the world, and at the same time, we obviously need to sustain momentum on fighting climate change. So in many ways, you could say, is there a strong sentiment now for oil and gas companies to make a lot of money because enterity prices have spiked up and it doesn't cost anymore for the oil companies to take up more oil and gas from the underground. Of course, that is attractive to investors because they make lots and lots of money and the share prices go up. That's how at least those are some of the dimensions of our capitalism works. I have no concerns that if we and here I mean both governments and the renewables industry, if we continue to do the right thing. This is a temporary setback only and if you look at only what has happened in the last few months, we have seen renewables ambition only go one way, and that is up. We've seen the north Sea Declaration, with the North Sea States opping off shore ambitions, the Politic declaration. Right now the world has an ambition of an off show alone for three hundred and eighty gig awards of capacity by twenty thirty and two thousand gig awards, which is more than twice of the US total entity consumption by twenty fifty. So I am one hundred percent convinced that momentum will sustain. But yes, we have setbacks. We have setbacks in terms of permitting process being too slow. We have setbacks in terms of cost of capitual going up. We have setbacks in terms of oil companies obviously being able to invest chalkloads of cash, which in some ways is good because they also invest in renewables projects and he saw them. So it's a mixed bag of good and bed. But I can promise you that both we and O those players in this industry are not going to take our eyes off the ball of the target that we need to get to. I think the arguments on the long term you make are pretty reasonable. Onshore wind has been the cheapest source of power in Europe for a long time now already, and offshore wind prices have been falling and they will continue to fall for some time. But the short term matters a lot because it empowers companies like oil and gas companies to be able to eat your lunch. They will go and buy up sea bed rights, which they have done in the UK, which has great of your wind ambition. How are you dealing with that kind of competition? Well, first and foremost, I think it's super important that any dollar or euro that goes into renewable power instead of fossil fuels is a good thing from an all star specific point of view. Of course, it's annoying because if there is in some cases what I call irrational competition with somebody who just wants the gig awards and really don't care about the returns. Ultimately, that risks stopping the flow of capital to renewable energy because investors, if there is no financial return, it becomes financially unsustainable, and no matter how much gas oil and gas companies will have, then eventually that momentum will discontinue. It is super important that our industry, not just for the sake of our investors and for our own companies, but for the sake of the momentum of renewable energy, that we continue to actually keep financial discipline to ensure that there's the least an acceptable financial return. But I am also hearing that some of the oil companies are starting to signal now that it's really important that there is a return. Of these examples would be a Queen of from Norway BP have recently said the same. So I think they're glimmers of hope that we will have an industry that is also very sort of mindful about the necessity to continue to generate returns. I don't say that because austed is afraid of competition. I'm saying this because we are a company with the vision of a world that runs entirely in green energy, and the lack of capital flowing to that transformation is the single biggest race we have. That's interesting. We interviewed the CEO of Investors. They make wind turbines, they supply some of them to you, they supply many to others, and his response was, we have no concerns with capital. Investors want to put the money in. European Union is committing lots of money. Our main challenge is permitting problems that governments are not allowing wind turbines and wind farms to be built where they need to go, and the race to the bottom where countries are competing to advertise how cheap renewables have become, but in the process making the small profit margins or maybe large profit margins that wind companies make shrink them further and make them less viable. That but Hendrick and are saying exactly the same thing. We're just saying it in different ways. Hendrick is the CEO of Vests exactly. I fully agree on the permitting point. It actually takes longer to get a plot of seabed permitted than it does to build the entire farm that is completely unacceptable. How much time does it take to permit and how much time does it take to build? It can take, worst case, seven to ten years to get it permitted, in many cases shorter, but typically takes two to three years to build. And just talk us to the process of permitting. What is it that they have to what are things that they have to do. They have to get environmental permits. There needs to be stakeholders, so everything from birds to fish, biodiversity, which by the way, is super important, fishermen, communities, local summer house owners, seabed geological investigations, and all of that needs to so they send out people to count the fish and count the birds and talk to the people who may see these winter kinds of hearings, all of that. But that's important, It is important. But the worst thing is that if that was done efficiently, it could be done in a year. In some