Interview: Red Rock Power's CEO Guy Madgwick

“In footballing terms, I think I’d be described as a journeyman because I’ve been at many different clubs,” says Guy Madgwick, CEO at Red Rock Power.

A glance at his career shows stints at heavy-hitters in renewables, including Eneco, RWE and Senvion. But now he is taking a path that famous players including Didier Drogba and Nicolas Anelka have taken in recent years: moving to a Chinese club.

In November, Madgwick became CEO at Red Rock Power, which is the European power arm of China’s State Development & Investment Corporation. A Word About Wind caught up with him to find out the company’s plans for wind in Europe, the big challenges he sees for offshore wind cost-cutting, and misconceptions about China.‍

European competition

SDIC put down roots for Red Rock three years ago when it bought Repsol’s offshore wind business in the UK for €238m, including 25% of the 588MW Beatrice project off the Scottish coast and the 784MW Inch Cape.

Beatrice this month reached the milestone of all turbines installed, and Red Rock is set to enter Inch Cape in the UK’s new Contracts for Difference auction, which is also due this month. But its goals are more than offshore wind: it also bought InfraRed’s 50MW Afton wind farm, which secured financing this month, in November and is eyeing other sectors too.

SDIC Power has a hydro business, and Madgwick says it would also look at deals in geothermal, solar, storage and waste-to-energy. SDIC Power is part of state-owned SDIC, but Madgwick says the company decided to call SDIC Power’s European arm Red Rock as it wanted the business to be more independent of its parent group.

But Red Rock will be able to draw on SDIC’s financial firepower, which owns assets of more than $75bn and reported revenues of $15.5bn in 2017. Madgwick says that the company is set to favour northern Europe over southern Europe because of the location of the offshore wind market, but said that he wouldn’t rule out anywhere.

He added that the company should “get Inch Cape sorted out and then move on”.

He believes that Inch Cape is a sensible size to bid in the new auction as it can take lessons learnt at Beatrice and other schemes. But he adds that he is concerned that CfD auctions could push auction prices at winning schemes to unsustainable lows.

He says: “The CfD mechanism was not designed to have 12GW of projects chasing 6GW… I think there is a view that the supply chain can keep on delivering price cuts, but it’ll be a fascinating insight to see where people bid, where the clearing prices go, and whether actually some of those projects can be built at those clearing prices.”

The continued falls in offshore wind costs has been key to the success of the sector, but Madgwick says that this could result in uneconomical bids with negative results.

“It’s important for us to find a balance between cost saving and maximising UK content. It’s not easy to achieve both with high competition from Europe and further afield. Developers naturally look to reduce capex exposure to meet the rapid price degression we have seen, but the supply chain cannot necessarily keep up with this expectation, leading inevitably to a response where the suppliers fight back and say no more. The industry has to be more inventive about how it produces reductions in cost, whether through opex and – dare I even mention – collaboration.”

Challenging perceptions

For Red Rock, one common criticism from rivals is that it will cut costs by relying on cheaper Chinese imports, but that isn’t its intention: “We are committed to ensuring our projects have strong UK content and SDIC very much backs us in this regard.”  he says. “It is encouraging that they want to learn from the UK way of doing things, including CfD mechanisms.”    

This is an example of what he calls the “unhealthy scepticism” by European firms about the influence of Chinese entrants, including SDIC, China Three Gorges and China General Nuclear. He says Chinese companies aren’t simply seeking to take knowledge from Europe, but can also help with technology and project affordability.
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“They’re ahead of us on several fronts,” he says. “It’s often perceived with Chinese companies that information sharing is one way but, from what I’ve seen, there is an opportunity for us to learn from SDIC’s expertise in developing large renewables projects. Fifty-four percent of SDIC Power’s global generating capacity is from renewable sources so there is a lot of experience there to apply to our projects.”

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This lack of understanding is not solely the fault of Europeans. Madgwick says that he learnt a key lesson about China’s approach to business on his first trip to Beijing.

“I was told when I was over there that their favourite semi-precious stone is jade because it reflects the Chinese characteristic. When I asked what that meant, they said it’s because it is semi-transparent to match their cultural personality. I find that fascinating,” he says. That must be a limitation where collaboration is concerned.

Magdwick says that Red Rock will let him to do what he enjoys: building businesses:
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“Red Rock has huge potential to gain a reputation as an industry force with some restructuring, re-motivating and redirecting. The fundamentals of the business, with SDIC backing, was an attractive proposition for me in that there is an opportunity for me to apply my experience working throughout the industry’s supply chain.”

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And there is a major difference between Madgwick and European footballers. The latter group join a Chinese club to see out their careers. He says that it isn’t the case here:  “At this stage of my career, I need to do something of this ambition.”

It’s what every journeyman wants: new goals.