Ørsted halts development of FlagshipONE

Located in Örnsköldsvik in northern Sweden, FlagshipONE was expected to produce up to 55,000 tonnes of e-methanol annually to enable the shipping industry off-takers to achieve a >95 percent reduction in carbon emissions versus when using conventional fossil fuels.

The liquid e-fuel market in Europe is developing slower than expected, and we have taken the strategic decision to de-prioritize our efforts within the market and cease the development of FlagshipONE. We will continue our focus and development efforts within renewable hydrogen, which is essential for decarbonizing key industries in Europe and closer to our core business. We maintain a strong focus on de-risking project execution and prioritizing growth options with the highest potential for value creation, said Mads Nipper, Group President and CEO of Ørsted.

In December 2022, Ørsted made a Final Investment Decision (FID) to go ahead with the FlagshipONE e-methanol project and took full ownership of the project by acquiring the remaining 55 percent stake in the project from Swedish electro-fuels (efuels) project developer Liquid Wind AB, the original developer of the project.

Since the final investment decision (FID) of the liquid e-fuel project FlagshipONE in 2022, we have been maturing and progressing the project. While we were aware of the substantial uncertainties and risks associated with the development of a pioneering and immature liquid e-fuel project and market at the time of the FID, it was a strategic choice to take a leading position in shaping the industry, Mads Nipper said.

Sited adjacent to municipal energy utility Övik Energi AB that provided the space, FlagshipONE planned to utilize the biogenic carbon dioxide (CO₂) from the biomass-fired combined heat and power (CHP) plant and recover the residual heat from the power-to-liquids process.

The proximity to a harbor provided an attractive logistical benefit for the end product e-methanol. A groundbreaking ceremony, held in May 2023, marked the start of construction for FlagshipONE.

We continue to believe in the long-term market for e-fuels but the industrialization of the technology as well as the commercial development of the offtake market have progressed significantly slower than expected. Furthermore, the business case has deteriorated during maturation due to the inability to sign long-term offtake contracts at sustainable pricing and significantly higher project costs. Based on the combination of these developments, we have taken the strategic decision to cease the execution of FlagshipONE and de-prioritize our immediate efforts within the liquid e-fuel market. We will continue our focus and development efforts within renewable hydrogen as we believe that hydrogen will be a critical part of the European industrial economy for decarbonizing steel, chemicals, and refineries and as an input to liquid e-fuels longer term, Mads Nipper said in the interim report.

For Ørsted, halting the development of the FlagshipONE project has resulted in over DKK 1.5 billion in impairment losses and approximately DKK 300 million in cancellations fee provisions in the Interim Report.

Commenting on Ørsted’s unexpected decision, Övik Energi said in a statement that it will cease its work on connecting the planned e-fuels facility to its CHP plant stressing that its ordinary heat and power operations and customer relations remain unaffected.

We have an agreement with Ørsted on cost coverage, which means that the investments we made for the project do not result in any financial losses for Övik Energi. The expected future increase in income from this particular project will not materialize, but the location is still attractive for an establishment. The decision does not lead to staff layoffs or affect our customers. We are determined to continue our journey of enabling energy solutions for a sustainable future, said Roland Nordin, CEO of Övik Energi.