Poland this week welcomed US President Donald Trump for a state visit. Perhaps he was getting tips from its coal-loving leaders on how best to stymie the wind industry.
Over the last 21 months, the eastern European nation has pursued a set of anti-wind policies that would make the anti-wind Trump drool. In fact, the only way to make the laws look more attractive to Trump is if they were wearing high heels and a blonde wig.
The Law & Justice Party came to power in Poland in October 2015 with a pledge to prioritise growth in coal – sound familiar? – and curtail renewables. This resulted in its Act on Investment in Wind Farms, which came into force in July 2016 and introduced tough restrictions on where wind farms could be built and when.
This introduced a rule where wind farms have to be located more than ten times the height of the turbine from the nearest homes and protected natural sites. In practice, this means wind farms have to be built over 1.5km from those sites.
The law also changed a tax on owners to tax them based on the total value of the wind farm and not purely the construction elements of the project. This raised bills significantly.
If you don’t like wind farms, these policies have been a ‘success’. The setback rule contributed to a fall from 1.3GW of wind farms completed in 2015 to 682MW in 2016; and only 6MW in the first three months of 2017. The act also meant 70% of wind farms in Poland made a loss in 2016. For wind, they are a disaster.
And, to top it all, we now see a $325m lawsuit from an aggrieved developer. US firm Invenergy has this week filed a series of legal claims against Tauron Polska Energia, one of Poland’s four largest energy companies, related to a deal by Tauron and its subsidiary PE-PKH to buy electricity and green certificates from Invenergy.
Invenergy is not a new player in Poland. It has been active in the country since 2005 and has built 11 wind farms, in which it has invested an estimated $595m.
In 2010, it signed a long-term deal with Tauron and PE-PKH but, shortly after, it says that the pair tried to get out of these deals. This culminated in Tauron’s liquidation of PE-PKH in July 2014, which Invenergy says was done “with the intention of causing a de facto annulment of PE-PKH’s contractual obligations”. Tauron says it has not yet received a claim, but adds the claim focuses on PE-PKH, not the parent group.
There are two sides to every story, of course, and we cannot pre-judge the verdict of the Polish courts. But we can say that this case will give vital insights into how wind investors are treated in a country where politicians have been making life very tough.
However, that is not to say that Poland is a lost cause for investors. Its government is under pressure to hit a binding European Union target of gaining 15% of its energy from renewables by 2020; and the new taxes on wind farm owners have created an impression that investors in Poland cannot rely on stable rules. Poland’s leaders are now looking to reverse the tax on whole wind farms and put it back how it was.
They are also considering easing the tough deadlines in which developers have to use their permits. Both of these changes would help existing investors.
What Poland’s leaders have not done, though, is make any change to the punitive setback rule that has restricted wind development in large parts of the country, and done the most damage to developers and investors seeking to pursue new schemes. We welcome the positives where we see them – but they are nowhere near enough.
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The renewed dynamism of the Australian wind market
By Ilaria Valtimora
Australian Prime Minister Malcolm Turnbull has been making life tough for wind developers and investors. He publicly blamed wind farms for a series of blackouts in South Australia in late 2016 and early 2017 in the face of evidence to the contrary.
Despite that high-level hostility, the wind sector in the country has been incredibly active lately, and regional governments and companies have been driving this renewed dynamism in the sector. Turnbull’s hostility has, so far, proved an irrelevance.
For example, this week Australian farming business Nectar Farms unveiled a plan to grow its greenhouse facility in the state of Victoria from 10 to 40 hectares, and entirely power it with wind energy. It has chosen French developer Neoen to develop a 196MW wind farm and a 20MW battery storage facility as part of the its A$350m ($265m)...
Size isn’t everything. I'm sure we've all tried to claim this at some time. It is a message that is falling on deaf ears in wind, where bigger is still seen as better.
And with good reason. Taller turbines, larger projects and a bigger industry each play a role in making the industry more competitive, and cutting the cost of wind power. Nowhere is this truer than in offshore wind, where manufacturers have told us for years that we will soon be seeing 10MW wind turbines taller than skyscrapers.
But we can still be surprised, and we were by an idea that came up at the Offshore Wind Energy 2017 conference in London last month. We have been mulling it ever since.
The idea came in a speech by Mark Gainsborough, executive vice president at Shell New Energies. He talked, almost in passing, about a concept for 10GW offshore mega-projects. Yes, 10GW. The largest operational offshore wind farm in the world today is still the 630MW London Array, and even the largest in planning are sub-2GW, like Dong’s 1.8GW Hornsea 2.
