Energetic duo

Chemistry and renewable energy - two industries that are intertwined in many ways. And without their interaction, a climate-neutral future is not possible. Peter Obling, the European head of the energy supplier, and Markus Steilemann, CEO of the plastics manufacturer and President of the German Chemical Industry Association (VCI), talk about what Ørsted and Covestro are doing to achieve this.

By 2050, two thirds of the world's energy supply is to come from renewable sources. A good proportion of this is from wind power. There are enough expansion targets, but expansion is stalling. How come?

Peter Obling: We are working on nothing less than the conversion of our entire energy supply. It is understandable that there are sometimes setbacks or delays. After all, the demands and complexity of our industry are enormous and continue to grow, especially with the new expansion targets, such as in Germany. By 2045, at least 70 gigawatts of offshore wind power are to be installed here. Starting from just around 8-9 gigawatts at present. It's great to see that politicians have recognized the potential and want to expand – across Europe. But an industry must also be able to cope with this speed. It is important to have a robust, large-scale European supply chain. And this is currently not the case to a sufficient extent. Production capacities should actually double with the increasing investment in green technologies. In addition, our industry, like so many others, is struggling with higher material procurement prices. The current auction system for offshore wind farms in Germany is another challenge.

Why is that?

Obling: This is currently very much price-driven, which does lead to considerable revenue for the state. But this approach makes it more costly for energy-intensive industries and companies like Covestro to switch to green energy and could ultimately lead to a slowdown in the green transition. We need ambitious, predictable, long-term strategies where offshore wind can become an integral part of a low-cost, low-carbon and flexible electricity grid. And which offers the opportunity to create an industrial growth path. For example, through the integration of electrolyzers for the production of green hydrogen, which can then be used in shipping or the decarbonization of heavy industries.

And how are you still making progress?

Obling: We are of course continuing to expand, even under the current conditions. Just like in Germany, where two offshore projects are currently being realized. As the market leader, Ørsted has a considerable pipeline, which we can also implement thanks to existing contracts and good partnerships with our suppliers and service providers. And fortunately, there are rays of hope from the business world that are helping to drive the expansion forward: More and more companies want to become climate-neutral and are approaching us so that we can find solutions together. Covestro is a great example of this. We are very pleased that the plastics manufacturer secured green electricity from a wind farm early on with a direct contract, which did not even exist at the time. That gave us planning security. Borkum Riffgrund 3 in the North Sea is now under construction – the first large offshore wind farm in the world to be awarded the contract with a zero-cent bid.

Why is Covestro teaming up with energy providers?

Markus Steilemann: Our plants require as much energy as entire cities. At present, this is still predominantly fossil-based. However, to become climate-neutral by 2035, we need reliable large quantities of green energy. In addition, the energy crisis resulting from the war in Ukraine has shown that we should switch to sustainable sources wherever possible. We have been doing this consistently since 2019, when Covestro signed the world's largest electricity supply contract for industrial customers from offshore wind turbines with Ørsted. It is fantastic to see the first foundations of the towers being laid in the North Sea, from which we will be sourcing green electricity from 2025. At the same time, we are concluding more and more such contracts worldwide, most recently in the USA and also with Ørsted. Overall, we want to cover up to 18 percent of our energy requirements from renewable sources by the end of this year.

The chemical industry now has a dual role: not only a customer, but also a supplier to the energy industry.

Steilemann: Exactly, it is always said that no wind turbine would turn without the chemical industry. This also applies to our products. The core of rotor blades is made partly of wood and partly of synthetic resins from Covestro, which enclose carbon fibers, for example. This gives a rotor exactly the right balance between hardness and flexibility. To ensure that a wind turbine lasts a long time even in harsh weather conditions, especially on the high seas, it is coated with protective coatings, for which we also provide the materials. And our material is also used for the cables under the surface of the sea to prevent them from being damaged. All of this reduces maintenance costs for the operators and increases energy yield. So there is a real economic advantage to using good materials.

Obling: This example also shows how closely intertwined our two sectors are. I am very pleased that these ties are now being further strengthened, including in the context of energy policy. In Germany, for example, we want to use our associations to help advance the sluggish expansion of renewables with a joint position paper. This kind of solidarity should set a precedent across many other sectors. We need to take a holistic view of the energy transition, exploit synergies and, above all, work together across industries and countries.

So the economy as a driver of macroeconomic change?

Steilemann: Yes, we need to see the energy transition and ultimately the economic transformation towards comprehensive sustainability much more in context and coordinate the transformation of the individual sectors more closely. The chemical industry, for example, has set itself a huge, very ambitious program to achieve climate neutrality by 2045, but this will only work if many other wheels are turning. And the transformation in other sectors such as mobility also depends on progress in the chemical industry and the energy sector. And overall, the more climate-neutral products based on green electricity and green raw materials the chemical industry offers, the better the ecological footprint of countless companies will be. And this in turn supports the economic transformation towards climate neutrality and a circular economy.