cases, for example, in the US, we are still struggling with the Bureau of Ocean Energy Management getting enough resources to keep momentum. In other places, it's an endless bureaucracy where maybe sometimes tens or twenties of different government bodies need to be involved. And they don't coordinate. Sometimes an application can lie two months on the desk and not get onto the next one. There are so many practical dimensions. Yeah, we've seen the amount the paperwork then used to be done to get an offshore wind permit or even onshore wind permit. Yes, and it looks like half a ton of paper. Yes, I'm not joking. No, I mean one of the applications we've done there has been four thousand, three hundred pages. I know that there will be a report that will say, yes, what needs to be done, But what are you asking of government? I'm asking that whatever the key challenge is. Someplaces resources, someplaces bureaucracy, someplaces just excessive caretaking of stakeholder concerns, whatever the challenge is in a specific country, because it's different that the political will, Because the political will is there that that is transformed into real action and say, whatever happens, come hell and high water, it should never take more than one year, and just ask somebody to get it done. That's what I would do. If permitting is one problem the industry faces, then capital is another. What that means and why it's an issue? After the break matts and I talked a lot about the pressure the wind industry is facing. One of them is the cost of capital, which simply put, is the price you pay to borrow money from banks or investors, and that matters a lot because most large businesses run on borrow money and not their own capital. The other pressure comes from the industry selling itself as one of the cheapest forms of energy you can buy, agreeing to sell power at fixed prices for decades. In doing so, the industry has created a trap for itself as interest rates rise and supply chains are squeezed, raising the cost of the are roughly eight thousand pieces that go into a turbine. The industry's profits are also squeezed, threatening the financial viability of wind developments. I asked mad how this is affecting orsted and supplies like Danish wind turbine maker Vests run by CEO Henrick Anderson. Let's come to the capital, exactly capital the capital point. Henrick says it's a race to the bottom, and I say, eventually the capital will dry out. Because Henrick is right that it is a race to the bottom. There is very very little realization that right now, inflation on many components all the way from wind turbines to steal to corpon to vessel rentals, to fuels to drive the ships and so on. All of that is exploding in inflation, actually more than in internal inflation. And at the same time, in many cases, the financial return above cost of capital and offshore wind is in many cases one two, in a really good product three percent. Just bear in mind the last three months cost of capital has gone up by two to three percent. That puts a huge pressure on the returns. And if states around the world say entergy prices can only go down, then it will be a race to the bottom. And add to that, if they are still irrational behavior from some companies to say we would bid whatever it takes. If we are pressure as a developer, what will we do. We'll put huge pressure on Vestas and other turbine suppliers such as Siemens, Caamazer or General Electric. They already lose money, so that will mean that the health of the industry would be put under further pressure. It's such a strange thing though, I mean, an industry that's so much in demand, is producing clean power that the world needs, is doing it at scale in tens of countries around the world is being hit by its own success and if the numbers you're talking about are right, could collapse. See, I'm fundamentally and i'm what I call myself a pragmatic optimist. This industry offshore and renewables in general is probably the fastest growing industry anywhere in the world. A glimmer of hope, which is a big glimmer of hope, is that an onshore which has a much shorter cycle from when you approve it and when you build it and when you sell the power. We see that the price that's being paid for the power moves completely intended with inflation because the corporate off takers of power, utility off takers of the power, they know that the power has to have realistic prices. And by the way, it's a power price that is less than a fifth of the current power price. So it's still a bargain to get tens of years of what is comparatively to right now super cheap power offshore. Right now, we have governments who have talked themselves into a narrative it can only go down. Countries need to look at the societal benefits, so how many jobs are created are the export industries created. Do we have companies invested in biodiversities we see better ocean biodiversity. Do we ensure that there's social justice in the transformation, if that's to become a criteria rather than only putting pressure on price, that is a time with this industry will really start to not only grow because it will grow, but grow in a healthy way. But we should also just think about economics, because economics drives a lot of the markets. You're talking about not going to the race to the bottom on absolute power prices, but the relative which is the difference between offshore and gas or coal is growing. And so because gas and coal are currently expensive, yes, even though wind power prices are going up a little bit more because of inflation, because of supply chain issues, the delta the difference between those prices has only