Gainsborough started his speech by saying that offshore wind could be the “energy backbone” of northwest Europe, with potential for projects totalling 200GW. That would need a 15-fold increase from the 13GW installed capacity at the end of 2016, and Gainsborough argued that does not fit well how projects are currently tendered.
In Europe, the system relies on governments tendering sites for individual projects, which are still typically in the 300MW to 1GW range each. Germany’s debut offshore auction saw four projects awarded support, with capacity of 110MW to 900MW each. These are big projects, but it takes a lot of them to get near 200GW.
Gainsborough said the industry needed to move on from these smaller auctions, and focus on fewer larger and more integrated projects of up to 10GW each. These would be developed by a consortium of large companies and with an “anchor tenant” that takes on the biggest risk, equivalent to about half the project.
The idea of an 'anchor tenant' is taken from the retail sector. A developer will come up with a plan for a shopping centre, but will only take the final investment decision to build it when they have let a certain proportion of the retail floorspace. This forces the developer to try to find tenants for the largest units – typically department stores or large supermarkets – that anchor the scheme and enable construction to begin.
This is not completely analogous with wind. In retail development, signing up those anchor tenants means a developer can start construction on the full project, safe in the knowledge that they have already secured, say, 50% of their total rent payments and can rent out the rest of the shopping space while the project is built. The nearest equivalent to an ‘anchor tenant’ in wind is actually a power purchase deal that gives the developer the guaranteed income – and thus confidence – to build their project.
Now, you could argue I’m being overly technical. You’re probably right: I rarely get the chance to show off the knowledge I gained writing about commercial property. I’m going to take this chance!
However, there is a fundamental difference in how shopping centre owners and wind farm owners sell their ‘product’ – shop space and electricity – that raise questions over how a 10GW mega-project could work. Will it really be much different from the situation now?
And, boring as it sounds, I don’t see huge change. Governments will still control the land offshore. This 10GW model might put more pressure on them to decide what schemes they want before an auction rather than rely on developers to pitch their schemes – but this might just mean more collaboration with developers early on.
Or if this 'anchor tenant' concept is simply the idea that a scheme will be built by a group of companies with one taking most financial risk, that is already happening. A 10GW project needs backers with deeper pockets than a 2GW one, but the structure is similar.
Either way, we are right to think about how projects of up-to-10GW could work. Size is important – as much as we sometimes deny it.
This week, a second major cyberattack in as many months has hit businesses and others globally. Firms in wind must be aware of the risks and costs of such attacks.
Last month’s ransomware attack, called WannaCry, hit 230,000 companies in over 150 countries, and this week’s, called Petya, is still spreading around the world. ‘Ransomware’ is software that online criminals can use to lock up the data stored in a computer until the victim pays a ransom to unlock the information again.
No sector is safe. Russia’s biggest oil company, Ukrainian banks, advertising agency WPP, and ports operator Maersk are just some of the firms affected by Petya. And we have seen incidents like this seriously affect the energy sector in the past.
For example, in December 2015 an attack on a major media group caused a power blackout in Ukraine over Christmas; and a second power cut in Ukraine, also caused by a cyberattack, followed in December 2016. Politicians in the US and Europe and becoming increasing aware of how such attacks threaten the energy sector, and the potentially deadly knock-on impacts of blackouts on sectors like healthcare.
In January 2017, the US Energy Department in its Quadrennial Energy Review said the electricity system “faces imminent danger” from cyberattacks as "cyber threats to the electricity system are increasing in sophistication, magnitude, and frequency". It said the threats were evolving faster than the defenses against them.
The European Parliament also acknowledged the threat and last year started work on its cybersecurity strategy for the energy sector. A plan of action should be unveiled this year. Cyberattacks are becoming a routine risk of doing business – and we find it strange that we never hear anyone in wind discussing it.
There are two factors that could cause cyber risks for wind farms.
The first is that the move from a centralised energy network to a distributed system of wind farms and other smaller developments increases the number of points where attackers could get into the system. And the second is that increasingly-sophisticated digital systems, including in turbines and the grid, also adds more points to attack. This is on top of the risks all businesses face from using computers and the internet.
Wind farm owners need to be aware that the consequences of cyber threats is not limited to loss of data. A study by Deloitte last year analysed the financial impacts of a cyber-attack to businesses: cybersecurity improvements, attorney fees, technical investigation, higher insurance premiums, operational disruption, and the value of lost contract revenue are just some of the costs that wind companies could face.
Deloitte estimates that for big companies, with up to $40bn of revenue, these costs could reach up to $3bn with consequences for the business which could last up to five years.
How can wind companies protect themselves? One example is the deal signed by GE Renewable Energy with US developer Invenergy this year to protect Invenergy’s entire fleet of US wind farms. The $13m deal covers cybersecurity and protection over operational technology from GE’s subsidiary Wurltech, which it bought in 2014.
