The Viability of Energy Transition Companies

Abstract

Various phases of economic development have been characterized by traditional energy transition from one predominant energy source to another. However, S&P Global, (2020) refers to Energy Transition as a global energy sector shifting from a fossil fuel-based system of energy production and consumption, including crude oil and natural gas, coal to renewable energy sources like wind, solar, as well as lithium-ion batteries. The production and consumption of fossil fuel energies contribute disproportionately to global GHG emissions, with undesirable effects on a widespread, rapid, and intensifying climate change. To achieve a low carbon economy, society needs to deliberately reduce the use of fossil fuels. This has translated to energy supply uncertainties, posing substantial investment risk for energy suppliers and investors. On the other hand, these challenges have also created opportunities to produce and consume energy in a sustainable manner. This paper reviewed various reasoning on financial viability of energy transition companies, attributes, and its theoretical basis, with supported practice of Orsted Energy’s enterprises to put forward several directions for further study. In this regard, the viability of transition from oil and gas companies to renewable energy companies by Orsted Energy, was analysed. Financial statements collected from Orsted Energy Company’s website from the period 2013 to 2020.  From the data, Orsted Energy's financial performance highlighting its profitability, revenue, and leverage metrics were critically reviewed to appreciate the financial viability of Orsted Energy. This shows that Orsted Energy displayed strong financial viability since its flip energy transition strategy. Therefore, enablers for energy transition were deduced from the findings, whereby seek to inform policymakers, emerging and existing energy services providers for decision making to further achieve the Net-zero target in 2050.

Keywords: Energy Transition, Financial Performance, Orsted Energy, Renewable Energy, and Conventional Energy.

DOI: 10.7176/JETP/12-2-05

Publication date: July 30^th 2022