grown. That should make offshore more attract That's my very point. That's my very point is that if there was rational behavior from all relevant governments, they would say that since the fossil few prices of energy have only gone up, then it is actually a smart thing to accept that the prices off shore and onshore will go up comparatively and until and I'm convinced that will happen, until government buyers will realize that the price will have to be more realistic, which will still be significantly cheaper than any fossil fuel. There will be a risk that things will slow down and even some projects potentially not built. We saw some colleagues in the US going out and saying, we're not sure we can build these projects. So that is the risk of a slowdown. But is the growth potential of offshore is that going to be realized on the long term? Absolutely? Well, you didn't ring up one risk factor, which is that big oil companies are coming into this space and they have very deep pockets. How are you going to deal with those companies being okay not making money on off shore for a while and maybe eating into your share. But see, that is where we have the privilege of having more than fifty gigawatts of pipeline. We recently said no to participate in a Taiwanese auction, even though we are the biggest by far the biggest developer there, because we couldn't make a good project there. And the market leader has many responsibilities, and one of them is to also say no when things are not sustainable. And I don't want to sound arrogant, but having built close to thirty utility scale also wind farms, we know better than anybody else what is realistic. Economies that are not so when we say no, the industry can trust that that is what's realistic. Are you worried that having oil companies come in will slow down your growth, will eat up into your pipeline. The short answer is no, because we believe that many opportunities. I mean, for example, in the UK we will build the Haunts three, which is the world's largest offshore prouty with two point eight gigawatts. We still have haun C four. We got a gigawatts in scott Wind, so even there there sample opportunity. Worth noting that when the UK held its recent seabed rights auction for offshore wind, more than half the beds were won by oil and gas companies, specifically BP and Total. Could there be a scenario where some countries turn out to be less attractive than they usually happen? Yes, that could happen. I won't point to anything specific, but if that happens, the great thing is that all over the world we're seeing offshore being really, really wanted to grow. So if some of those countries do not get it, or if the competition means that there are no good projects there, then we will turn our capital to other markets. And that's the great privilege of being a globally present developer. There's also competition not just in oil companies coming and taking seabed rights, but they're also taking many of the executives that work in austed and there's been quite a churn in ousted in the leadership ranks. How are you dealing with the talent pool issue? Well, in general, as an industry, we need to ensure that we continue to build not just strong executives, but really really strong talent because right now I think there are twelve million people employed in renewables around the world. In eight years there's going to be a thirty eight million. That's projection. So in general, we in the industry need to take a huge responsibility for educating, retraining lots of workforce. Allstar as I'm too. You know, we are twice as big as the second biggest and offshore we've been in this for longest, so we have a deep capability at all levels in the organization. That means our employees are attractive. I obviously don't like it because I would love to keep our people. But on the other hand, I know they are great people with good values. So if they can get in into another company and help them accelerate again as a world citizen, I love that you've been in the off shore industry the longest. New players are coming left, right and center. Why is it so easy for them to come in and eat your lunch. I'm not sure it is as easy as it sounds, because if you look at who actually builds something at scale, there aren't that many of us. If you look at how many people are bidding in, if you look at how many people saying they have off show ambitions, there are a lot. But if you look at how many people actually have operational or under construction assets at scale, they aren't that many. So I think we will see an industry which will also sort of mature and saying some of those who came in found out it wasn't exactly as easy, And I greatly respect competitors, and I'll call them industry colleagues who come in who are serious, who know what they're doing, they want to do it in the right way. Both from a sustainability and a financial point of view, and they stay in the industry. But those who come in try to make a big box, develop a project and sell it again. It's okay if they don't stay for the long term. Thank you so much for your time. This is a great conversation. My pleasure. I'm sorry about my sore throat. The story of oysters transformation from a fosso fuel company to a clean energy company was anything but straight up corporate strategy. It also needed state intervention and happy accidents. Lots of fossil fuel companies will have to undergo a similar transition over the coming decades. If we are to reach zero emissions, we cannot rely on happy accidents alone. And just a side note, the research for this telling of the Oyster story is based on work I did for my book on climate solutions that will be published later this year. I hope you'll give that a read when it's out. Thanks for listening to Zero. If you like this episode, please take a moment to rate and review the show on Apple Podcasts and Spotify, Send it to a friend, or whisper it into the wind. If you've got a suggestion for a guest or topic or something you just want us to look into. Get in touch at zeropod, at Bloomberg dot Net. Zero's producer is Oscar Boyd and senior producer is Christine driscoll Our. Theme music is composed by Wonderlely Special thanks to Kira bin Ram and to energy reporter Will Mathis. If you'd like to read more stories from him about the state of the wind industry, We've linked some of those in the show notes. I'm Kshatrati back next week.