But we don’t hear about deals like this very often, or even much talk about the topic. We think there needs to be more awareness and discussion from developers and investors about how they can face this threat. Cyberattacks are unpredictable but also inevitable. There will be more, and the financial risks are all too real.
Australian Prime Minister Malcolm Turnbull has been making life tough for wind developers and investors. He publicly blamed wind farms for a series of blackouts in South Australia in late 2016 and early 2017 in the face of evidence to the contrary.
Australian Prime Minister Malcolm Turnbull has been making life tough for wind developers and investors. He publicly blamed wind farms for a series of blackouts in South Australia in late 2016 and early 2017 in the face of evidence to the contrary.
Despite that high-level hostility, the wind sector in the country has been incredibly active lately, and regional governments and companies have been driving this renewed dynamism in the sector. Turnbull’s hostility has, so far, proved an irrelevance.
For example, this week Australian farming business Nectar Farms unveiled a plan to grow its greenhouse facility in the state of Victoria from 10 to 40 hectares, and entirely power it with wind energy. It has chosen French developer Neoen to develop a 196MW wind farm and a 20MW battery storage facility as part of the its A$350m ($265m) Bulgana Green Power Hub.
And Neoen has customers for all of the electricity from the 196MW project already. Nectar is set to use 10% of the power produced, and the state government of Victoria has signed a memorandum of understanding to send the remaining 90% to the local grid.
The Victorian government sees the project as a way to help it hit a target of gaining 25% of its electricity from renewables by 2020 and 40% by 2025. And this is not the only scheme.
Earlier this month, Victoria backed a plan by local developer Offshore Energy to build the first Australian offshore wind farm off the coast of Gippsland in eastern Victoria. The project is still at a very early stage, but could include 250 turbines with total capacity of 2GW.
This activity in Victoria demonstrates how important state governments and corporates are in Australia’s wind renaissance. Under Turnbull’s predecessor Tony Abbott, the country’s wind sector ground to a halt. It is no longer the case – and, for that, we should be grateful.
Wind Watch
Wind Watch is published every Monday and Friday.
In the meantime, on 7th November we are due to publish our sixth annual Top 100 Power People report and we need your help. Who are the most influential people working in wind today?
Nominations are now open and you can get in touch with us by 11th August to let us know who you think we should consider.
Specifically, we are looking for individuals who:
- Carry the greatest influence within the industry as a whole, or their own particular part of it.
- Make the biggest deals and investments.
- Broaden horizons for wind by shaping policy, creating opportunity and driving markets forward.
- Lead the biggest and most successful businesses and organisations in wind.
You can send your nominations to editorial@awordaboutwind.com, providing a brief overview of who you think we should include and why. Just give us the hard facts in no more than 300 words and our team will consider them for the shortlist to be put in front of our panel of judges later this year.
We look forward to hearing your suggestions.
If you invest in Africa, you have to be comfortable with political risk. It is a truism with which all investors in the continent will be aware, and wind is no exception.
And we have seen developments in some key African markets this month that might give investors cause to reconsider their plans for the continent. Africa has strong resources for both wind and solar, but this month we have seen that even the strongest markets and most high-profile schemes can fall foul of regional instability.
The biggest of these is South Africa where, last week, the government said it did not expect a solution to long-standing problems with state utility Eskom until at least February 2018.
Eskom’s refusal to sign power purchase agreements for 37 wind and solar projects awarded government support in April 2015 has brought the South African renewables development market to a standstill, and there is no end in sight.
This is not a new problem. Eskom was obliged to sign the PPAs in April 2016, but this hasn’t happened as the utility warned that the projects produce electricity that is too expensive; put the country at risk of electricity over-supply; and threaten the position of its own coal power stations. President Jacob Zuma said in February that Eskom would sign these PPAs, but there is little evidence it will.
It is a well-known issue – but the announcement by government last week is a gut punch for investors. They now need to wait for the government to finish a review of the country’s electricity needs before the PPAs can be signed, which is likely to be done by February 2018 (or, conceivably, in August 2017). Eskom controls 95% of the South African electricity market, and wind will face a tough battle to prevail in the face of this vested interest.
This month, we have also seen a state-run firm causing problems in Kenya. While the consortium behind the 310MW Lake Turkana wind farm managed to complete the scheme early, the same cannot be said for its grid operator. The project now cannot be connected to the grid until at least early 2018 because the Kenya Electricity Transmission Company has not completed its 428km transmission line. This is due to delays caused by land disputes.
This is a different situation to Eskom, of course. We see no indication that Ketraco is dragging its heels to complete the transmission line. But what this does show is that inexperienced local players can delay the commissioning of schemes if they are not able to complete transmission lines on time.
