Interview: Michael Hannibal, Partner, Copenhagen Infrastructure Partners

If you want to be a major player in offshore wind in 2022, focusing solely on offshore wind is not enough. Companies need to get to grips with emerging technologies such as power-to-X systems if they want to remain relevant for the next decade.

This is a major focus for Copenhagen Infrastructure Partners, which was set up in 2012 and now manages assets worth more than €16bn in eight funds that span Europe, Asia-Pacific, North America and other emerging markets. It plans to grow this to €100bn deployed into green energy investments by 2030.

We spoke to Michael Hannibal, partner at CIP, for a video interview before the ‘Wind Investment Trends 2022’ report that we released last month.

He shared insights into CIP’s latest developments in offshore wind and power-to-X; obstacles that could hold back the expansion of wind; and the impact of localisation policies on supply chains.

Seabed successes

CIP has started 2022 with winning bids in the two biggest seabed leasing auctions of the year so far. In January, CIP and its partners Marubeni and SSE Renewables secured the right to develop a 2.6GW floating wind farm in UK waters in the 25GW ScotWind auction.

The firm followed this in February by winning the right to develop a site off the US east coast in a vehicle called Mid-Atlantic Offshore Wind, for $285m. This helps CIP to further reinforce its status in US offshore wind following the 800MW Vineyard Wind 1 project, which reached its $2.3bn financial close in September 2021. The first power from Vineyard Wind 1 is due to be delivered to the grid in 2023.

Hannibal said the benefit of large seabed leasing rounds such as ScotWind is that it establishes a clear pipeline of projects and gives companies confidence to invest in the supply chain.

This is especially important for floating wind, which has a long way to go to ensure it competes commercially with fixed-bottom projects: “Coming out with larger targets, goals and ambitions then help to drive the further industrialisation in the market,” he said.

Hannibal said one concern he has is that countries are seeking to establish tougher rules on local content, which can be a barrier to investment in the optimal supply chain. He said this ‘localisation’ is a form of protectionism.

“It would be good if there could be some sort of regional localisation in Asia, some localisation in the US, some localisation in Europe, so that we could basically have fully utilised factories and fully utilised supply chains,” he explained. “We could, in that way, make sure you get a healthy value chain where [firms are] not forced to, basically, invest into all countries.”

The offshore wind industry has spent 30 years to get to total installed wind capacity of 48GW, but now it needs to grow more quickly and needs a supply chain that can fit that. Hannibal said offshore wind could make up 20%-25% of global wind by 2025, and added that the company is pursuing opportunities in Asia too: it is working on two projects in Taiwan, and looking at opportunities in Japan and South Korea.

Power-to-X potential

But it will not simply be standalone offshore wind projects that define the success of the sector. Companies are also pursuing power-to-X projects that use electricity from offshore wind farms to produce renewable fuels for hard-to-abate sectors, including transport and infrastructure.

For CIP, these include a project in the town of Esbjerg on the west coast of Denmark that would be Europe’s largest production facility for green ammonia, announced in February 2021; a power-to-X plant in Aalborg, Denmark, to produce green methanol from carbon dioxide from a waste incineration facility; and the Murchison Renewable Hydrogen Project in Australia, that would produce green hydrogen from 5GW of wind and solar.

It also unveiled plans for a green ammonia facility in Norway last month.

CIP is investing in power-to-X projects via dedicated fund CI Energy Transition Fund 1, which was formed in June 2021 with €800m and is due to reach a final close this month. The fund's focus is power-to-X projects to help decarbonise hard-to-abate sectors in low-risk parts of Western Europe, North America, Asia and Australia.

“We have several [of these projects] so we do see a huge need. If we are to meet the climate challenge then power-to-X will be a vital part of that for hard-to-abate sectors: vessels, trucks, airplanes. They need a power-to-X fuel and are not suited well for the green electrons,” said Hannibal.

Finally, he shared his concerns that the energy transition could be derailed by slow permitting, and proposed that consenting processes could be harmonised in Europe, the US and Asia to increase.

“The capital is there, the projects are there… [but] I fear that permit consenting will be… too slow for fulfilling a lot of governments’ real targets and where they want to be in 2030,” he said.