Welcome to zero. I'm kshatrati this week high winds, high seas, and the high price of paperwork. Windpower has seen explosive growth over the past couple of decades. What was once a fledgling industry with a few scattered turbines is now more than seven percent of global electricity supply, up from merely two percent in twenty ten. Just last week, the UK set its new wind energy record, with two thirds of the country's electricity coming from wind at one point. But if the world is to achieve net zero by twenty fifty, we're going to need a lot more wind turbines, both on land but more importantly out at sea. One company building that future is ORSTED, the world's largest developer of offshore wind power. Formerly known as Danish Oil and Natural Gas or DONG, the company has undergone a remarkable transition. A little more than a decade ago, it produced more than eighty five percent of its electricity from fossil fuels. Now almost all of that comes from wind power. It's a story of success, the kind of story we need more of, but it's one that could very well have not happened. Austered has become a case study of how to transform a fossil fuel company for the clean energy era. But it's actually not just a story of well timed forward thinking, but also of a lot of government intervention and many happy accidents. Despite all the success of Ousted, CEO Madsniper told us that the wind industry is in a strange position. There's clearly growing demand for clean energy as the world overcomes its addiction to fossil fuels, but the industry is struggling to make a decent profit as it reckons with permitting problems, supply chain issues, and increased competition. Until government buyers will realize that the price will have to be more realistic, which will still be significantly cheaper than any fossil fuel, there will be a risk that things will slow down and even some products potentially not built. This week on Zero, mad Nipper joins us to tell the real story of his company's transformation, the challenges Arested is facing, and the impact of fossil fuel companies now trying to get in on the wind game. Welcome to the show, mads Thank you so much. Now, Orsted is known today in the world as a giant in off your wind. It wasn't that very long ago. It was called DONG, which stood for Danish Oil and Natural Gas. What happened, okay, a brilliant question and a very important question, because TONG was born as a merger of a number of smaller Danish energy utilities and the oil and gas business essentially in Denmark. And what happened was that after a few years or some years of successful operation, the company found itself in increasing sort of financial challenged outlook, and at the same time the then management and board said, the path we're on is not future proof. Danish businesses and many businesses, successful businesses generally have attendency to say, is the business we're running is that fundamentally future proof if we think long term and already then this was essentially born with strength back in two thousand and eight. Already then it was painfully opposed that oil and gas and fossil future in general is not future proof. So that started with a vision of going from at that time fifteen percent renewables and eighty five percent fossil fuel generation, and the then CEO had a vision to say, let's turn it around and say eighty five percent renewables and fifteen percent fossil by twenty forty and then the rest of history. So we exceeded that. It actually more than twenty years ahead of the first five percent renewables and renewable wonderful. Now you also rebranded to Orsted at sometimes right in the middle. Why the change, Well, Danish all a natural gas. Obviously it's not a good name if you're the world's undisputed offshore wind leader. So at the time it was said, we need to ensure that we find a name that not only is different than tongue, but is something that signals the future. And Hans christ and Ousted was actually the man who discovered electromagnetism, by the way, which fewer people know. He was also the one who discovered aluminium and invented more than two thousand words in the Danish language, So a brilliant mind. But the contribution to inventing electromagnetism, which obvious is a foundation for so many things in society today, was why we picked that name. In terms of Orsted getting a rebrand, it also was the moment where you went from being fully publicly owned by the Danish state to majority owned by Danish state, and then you're listed on the stock exchange. Yes, and for a while you were twice thrice the size of BP. Yeah, I don't think we were twice a side quiet, but we had a larger market cap than BP, and I think that was a recognition from investors that the future is renewables, and no doubt that we need all possible renewable technologies, ideally offshore wind, onshore wind, solar, different storage solutions, and who knows, may