For long transmission lines that can be subject to land disputes with many landowners, these problems are multiplied.
And, in Egypt, the wind market is being hamstrung by the bureaucracy facing foreign investors, and uncertainty over how much protection overseas companies face when things go wrong.
The government is set to introduce laws to attract investors in the next week, but an estimate from BMI Research is only 3GW of renewables projects are set to be completed in the country by 2026, out of a pipeline totalling 5.6GW.
Vested interests in South Africa. Difficulties with local expertise in Kenya. Legal problems in Egypt. These three challenges may not have much in common, but they should all remind investors and developers that doing business in countries in Africa is not simple
even when governments are in favour of renewables.
Wind has great potential in Africa – we said so in our Emerging Markets report – but the market is a long way from established.
Wind companies in the UK might have welcomed the statement from Bank of England governor Mark Carney last Tuesday that the interest rate will stay low for the rest of this decade. It should mean onshore and offshore wind stays attractive for investors.
However, we also see a warning in his words.
In January we said that the Bank of England was likely to raise its interest rate this year and, this month, the BoE was close to doing so: at its meeting on 15 June, three out of eight policymakers called for an interest rate hike from its current record low of 0.25%. It was the tightest call since 2011.
The prospect of an interest rate rise was seen as good news by financial markets. While the main reason for a rise would be to avoid inflation overshooting the BoE’s 2% target, the markets also see it as a sign that the central bank considers the UK economy strong enough to manage a slightly higher interest rate.
Carney has moved to cool the enthusiasm of the markets. He said on Tuesday that it was “not yet the time” to raise the rate as he wants to see how the economy reacts to the reality of Brexit negotiations. This view was not supported on Wednesday as the BoE’s chief economist Andy Haldane said he would consider voting to raise the rate next time as “the risks of leaving policy tightening too late are rising”.
The pair want to react in different ways to the same issue: increased economic and political uncertainty. So what does this divergence of opinion mean for wind?
We see good news and bad news. The good news is that if the interest rate is kept at its record-low level, as Carney wants to, wind firms in the UK should keep benefiting. It makes it cheaper for developers to build and enables manufacturers to cut the cost of their products, and hence help the sector to reduce prices.
Also, if returns in government bonds stay low then wind farms remain an interesting choice for investors seeking better returns for reasonably low risk.
Now comes the bad news. At the beginning of this year, an interest rate hike by the BoE looked possible because the UK economy seemed to be reacting well to Brexit, and so it could raise interest rates without hurting the economy.
That sentiment has weakened. In the first quarter of 2017 the UK economy grew just 0.3%, slowing more than expected compared to 0.7% growth in the last quarter of 2016. This particularly reflects slower activity in services and manufacturing.
And that sentiment has worsened since Prime Minister Theresa May called the snap election that plunged the UK into a fresh political crisis. Four of the BoE’s eight policymakers want to raise the interest rate now to give the BoE more room for manoeuvre and support the UK economy if Brexit negotiations don’t go well.
In addition, a poll of 700 business leaders by the UK’s Institute of Directors right after the election has shown that 65% of businesses questioned believed uncertainty over the future of the government was “a significant concern” for the UK economy. This is not just a reflection of the weakness of the Conservative government, but also the prospect it could be replaced by a Labour party headed by far-left Jeremy Corbyn.
Continued low interest rates can be good for wind, but they also show there is a weak economic outlook and political uncertainty that could discourage investors.
We remain relatively upbeat about the prospects for wind in the UK. Growth in the offshore sector is set to continue under the Contracts for Difference regime, while those in onshore wind know the rules within which they have to work.
In the short term, UK wind companies should keep benefitting from loose monetary policy, but caution will be the watchword as Brexit really starts to take shape.
Wind Watch
Wind Watch is published every Monday and Friday.
In the meantime, on 7th November we are due to publish our sixth annual Top 100 Power People report and we need your help. Who are the most influential people working in wind today?
Nominations are now open and you can get in touch with us by 11th August to let us know who you think we should consider.
Specifically, we are looking for individuals who:
- Carry the greatest influence within the industry as a whole, or their own particular part of it.
- Make the biggest deals and investments.
- Broaden horizons for wind by shaping policy, creating opportunity and driving markets forward.
- Lead the biggest and most successful businesses and organisations in wind.
You can send your nominations to editorial@awordaboutwind.com, providing a brief overview of who you think we should include and why. Just give us the hard facts in no more than 300 words and our team will consider them for the shortlist to be put in front of our panel of judges later this year.
We look forward to hearing your suggestions.
