Danish renewable energy company Orsted has halted construction of Europe’s largest synthetic methanol production project, citing the slower-than-expected development of Europe’s green fuels markets.

The FlagshipONE project, based at Ornskoldsvik in northern Sweden, had been scheduled to start up in 2025, with initial output of 55,000t/yr of e-methanol produced from electrolytic hydrogen and biogenic CO₂.

Orsted’s decision to abandon the project more than a year into its construction has resulted in it booking a DKK1.5bn ($220m) impairment loss.

“The liquid e-fuel market in Europe is developing slower than expected, and we have taken the strategic decision to de-prioritise our efforts within the market and cease the development of FlagshipONE,” said Mads Nipper, group president and CEO of Orsted, in the firm’s H1 earnings statement.

“We will continue our focus and development efforts within renewable hydrogen, which is essential for decarbonising key industries in Europe and closer to our core business,” he added.

Orsted’s decision to abandon FlagshipONE, the largest of its type in Europe to reach FID, is a setback both for the Danish company’s green fuel strategy and for the wider transition to hydrogen-based e-methanol as a maritime fuel in Europe.

Previously, Orsted had said the project had the potential to become “the cornerstone of a new European industry” and would help to “cement e-methanol as the fossil-free fuel of choice for early movers in the shipping industry”.

Transition risk

This latest setback for Orsted highlights the risk for pure-play renewables companies exposed to fluctuations of the global transition. Last year, the company was forced to cut jobs and reviews its strategy amid severe cost pressure, especially in the offshore wind sector.

“We maintain a strong focus on de-risking project execution and prioritising growth options with the highest potential for value creation,” Nipper said.

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Author: Stuart Penson