Increasing volatility driven by greater penetration of renewable power will require a major increase in system flexibility, according to Ørsted CEO, Henrik Poulsen.
Posting half-year results, the company demonstrated resilience to the impacts of Covid-19, with operating profit up 11 per cent to DKK 8.2bn (£991m), though second quarter earnings were negative.
The UK business was most impacted in terms of demand for power, said Poulsen and he expects “similar, maybe slightly smaller impacts” in the second half of the year. In some cases, energy suppliers and their business customers may need to resolve “important” discussions around contractual arrangements, he said.
The UK electricity system operator has had to work harder to keep the system stable due to exceptionally low demand as a result of Covid, with a significant increase in balancing costs.
With the ESO planning to run the system entirely on renewables when possible within five years, this summer has provided a glimpse of the future.
“As demand goes down the share of renewables in the mix goes up, driving additional volatility,” said Poulsen. “Ultimately volatility needs to be matched by increased flexibility either in production, dialling up or dialling down. Or to add storage mechanisms to production and consumption to smooth out peaks, or to [add] more flexibility from industrial consumers.” Either way, he said, “There is no doubt there is a big need for building more and more flexibility into the end-to-end energy system to create better alignment.”
Ørsted is “investing in the ability to have our offshore wind farms respond as quickly as possible to any imbalances in the system; increasing the responsiveness of offshore wind production is high on our agenda,” added Poulsen.
The company is also building battery storage alongside some of its generation projects, but Poulsen said hydrogen production via offshore wind power could also play a balancing role.
The company last week received government funding for the Westküste 100 hydrogen project in Germany. The initial plan is for a 30MW electrolyser, though “the ultimate ambition is to create a 700MW capacity electrolyser”, said Poulsen.
Meanwhile Ørsted is building a sustainable fuels hub at Copenhagen Airport along with companies such as Maersk and airline SAS. It could be producing transport fuels as soon as 2023, said Poulsen. “The vision is to become what could be one of the world’s largest electrolysers for hydrogen production,” he added.
The earnings press conference may have been Poulsen’s last before stepping down as CEO. The search for his successor is ongoing.
Full results here.