Despite measuring 970,000 square miles and having 21 coastal countries, the Mediterranean Sea is still an unexplored territory for offshore wind. But with a turbine deal signed at the first offshore wind farm to be built in these waters, we think it is worth a look.
Specifically, Senvion last week secured the deal to supply turbines for a 30MW offshore – technically nearshore – wind farm that is set to be built in front of Taranto harbour in the Apulia region in southern Italy. The project will be developed by Italian company Beleolico, a subsidiary of Belgian firm Belenergia, and Senvion is set to provide ten 3MW turbines.
The project was among the winners of Italy’s wind auction in December 2016, securing a 25-year fixed-price tariff of €161.70/MWh, and is expected to be commissioned by 2018.
It may a small project and with an eye-watering tariff by northern European standards but, according to recent studies, there should be room for more in the Mediterranean Sea.
In 2015, the European Union’s Science Hub published a report that identified potential offshore wind ‘hotspots’ in the Mediterranean, based on wind resources, the depth and shape of the seabed, distance from shore, and grid infrastructure.
This highlighted five large areas with exploitable potential: the coasts of the Gulf of Lyon; the North Adriatic Sea; the entire coastal area of the Gulfs of Hammamet and Gabès in Tunisia; off the Nile River Delta; and the Gulf of Sidra.
But there is a long way to go to turn interest from the scientific community into a viable business proposition. We need only to compare it to the strong market in northern Europe, which is the regional and global leader in offshore wind for a host of reasons, including the combination of wind speeds, shallow waters, and utilities with a track record offshore.
These factors meant northern European countries started work on the earliest offshore wind farms around 20 years ago, and there is now a complex system of infrastructure and supply chain.
The Mediterranean is still at a very early stage so it would take many years for it to catch up.
The conditions in the Mediterranean are also less favourable. The waters are generally deeper, which means that projects need to be build nearshore where the sea is shallower. Floating turbines would open up a larger area but they are not yet commercially viable .
In addition, towns and cities along the Mediterranean coasts are generally more tourism-focused than commercially-focused. This might imply a lack of essential infrastructure for the deployment of offshore wind, including ports equipped to welcome large vessels and turbines blades. There are ports in the region that could handle the job – but a lot of work is needed to support this industry.
Moreover, offshore wind farms are still dependent on the support of governments and, in the areas that have been identified to be suitable for its development, we have seen little interest so far. The exceptions are Italy, with its first small project, and France, which is exploring the potential of floating schemes to resolve the issue of deep waters.
The French government has made €150m available to develop this new technology and last year awarded three floating projects to explore the potential of floating offshore wind farms.
In July, French developer Quadran formed the EolMed consortium and won French government approval for a pilot 24MW project in the French Mediterranean Sea; and, in November, EDF Energies Nouvelles won backing for its 24MW Provence Grand Large project in the Faraman zone, off Fos-sur-Mer. Meanwhile Engie, EDP Renewables and Caisse des Depots were awarded the right to build a 24MW project in a zone off Leucate, in the Gulf of Lion.
But these are still rare exceptions. We could well see France and Italy lead the way on offshore wind in the Med but, with many southern European economies still suffering, we expect most politicians would see offshore wind as a risk on which they don't want to expend either time or money.
The market may be a tasty appetiser for some, but firms still need to look elsewhere for the main course.
For the UK’s Conservative Party to lose one unnecessary vote might be regarded as a misfortune. To lose both looks like carelessness.
But with the Brexit referendum 12 months ago and the election last week – which Prime Minister Theresa May called to bolster her position but achieved a hung parliament – that is the reality for the UK. And it is undeniable that last week’s election has only added more uncertainty for British businesses.
The UK was already heading into complex negotiations to exit the European Union, which will shape the trading relationships between British firms and their EU partners. These must be done by March 2019, which was always going to be tight but at least we had a plan of sorts.
Now we have a prime minister with a minority government that, propped up by the Democratic Unionist Party, is posing a threat to the Northern Ireland peace process. Now we have a changing roster of ministers in the department leading Brexit, ahead of official talks starting next week. And now we have chance that the Conservatives could be ousted by a Labour Party which, under Jeremy Corbyn, is in thrall to hard-left policies. There are a myriad concerns for UK businesses, in addition to Brexit.
And within all of this sits energy policy. The Conservatives’ big manifesto pledge was to cap energy prices, which is a major shift from its ideology of not intervening in free markets, but that policy is now in doubt.
The party also said it would not support big onshore wind farms in England but would support them on remote Scottish islands; and reiterated its support for offshore wind. At least the latter of those is positive.
How might the approach to onshore wind change in this new government?
