The renewable energy sector is buzzing. Forward prices are down, inflation is cooling, and after a tumultuous 2023, everyone is vying for the most value-accretive projects. Amidst this clamor, Ørsted, the Danish offshore wind giant, has unveiled a revised business plan, one that seemingly prioritizes stability and a robust balance sheet. But behind the headlines of dividend holidays and CapEx reductions, something else is stirring – a subtle, almost whispered, commitment to carbon capture and storage (CCS).

While Ørsted's management emphasized their commitment to offshore wind, repeatedly calling it their 'most important strategic priority', a closer look at their Q1 2024 earnings call transcript reveals a telling detail. Mads Nipper, the CEO, proactively addressed a question about their CCS facility in Copenhagen, a project barely mentioned in their financial reports. He stated with striking confidence, 'That is progressing well… it is progressing to plan. And as of now, we have no reason to believe that we cannot keep the COD deadlines of starting to catch carbon in 2025.'

This casual confidence stands in stark contrast to the cautious language used when discussing offshore wind projects. Nipper admitted that the offshore wind market remains volatile, requiring increased contingencies and pre-commitments to manage risk. Yet, with CCS, there's a distinct lack of concern, even though this is a 'first-of-its-kind' project. This suggests a level of internal conviction and progress that hasn't been publicly disclosed.

Could Ørsted, famous for its green energy prowess, be quietly amassing a formidable position in CCS? It's a tantalizing hypothesis. After all, Ørsted is deeply intertwined with the energy transition, and CCS, while controversial, is increasingly recognized as a critical tool for decarbonizing heavy industries.

Consider the numbers. While Ørsted's revised CapEx plan towards 2030 has been reduced to DKK 270 billion, approximately a third lower than their previous target, there's still significant investment capacity. They've earmarked DKK 140 billion for projects from 2027 to 2030, boasting 'a very high degree of flexibility' in deploying this capital.

Furthermore, Ørsted’s expertise in offshore wind construction and operation translates surprisingly well to CCS. The same skills required to build and operate massive offshore wind farms – managing complex supply chains, securing permits, and engineering robust infrastructure in challenging marine environments – are directly applicable to CCS projects.

Adding fuel to the hypothesis, Ørsted is partnering with Aker Carbon Capture, a leading Norwegian CCS technology provider, for their Copenhagen project. Aker is renowned for its expertise and has secured multiple large-scale CCS contracts globally. This partnership could be the foundation for a powerful alliance, positioning Ørsted to capture a significant share of the burgeoning CCS market.

Of course, this is still speculation. Ørsted hasn't explicitly stated their ambitions in CCS, and their focus remains firmly on offshore wind. But the seeds of a potential pivot are there. As the renewable energy market matures and competition intensifies, a strategic move into CCS could provide Ørsted with a unique edge, tapping into a new wave of growth and cementing their position as a true energy transition leader.

EBITDA Growth: Offshore Wind vs Onshore Renewables

The following chart compares Ørsted's EBITDA growth from offshore wind and onshore renewables, based on data from their Q1 2024 and Q4 2023 earnings calls.

Source: Seeking Alpha

Source: Seeking Alpha

"Fun Fact: Ørsted was originally named DONG Energy, an acronym for Danish Oil and Natural Gas. Their transformation into a renewable energy powerhouse is one of the most dramatic examples of corporate reinvention in recent history. Could their quiet CCS endeavors be the next chapter in this remarkable evolution?"