be much better for you to prove nuclear technologies when we get ten twenty years further ahead. We need everything to fundamentally turn around the world's energy system. But investors saw that if a company like AUSTED can make a complete transformation from being one of Europe's most fossil fuel intensive utilities to being one of the strongest and then offshore the very strongest company in ten years, the almost limitless potential. Now I'm going to take a pin and prick a hole in this story because I'm going to give a little bit more context as to how Orsted happened, and you should correct me if I'm wrong. The story of Orsted isn't as simple as Mads is making out. To understand how ORSTED grew into one of the world's largest wind developers. You need to go back to the formation of DONG Danish Oil and Natural Gas. In nineteen seventy three, there was the Opeque oil crisis, and Denmark was among the worst hit in Europe. That forced the government to pause and come up with a strategy. It combined several Danish oil and gas companies to create DONG, and that entity became the state's route to produce oil and gas from the Nazi that it had recently found. DONG was just one of many state owned enterprises crucial to ensuring Denmark's energy security well into the nineties. However, by that time, the European Union started implementing rules to promote more competition in the energy market. This put the Danish government in a tricky position, as they were worried that DONG might not be able to compete with the likes of Germany's RWE or Sweden's battenfal. So, the Danish state decided to create a national energy champion and told DONG to go out and start buying power plants. Most of the power plants that existed at the time, if they were not running on gas, were running on coal, and so By the late two thousands, dong became Dong Energy. It had oil and gas and coal, and accidentally it had also acquired some offshore wind turbines as part of the utility companies it had bought. And then two thousand and nine was when the Copenhagen Climate Summit happened, and so the government said, Tong Energy, you cannot hold on to coal. Dong Energy said, yes, we realize the future is not coal. And they turned around and they said, oh, but we have these offshore wind turbines. Could we make something of it. Did I get anything wrong? Yeah, you got You did a very good piece of research, and almost everything you say is factually correct. I will say, though, the really important part of this is when is the transformation made from being essentially a utility and an oil and gas company and into a fully renewables company. That was not something that the government pushed in connection with CUP fifteen, which happened in two thousand and nine. That was something that happened essentially as part of a vision from the company CEO and the company management. So that is the main difference. And then the other really important thing was that Tongue at the time also really forcefully wanted to convert the cold fire power plants to being fired on sustainable biomass, which obviously, I mean, there are still opponents to biomass, but what everybody at least can agree is that it is better than cold. So those are the two nuances. And then the story from two thousand and eight when that vision was launched up until two thousand and twelve, which was essentially when the company said, now we make that choice. Now we get in capital from in this case Goldman Sex and later on a listing, which was what gave the financial opportunity to really accelerate offshore wind. Right, So you're right, we got those offshore wind turbines from what, by the way, was the world's first offshore wind from Binibu, which is now decommissioned. We got that, you could say, by accident, but it gave an inspiration to something where the choice into one key technology and making a whole hearted pair on that was something that was really transformation. And we can now just say Ousted has become the offshore wind giant, and that's where the story ends happily ever after. Yeah, but it's not the case. That is not the case. So right now, there are some serious challenges, unexpected as they may be. Europe is going through an energy crisis. It would speritly desperately want to get away from gas and coal, and yet wind power companies, not just developers but also suppliers of wind turbines are getting hammered in the market. Oil and gas giants are making tons and tons of profits. Why is that happening. Shouldn't this be the moment where renewable energy really shines. Yeah, the great companies and great societies in the world are those that keep a long term view and continue to do what is fundamentally right when things are difficult, and things are difficult on a super tragic background with the unacceptable warn Ukraine, it has become very obvious that we need to deliberate ourselves from energy imports from that part of the world, and at the same time, we obviously need to sustain momentum on fighting climate change. So in many ways, you could say, is there a strong sentiment now for oil and gas companies to make a lot of money because enterity prices have spiked up and it doesn't cost anymore for the oil companies to take up more oil and gas from the underground. Of course, that is attractive to investors because they make lots and lots of money and the share prices go up. That's how at least those are some of the dimensions of our capitalism works. I have no concerns that if we and here I mean both governments and the renewables industry, if we continue to do the right thing. This is a temporary setback only and if you look at only what has happened in the