The first thing to say is there has been a lot of focus on the policies of the climate-change-denying DUP, on whose ten MPs the Conservatives will be relying for votes in the House of Commons. The DUP’s manifesto called for cheap energy but did not actively back renewables. It could force the Conservatives to get tougher on wind.
However, we are not quite that pessimistic. If the Conservatives learn anything from this election – and they will have to – it is that they must do more to appeal to those across the political spectrum, and particularly the young. As official government stats show that 73% of people support the growth of onshore wind, alongside the 80% for offshore wind, then giving more support to this industry would show it is listening.
In fact, Labour campaigned on a manifesto that would help wind: it pledged that 60% of UK energy should come from renewables or zero-carbon sources by 2030. Doing more to embrace onshore wind could be a palatable cross-party compromise.
There is hope this parliament could be a moderating influence on the Conservative approach until now, much as the Liberal Democrats were in the coalition government from 2010 to 2015. Well, in uncertain times we may as well look for a bright side!
Plans to reform the energy market with a price cap might be tougher to shift, though, given that a similar idea was in a Labour manifesto as recently as 2015 and Corbyn’s instincts are towards interfering with markets he sees as unfair. Any suggestion that the UK does not have a free energy market would, of course, be a concern for firms in this sector.
The hope for those who hate this policy is that the Conservatives won’t have the stomach for a fight while they are in protracted Brexit talks with the EU.
And ultimately for UK companies, including in the wind sector, it is those Brexit talks that will have the biggest impact on business. The lack of a strong mandate for May could lead us to a ‘softer’ Brexit where the UK keeps its place in the single market – or the tougher situation at home could make “no deal” more likely. We don’t know. There is even talk Brexit could be scrapped as the negative impacts become clear.
For the UK, it’s time to hunker down and hope to find a way out of this mess.
Guest post by Ben Scholes, CEO and co-founder of Papertrail.
Guest post by Ben Scholes, CEO and co-founder of Papertrail.
Nobody who has worked in an offshore environment would treat the health and safety risks lightly. And so far, the accident rate seen in offshore wind has been mercifully low. But that is no reason for complacency.
As the industry moves to ever-larger turbines, sited further offshore, and increasingly featuring new design features such as floating platforms, the potential health and safety risks are being multiplied.
How do you keep a handle on health and safety while at the same time striving for the lowest possible cost of construction and operations? Here are seven strategies to bear in mind.
- Get all the people on your project trained to a common standard
With so many teams, tasks and responsibilities cropping up in the construction and operation of offshore wind, it can be hard to make sure everyone is on the same page when it comes to health and safety.
Yet this is probably the single most important thing you can do to minimise the risk of accidents. If everyone has the same training then you can help eliminate the chances of omissions and misunderstandings.
- Stay tuned to the latest health and safety practices
The offshore wind industry is evolving rapidly, and with it so are the requirements for health and safety.
One example: helicopter accident training has not historically been a major requirement for offshore wind operators, but it is becoming more important for far-offshore projects. Siemens is among the providers now offering helicopter underwater escape training.
- Clarify roles and responsibilities
This is time-honoured advice for many aspects of offshore wind construction and operations, and is critical too for health and safety.
Knowing who is responsible for safety procedures and audits, or who is in charge in the event of an accident, can make a critical difference to the likelihood of a minor incident turning into a major disaster.
- Be aware of specific guidelines for offshore wind
Good practice guidelines from organisations such as the G+ Global Offshore Wind Health & Safety Organisation aren’t just there for the sake of it.
G+ provides guidelines on two types of specific risk that are not usually found together in other industries: working at height in the offshore industry, and the safe management of small service vessels. Ignore them at your peril.
- Distinguish between construction and operation risks
Construction tasks are vastly different from those involved in day-to-day operations—and so are the risks. In the build phase, the potential for major accidents is much higher, which tends to result in heightened safety awareness and compliance.
During operations, the likelihood of a serious incident decreases. But that can mean safety standards might slip, so you need to adjust your training and inspection processes accordingly.
- Develop opportunities for knowledge transfer
One aspect of offshore wind health and safety that rarely gets mentioned is that it still has much to learn from allied sectors such as oil and gas. But in many parts of Europe the oil and gas industry is in decline, with most seasoned experts nearing retirement age.
Failing to promote health and safety knowledge transfer between oil and gas operators and wind farm teams could be a lost opportunity. Have you thought about recruiting a gas sector safety expert, for example? If so, you need to do it while they are still around.
- Streamline health and safety record keeping
Keeping up-to-date health and safety paperwork may not be glamorous, but it’s essential not just to prevent accidents but also to minimise disruption if an incident does occur.
Ideally, you should adopt systems that can incorporate health and safety inspection results from the field and are easy to access anywhere, at any time.
