How Ørsted Navigated China’s Offshore Wind Market: Case Study

Company Background

Ørsted A/S, headquartered in Fredericia, Denmark, is the world’s largest offshore wind developer. The company underwent a remarkable transformation beginning in 2006, when it was known as Danish Oil and Natural Gas (DONG Energy), shifting from a fossil fuel-focused utility to a global renewable energy leader. By 2023, Ørsted had installed approximately 15.4 GW of renewable energy capacity globally, including over 10 GW of offshore wind — roughly 20% of the world’s total installed offshore wind capacity. The company’s 2023 revenue reached DKK 107.7 billion (approximately US$15.7 billion), with over 85% derived from renewable energy activities.

Ørsted entered the Chinese market in 2014 through a representative office in Shanghai, motivated by the sheer scale of China’s offshore wind ambitions. China’s offshore wind potential is enormous — the country has an estimated 3,500 GW of offshore wind resource potential in waters less than 50 meters deep, concentrated along its 18,000 km coastline. In 2021, China overtook the United Kingdom to become the world’s largest offshore wind market, with 16.9 GW of installed capacity — and by the end of 2023, that figure had grown to over 37 GW, representing nearly 50% of global offshore wind capacity.

The Challenge: Navigating China’s Unique Offshore Wind Market

China’s offshore wind market presented several distinctive challenges for Ørsted that differed from the European markets where the company had built its expertise:

Feed-in tariff phase-out: China’s national feed-in tariff (FIT) for offshore wind — set at RMB 0.85/kWh (approximately US$0.12/kWh) — was terminated on January 1, 2022 for new projects. This forced a transition to a competitive pricing regime that compressed project margins significantly. By comparison, Ørsted’s European markets maintained more stable subsidy frameworks.

Domestic competition: Chinese offshore wind developers — notably China Three Gorges (CTG), China Energy Engineering Group, China Huaneng, and Shanghai Electric Wind Power — had become technologically sophisticated and cost-competitive. Shanghai Electric Wind Power alone had installed over 3 GW of offshore wind turbines by 2023, competing directly with international OEMs like Vestas, Siemens Gamesa, and GE.

Local content requirements: China’s offshore wind projects increasingly required 60–70% local content, covering everything from turbines and foundations to cables and substations. For a foreign developer accustomed to European supply chains, building a China-compliant supply chain was a major operational challenge.

Grid connection challenges: China’s offshore wind farms — particularly those in Jiangsu, Fujian, and Guangdong provinces — face significant grid integration issues. Average curtailment rates for offshore wind reached 3–5% in 2023, and grid connection approvals could take 12–18 months.

Ørsted’s Navigation Strategy: Pivot from Development to Services

Rather than competing head-on with Chinese developers for large-scale offshore wind farm projects — a battle it was unlikely to win given China’s cost advantages and domestic preference policies — Ørsted made a strategic pivot. The company shifted from being a project developer to a technical services and advisory partner, monetizing its world-leading offshore wind expertise without taking on the capital and policy risks of Chinese project ownership.

Phase 1: Technical Advisory and Capacity Building (2014–2019)

Ørsted’s initial approach was to establish relationships with Chinese stakeholders and demonstrate its technical expertise. In 2014, the company opened its Shanghai office with just 5 employees, focusing on market research and relationship building. In 2016, Ørsted signed a memorandum of understanding with China’s National Energy Administration (NEA) to provide technical advisory services for China’s offshore wind development roadmap — a strategic move that positioned Ørsted as a trusted partner to China’s energy policymakers.

In 2017, Ørsted launched a technical cooperation program with the China Renewable Energy Engineering Institute (CREEI), the state agency responsible for approving offshore wind projects in China. Under this program, Ørsted shared its expertise in seabed geotechnical surveys, foundation design optimization, and cable routing — areas where it had accumulated over two decades of North Sea experience. The program helped Ørsted build relationships with Chinese regulators and gain deep insights into China’s approval and permitting processes.

In 2019, Ørsted signed its first commercial service contract in China — a RMB 25 million (US$3.5 million) agreement with CTG to provide operational optimization advisory for the Jiangsu Dafeng 400 MW offshore wind farm, one of the largest offshore wind projects in China at the time. Ørsted’s recommendations on turbine layout optimization and maintenance scheduling helped the project achieve a 3% improvement in capacity factor, from 38% to 41%, representing an additional 13 GWh of annual electricity generation worth approximately RMB 9.5 million (US$1.3 million) in additional revenue.

Phase 2: Strategic Partnership with CTG (2020–2022)

Ørsted’s partnership with China Three Gorges Corporation (CTG) deepened significantly beginning in 2020. CTG, China’s largest clean energy enterprise with over 80 GW of installed renewable capacity including 4 GW of offshore wind, was seeking international expertise to optimize its offshore wind portfolio and explore international project opportunities.

In December 2020, Ørsted and CTG signed a strategic cooperation agreement covering three areas: operational excellence for CTG’s Chinese offshore wind portfolio, co-development of offshore wind projects in Belt and Road markets, and knowledge sharing on health, safety, and environment (HSE) standards.

The operational excellence component was the most significant. Ørsted deployed a team of 15 technical experts to work alongside CTG engineers at four offshore wind farms in Jiangsu and Fujian provinces, with a combined capacity of 1.8 GW. Ørsted’s experts focused on three areas: predictive maintenance algorithms using machine learning (based on Ørsted’s proprietary O&M analytics platform), supply chain optimization for spare parts management, and advanced condition monitoring for turbine components.