last few months, we have seen renewables ambition only go one way, and that is up. We've seen the north Sea Declaration, with the North Sea States opping off shore ambitions, the Politic declaration. Right now the world has an ambition of an off show alone for three hundred and eighty gig awards of capacity by twenty thirty and two thousand gig awards, which is more than twice of the US total entity consumption by twenty fifty. So I am one hundred percent convinced that momentum will sustain. But yes, we have setbacks. We have setbacks in terms of permitting process being too slow. We have setbacks in terms of cost of capitual going up. We have setbacks in terms of oil companies obviously being able to invest chalkloads of cash, which in some ways is good because they also invest in renewables projects and he saw them. So it's a mixed bag of good and bed. But I can promise you that both we and O those players in this industry are not going to take our eyes off the ball of the target that we need to get to. I think the arguments on the long term you make are pretty reasonable. Onshore wind has been the cheapest source of power in Europe for a long time now already, and offshore wind prices have been falling and they will continue to fall for some time. But the short term matters a lot because it empowers companies like oil and gas companies to be able to eat your lunch. They will go and buy up sea bed rights, which they have done in the UK, which has great of your wind ambition. How are you dealing with that kind of competition? Well, first and foremost, I think it's super important that any dollar or euro that goes into renewable power instead of fossil fuels is a good thing from an all star specific point of view. Of course, it's annoying because if there is in some cases what I call irrational competition with somebody who just wants the gig awards and really don't care about the returns. Ultimately, that risks stopping the flow of capital to renewable energy because investors, if there is no financial return, it becomes financially unsustainable, and no matter how much gas oil and gas companies will have, then eventually that momentum will discontinue. It is super important that our industry, not just for the sake of our investors and for our own companies, but for the sake of the momentum of renewable energy, that we continue to actually keep financial discipline to ensure that there's the least an acceptable financial return. But I am also hearing that some of the oil companies are starting to signal now that it's really important that there is a return. Of these examples would be a Queen of from Norway BP have recently said the same. So I think they're glimmers of hope that we will have an industry that is also very sort of mindful about the necessity to continue to generate returns. I don't say that because austed is afraid of competition. I'm saying this because we are a company with the vision of a world that runs entirely in green energy, and the lack of capital flowing to that transformation is the single biggest race we have. That's interesting. We interviewed the CEO of Investors. They make wind turbines, they supply some of them to you, they supply many to others, and his response was, we have no concerns with capital. Investors want to put the money in. European Union is committing lots of money. Our main challenge is permitting problems that governments are not allowing wind turbines and wind farms to be built where they need to go, and the race to the bottom where countries are competing to advertise how cheap renewables have become, but in the process making the small profit margins or maybe large profit margins that wind companies make shrink them further and make them less viable. That but Hendrick and are saying exactly the same thing. We're just saying it in different ways. Hendrick is the CEO of Vests exactly. I fully agree on the permitting point. It actually takes longer to get a plot of seabed permitted than it does to build the entire farm that is completely unacceptable. How much time does it take to permit and how much time does it take to build? It can take, worst case, seven to ten years to get it permitted, in many cases shorter, but typically takes two to three years to build. And just talk us to the process of permitting. What is it that they have to what are things that they have to do. They have to get environmental permits. There needs to be stakeholders, so everything from birds to fish, biodiversity, which by the way, is super important, fishermen, communities, local summer house owners, seabed geological investigations, and all of that needs to so they send out people to count the fish and count the birds and talk to the people who may see these winter kinds of hearings, all of that. But that's important, It is important. But the worst thing is that if that was done efficiently, it could be done in a year. In some cases, for example, in the US, we are still struggling with the Bureau of Ocean Energy Management getting enough resources to keep momentum. In other places, it's an endless bureaucracy where maybe sometimes tens or twenties of different government bodies need to be involved. And they don't coordinate. Sometimes an application can lie two months on the desk and not get onto the next one. There are so many practical dimensions. Yeah, we've seen the amount the paperwork then used to be done to get an offshore wind permit or even onshore wind permit. Yes, and it looks like half a ton of paper. Yes, I'm not joking. No, I mean one of the applications we've done there has been four thousand, three hundred pages. I know that there will be a report