The right system should also be able to take care of certificate management, training records, safety-related task management and other duties. At Papertrail, we are seeking to drive up industry standards and so have published a wind industry white paper.
We have also created systems designed to help you keep accurate records and demonstrate compliance for equipment inspections and audits. But no matter how you manage these issues, the emphasis must be on what is best for your staff.
Nobody should have to send a loved one to work worrying that they won’t come home. The offshore wind industry has a good record so far. And we want to keep it that way.
RSPB eyes 2.3GW Supreme Court fight
Bird charity RSPB is looking to take its fight against four projects totalling 2.3GW in Scotland's waters to the Supreme Court.
The charity is set to appeal a judgment last month by the Scottish Court of Session that construction could start on the four projects, which overturned a decision last July in favour of the charity. RSPB is concerned about the impact of the projects on birdlife.
The four affected schemes are Mainstream Renewable Power’s 450MW Neart na Gaoithe; Chinese Red Rock Power’s 784MW Inch Cape; and Seagreen Alpha and Bravo of 525MW each, to be developed by a joint venture of Fluor and SSE. The schemes were originally granted planning permission in October 2014.
Shell in frame for Adwen buyout
Shell is reportedly considering a bid to buy offshore turbine maker Adwen to add to its project pipeline and technology offer.
The oil and gas giant is one of a number of companies said to be mulling a bid for Adwen, which is developing an 8MW turbine and has a 1.5GW portfolio of projects in French waters. It is part of Siemens Gamesa Renewable Energy and currently restructuring. None of the parties has commented on the reports.
Shell led a group that won the right in December to develop the 700MW Borssele 3 and 4 projects in Dutch waters.
Want more? Read our blog for up-to-date offshore wind analysis
Estonians win 1.1GW offshore backing
Estonian duo Nelja Energia and Hiiumaa Offshore Tuulepark are set to work with a local municipality on a 1.1GW offshore project.
The Estonian municipality of Hiiu has agreed to cooperate with the pair on the scheme. Nelja and Hiiumaa signed a letter of intent three years ago to develop a wind farm off the coast of the island of Hiiumaa. The region said this is now “a binding agreement”.
No further details about the project have been disclosed but the residents of Hiiu municipality will be able to invest in the wind farm by buying shares or bonds with a fixed annual interest of 15%.
Tennet in new €1bn green bond issue
Dutch grid firm Tennet has issued €1bn more green bonds so it can invest in Germany's offshore wind transmission network.
The issue consists of two €500m tranches, maturing in eight years and 12 years respectively. With the proceeds, the company plans to finance the transmission lines for eight offshore wind projects in the German North Sea, with total capacity of over 6GW.
Tennet expects to realise over 7GW of connection capacity for offshore wind by 2019; and to invest up to €11bn in offshore wind projects in Germany and the Netherlands in the next ten years.
RES places 429MW order with Senvion
RES Australia has chosen Senvion to supply 116 turbines to its 429MW Murra Warra wind farm in Victoria, Australia.
Senvion is set to supply 116 of its 3.7M144 turbine, which has been designed specifically for the project. The German turbine maker has also agreed to partner with Australian firm Downer on early works for the project, which has not reached financial close.
The Murra Warra wind farm was granted planning consent by
the Victorian government in December 2016. Victoria state has set renewable energy targets of 25% by 2020 and 40% by 2025.
Wind Watch
Wind Watch is published every Monday and Friday.
In the meantime, have you checked out the latest posts on our blog? If not, you should. This is where we put the analysis that we can't fit in our newsletters and special reports.
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Here is a taste of our post with the reflections on the first day of the conference. Find out more here.
OWE 2017: Reflections on the first day
By Richard Heap
In our newsletter on Monday we highlighted five of the major talking points we expected to see at the Offshore Wind Energy 2017 conference, run by WindEurope and RenewableUK, in London this week.
And, at the end of the first day, all have featured heavily. Here are our thoughts on what we have heard on these topics so far:
Zero-subsidy developments: These were always going to be a big talking point, and it was great to hear Dong Energy’s offshore CEO Samuel Leupold give more rationale on how its three winning projects in Germany’s offshore wind auction were possible.
In short, it is a combination of faith in the evolution of turbines; long-term support offered by the German government; and the direction of power prices across Europe.
However, it is clear that, for the time being, zero-subsidy projects in Germany are the result of a unique set of circumstances and we should not expect them to be a general feature of the market by 2020. There will need to be more innovation across the supply chain if these projects are to be financially viable – and the industry’s plan to build 60GW of offshore wind farms in Europe in the 2020s would help with that.