The results were substantial. Over the two-year partnership period, CTG’s offshore wind availability improved from an average of 88% to 94%, reducing unplanned downtime by approximately 500 hours per turbine per year. For a 400 MW offshore wind farm, this translated into approximately 55 GWh of additional electricity generation annually — worth roughly RMB 40 million (US$5.5 million) at the then-average onshore wind tariff of RMB 0.33/kWh. Ørsted’s advisory services also helped CTG reduce unscheduled maintenance costs by 18% through improved spare parts management and predictive maintenance scheduling.

Phase 3: International Co-Development and the Taiwan Channel (2022–Present)

In 2022, Ørsted and CTG expanded their partnership beyond China’s borders. The two companies announced a joint development agreement for offshore wind projects in Vietnam, South Korea, and Japan — markets where Chinese offshore wind expertise could be combined with Ørsted’s global project development capabilities. The partnership targets 2 GW of offshore wind capacity in Asia-Pacific ex-China markets by 2028, with an estimated total investment value of US$5 billion.

Additionally, Ørsted has leveraged its experience in China to strengthen its position in the Taiwan offshore wind market — which reached 2.3 GW of installed capacity by 2023 and is targeting 15 GW by 2035. Ørsted’s Great Changhua offshore wind farms in Taiwan — 1.8 GW across four phases — were built using supply chain relationships first established during the company’s Chinese market engagement. Turbine foundations, offshore substations, and array cables for Ørsted’s Taiwan projects were sourced from Chinese and Taiwanese suppliers that Ørsted qualified during its Chinese operations, reducing project costs by an estimated 15–20% compared to European procurement sources.

In 2023, Ørsted signed a framework agreement with Shanghai Zhenhua Heavy Industries (ZPMC) — China’s largest port machinery and offshore equipment manufacturer with annual revenues of RMB 35 billion (US$4.8 billion) — for the supply of offshore wind turbine installation equipment for Ørsted’s global project pipeline. This agreement covers the supply of specialized jack-up vessels and foundation installation equipment capable of operating in water depths up to 60 meters, extending Ørsted’s installation capabilities for its European and Asia-Pacific projects.

Key Results and Impact

Ørsted’s China navigation strategy, while different from its original development ambitions, has produced several meaningful results:

Revenue generation: Ørsted’s Chinese technical services and advisory business generated approximately DKK 250 million (US$36 million) in revenue in 2023 — modest relative to the company’s global revenue of DKK 107.7 billion, but operating at high margins (estimated 30–40%) and with zero capital risk exposure to Chinese assets.

Supply chain cost reduction: By qualifying Chinese suppliers during its market engagement, Ørsted reduced global procurement costs by an estimated 15–25%. The company’s supply chain team has certified 12 Chinese suppliers across turbine components, cables, and foundations, achieving annual cost savings of approximately DKK 500 million (US$73 million) on its global project portfolio.

Knowledge transfer: Ørsted has trained over 200 Chinese engineers through its technical cooperation programs, creating a network of industry professionals familiar with Ørsted’s technical standards and operational philosophy. This network effect has facilitated Ørsted’s market access and regulatory engagement across Asia-Pacific.

Global project pipeline expansion: The Ørsted-CTG international partnership has identified 3 GW of offshore wind opportunities in Vietnam, South Korea, and Japan, with 1.2 GW at advanced development stages. Combined with the ZPMC equipment supply agreement, Ørsted has built a Chinese-supply-chain-enabled global delivery model that reduces both costs and construction timelines.

Lessons for Foreign Clean Energy Companies

Ørsted’s experience in China’s offshore wind market offers important strategic lessons:

1. Pivot When Direct Competition Is Not Sustainable: Ørsted recognized early that competing directly with Chinese developers on large-scale offshore wind projects was not a winning strategy. Instead, the company monetized its global expertise through service-oriented partnerships. Foreign clean energy companies should assess whether their competitive advantage lies in ownership (capital-intensive, high risk) or expertise (asset-light, service-based).

2. Build Government Relationships Before Commercial Ones: Ørsted invested over five years building relationships with Chinese energy regulators before signing its first commercial contract. This patient approach — engaging with NEA, CREEI, and other government bodies — built trust and earned Ørsted influence in policy discussions that benefited its later commercial activities.

3. Leverage China for Supply Chain Competitiveness: Even without Chinese project ownership, Ørsted extracted significant value from its China engagement through supply chain development. Foreign clean energy companies should view China not just as a market but as a strategic sourcing base for global operations — particularly in industries where Chinese manufacturers dominate (solar, wind turbine components, battery storage).

4. Use China Partnerships as a Springboard to Other Markets: Ørsted’s partnerships with CTG and ZPMC generated benefits far beyond China — from Taiwan offshore wind projects to Asia-Pacific co-development to global supply chain savings. The ability to deploy Chinese partnerships across the global portfolio is the hidden value driver of Chinese market engagement.

Outlook

China’s offshore wind market is projected to reach 100 GW of installed capacity by 2030 under the 14th Five-Year Plan, with provincial targets in Guangdong (20 GW), Jiangsu (12 GW), Fujian (8 GW), and Shandong (4 GW) alone. While Ørsted may not become a major offshore wind farm owner in China, its service-based partnership model positions the company to benefit from this growth without taking on construction risk. The company has announced plans to expand its China technical services team from 30 to 60 employees by 2026 and target annual advisory revenue of DKK 500 million (US$73 million) from China and related supply chain activities by 2027. Ørsted’s pragmatic Chinese market strategy — prioritizing expertise monetization over asset ownership — provides a valuable template for foreign clean energy companies evaluating their approach to the world’s largest and most complex clean energy market.