that will say, yes, what needs to be done, But what are you asking of government? I'm asking that whatever the key challenge is. Someplaces resources, someplaces bureaucracy, someplaces just excessive caretaking of stakeholder concerns, whatever the challenge is in a specific country, because it's different that the political will, Because the political will is there that that is transformed into real action and say, whatever happens, come hell and high water, it should never take more than one year, and just ask somebody to get it done. That's what I would do. If permitting is one problem the industry faces, then capital is another. What that means and why it's an issue? After the break matts and I talked a lot about the pressure the wind industry is facing. One of them is the cost of capital, which simply put, is the price you pay to borrow money from banks or investors, and that matters a lot because most large businesses run on borrow money and not their own capital. The other pressure comes from the industry selling itself as one of the cheapest forms of energy you can buy, agreeing to sell power at fixed prices for decades. In doing so, the industry has created a trap for itself as interest rates rise and supply chains are squeezed, raising the cost of the are roughly eight thousand pieces that go into a turbine. The industry's profits are also squeezed, threatening the financial viability of wind developments. I asked mad how this is affecting orsted and supplies like Danish wind turbine maker Vests run by CEO Henrick Anderson. Let's come to the capital, exactly capital the capital point. Henrick says it's a race to the bottom, and I say, eventually the capital will dry out. Because Henrick is right that it is a race to the bottom. There is very very little realization that right now, inflation on many components all the way from wind turbines to steal to corpon to vessel rentals, to fuels to drive the ships and so on. All of that is exploding in inflation, actually more than in internal inflation. And at the same time, in many cases, the financial return above cost of capital and offshore wind is in many cases one two, in a really good product three percent. Just bear in mind the last three months cost of capital has gone up by two to three percent. That puts a huge pressure on the returns. And if states around the world say entergy prices can only go down, then it will be a race to the bottom. And add to that, if they are still irrational behavior from some companies to say we would bid whatever it takes. If we are pressure as a developer, what will we do. We'll put huge pressure on Vestas and other turbine suppliers such as Siemens, Caamazer or General Electric. They already lose money, so that will mean that the health of the industry would be put under further pressure. It's such a strange thing though, I mean, an industry that's so much in demand, is producing clean power that the world needs, is doing it at scale in tens of countries around the world is being hit by its own success and if the numbers you're talking about are right, could collapse. See, I'm fundamentally and i'm what I call myself a pragmatic optimist. This industry offshore and renewables in general is probably the fastest growing industry anywhere in the world. A glimmer of hope, which is a big glimmer of hope, is that an onshore which has a much shorter cycle from when you approve it and when you build it and when you sell the power. We see that the price that's being paid for the power moves completely intended with inflation because the corporate off takers of power, utility off takers of the power, they know that the power has to have realistic prices. And by the way, it's a power price that is less than a fifth of the current power price. So it's still a bargain to get tens of years of what is comparatively to right now super cheap power offshore. Right now, we have governments who have talked themselves into a narrative it can only go down. Countries need to look at the societal benefits, so how many jobs are created are the export industries created. Do we have companies invested in biodiversities we see better ocean biodiversity. Do we ensure that there's social justice in the transformation, if that's to become a criteria rather than only putting pressure on price, that is a time with this industry will really start to not only grow because it will grow, but grow in a healthy way. But we should also just think about economics, because economics drives a lot of the markets. You're talking about not going to the race to the bottom on absolute power prices, but the relative which is the difference between offshore and gas or coal is growing. And so because gas and coal are currently expensive, yes, even though wind power prices are going up a little bit more because of inflation, because of supply chain issues, the delta the difference between those prices has only grown. That should make offshore more attract That's my very point. That's my very point is that if there was rational behavior from all relevant governments, they would say that since the fossil few prices of energy have only gone up, then it is actually a smart thing to accept that the prices off shore and onshore will go up comparatively and until and I'm convinced that will happen, until government buyers will realize that the price will have to be more realistic, which will still be significantly cheaper than any fossil fuel. There will be a risk that things will slow down and even some projects potentially not built. We saw some colleagues in the US going out and saying, we're not sure we can build these projects. So that is the risk of a slowdown. But is the growth potential of offshore is that going to be realized on the long term? Absolutely? Well, you didn't ring up one risk factor, which is that big oil companies are coming into this space and they have very deep pockets. How are you going to deal with those companies being okay not making money on off shore for a while and maybe eating into your share. But see, that is where we have the privilege of having more than fifty gigawatts of pipeline. We recently said no to participate in a Taiwanese auction, even though we are the biggest by far the biggest developer there, because we couldn't make a good project there. And the market leader has many responsibilities, and one of them is to also say no when things are not sustainable. And I don't want to sound arrogant, but having built close to thirty utility scale also wind farms, we know better than anybody else what is realistic. Economies that are not so when we say no, the industry can trust that that is what's realistic. Are you worried that having oil companies come in will slow down your growth, will eat up into your pipeline. The short answer is no, because we believe that many opportunities. I mean, for example, in the UK we will build the Haunts three, which is the world's largest offshore prouty with two point eight gigawatts. We still have haun C four. We got a gigawatts in scott Wind, so even there there sample opportunity. Worth noting that when the UK held its recent seabed rights auction for offshore wind, more than half the beds were won by oil and gas companies, specifically BP and Total. Could there be a scenario where some countries turn out to be less attractive than they usually happen? Yes, that could happen. I won't point to anything specific, but if that happens, the great thing is that all over the world we're seeing offshore being really, really wanted to grow. So if some of those countries do not get it, or if the competition means that there are no good projects there, then we will turn our capital to other markets. And that's the great privilege of being a globally present developer. There's also competition not just in oil companies coming and taking seabed rights, but they're also taking many of the executives that work in austed and there's been quite a churn in ousted in the leadership ranks. How are you dealing with the talent pool issue? Well, in general, as an industry, we need to ensure that we continue to build not just strong executives, but really really strong talent because right now I think there are twelve million people employed in renewables around the world. In eight years there's going to be a thirty eight million. That's projection. So in general, we in the industry need to take a huge responsibility for educating, retraining lots of workforce. Allstar as I'm too. You know, we are twice as big as the second biggest and offshore we've been in this for longest, so we have a deep capability at all levels in the organization. That means our employees are attractive. I obviously don't like it because I would love to keep our people. But on the other hand, I know they are great people with good values. So if they can get in into another company and help them accelerate again as a world citizen, I love that you've been in the off shore industry the longest. New players are coming left, right and center. Why is it so easy for them to come in and eat your lunch. I'm not sure it is as easy as it sounds, because if you look at who actually builds something at scale, there aren't that many of us. If you look at how many people are bidding in, if you look at how many people saying they have off show ambitions, there are a lot. But if you look at how many people actually have operational or under construction assets at scale, they aren't that many. So I think we will see an industry which will also sort of mature and saying some of those who came in found out it wasn't exactly as easy, And I greatly respect competitors, and I'll call them industry colleagues who come in who are serious, who know what they're doing, they want to do it in the right way. Both from a sustainability and a financial point of view, and they stay in the industry. But those who come in try to make a big box, develop a project and sell it again. It's okay if they don't stay for the long term. Thank you so much for your time. This is a great conversation. My pleasure. I'm sorry about my sore throat. The story of oysters transformation from a fosso fuel company to a clean energy company was anything but straight up corporate strategy. It also needed state intervention and happy accidents. Lots of fossil fuel companies will have to undergo a similar transition over the coming decades. If we are to reach zero emissions, we cannot rely on happy accidents alone. And just a side note, the research for this telling of the Oyster story is based on work I did for my book on climate solutions that will be published later this year. I hope you'll give that a read when it's out. Thanks for listening to Zero. If you like this episode, please take a moment to rate and review the show on Apple Podcasts and Spotify, Send it to a friend, or whisper it into the wind. If you've got a suggestion for a guest or topic or something you just want us to look into. Get in touch at zeropod, at Bloomberg dot Net. Zero's producer is Oscar Boyd and senior producer is Christine driscoll Our. Theme music is composed by Wonderlely Special thanks to Kira bin Ram and to energy reporter Will Mathis. If you'd like to read more stories from him about the state of the wind industry, We've linked some of those in the show notes. I'm Kshatrati back next week.