Welcome to the Summer of Merchant Risk. It isn’t as fun as the Summer of Love that people in San Francisco enjoyed 50 years ago. The number of hippy hairdos that we counted at last week’s Offshore Wind Energy 2017 conference in London came in at a big fat zero. But the fun topic of merchant risk was never far from the panel sessions.
Jerome Guillet, managing director at Green Giraffe, underlined its importance during a panel discussion on Wednesday about cutting the cost of capital for offshore wind projects.
He said: “Merchant risk is going to emerge as a really big issue that people struggle with. It’s a risk that nobody likes. It’s a risk that people have lost money on. It’s also a risk that people are willing to take and the question is who’s best placed to price it.”
The issue of merchant risk rocketed up the agenda at this year’s event as a result of Dong Energy and EnBW’s winning bids in the German government’s offshore auction in April with ‘zero-subsidy’ developments. This means that when these four projects are completed they will have to rely solely on the prices they can get selling their electricity on the open market. Dong plans to complete its trio in 2024.
They based these bids on two main assumptions: manufacturers will keep building larger and more efficient turbines that can drive down the cost of producing electricity at offshore wind farms; and that power prices will rise over the next seven years. The first of these challenges is in the hands of the wind sector, but the second isn’t. This will affect how firms price the risk when they bid in new offshore auctions.
“Will you just increase IRRs to take the risk or will you take very low assumptions to minimise the risk? The whole industry is grappling with the question and whoever finds the smartest solution will have an edge for the next tenders, or whoever makes the biggest mistake will win the tender… It is the biggest question right now in the bidding strategy for all these projects,” Guillet said.
Christina Sorensen, senior partner at Copenhagen Infrastructure Partners, said she could not generalise on how happy investors would be willing to take on merchant prices as they would have different appetites for risk. However, she added that the sector has already been cost-competitive even with government support.
“Just because you have a feed-in tariff for a number of years, that doesn’t mean [the project is] not competitive,” she said.
Samuel Leupold, executive vice president of wind power at Dong Energy, said that another key factor behind the zero-subsidy bid was that the German government had offered a 30-year contract as part of its auction regime. This would give the industry certainty that support for offshore wind would be there for the long-term.
We see the logic behind these ‘zero-subsidy’ bids. Now it is up to other firms to work out how much merchant price risk they want to take. And we will only truly know the wisdom of their decisions in seven years.
The walking has taken its toll on our feet. The booze at the Green Giraffe party on Tuesday has taken its toll on our brains. But there were still plenty of reasons to get back to business at the second day of the Offshore Wind Energy 2017 conference in London on Wednesday. Here are a few of our highlights.
The walking has taken its toll on our feet. The booze at the Green Giraffe party on Tuesday has taken its toll on our brains. But there were still plenty of reasons to get back to business at the second day of the Offshore Wind Energy 2017 conference in London on Wednesday. Here are a few of our highlights.
Taiwan: We started by attending a session on the emerging markets of Taiwan and the US. In particular, there has been a great deal of excitement about Taiwan this week, and there are 29 offshore projects in the early stages of development in the Asian nation’s waters. It has also succeeded in attracting the likes of Dong Energy, Macquarie and Northland Power.
But Lucas Lin, president of Taiwan’s Swancor Renewable Energy, said it would not be plain sailing for overseas firms in this market. The Taiwanese government wants to ensure that local firms benefit from any offshore wind boom, which means that experienced overseas players have to link up with local companies that lack experience in the wind market.
Lin also said there could be challenges with the legal system. Specially, he highlighted that last year the government needed to award special authorisation for imports of steel from China for a project of only two turbines. Taiwan has ambitious offshore targets, but it also needs its legal system to catch up and local content rules could give firms headaches.
None of this should be insurmountable, though. You can read a comment piece from K2 Management’s Per Melgaard in our Emerging Markets report, which goes into more detail.
Cost of capital: After that, we joined some of the industry’s leading financial experts to talk about the cost of capital for offshore wind projects, and whether there are steps that those in the sector could take to reduce it further. The result is that there might be ways to make small savings, but these would rely on developers continuing to de-risk their developments.
Christina Sorensen, senior partner at Copenhagen Infrastructure Partners, said that making further reductions to the cost of capital would be “very challenging” as a major reason that the cost of capital is so low at present is because of historic low interest rates.
Jerome Guillet, managing partner at Green Giraffe, said that the experience developers and contractors are gaining in building offshore wind farms would help to cut the cost of capital, as it would mean less money needed to be set aside in contingency budgets. He added that the level of experience among the major players is already good: “They know what they’re doing. They know what it takes to bring projects to completion,” he said.
But Ranjan Moulik, head of power and renewables at French bank Natixis, said he hoped the cost of capital that banks lend to investors would stay where they are – an understandable response given that this would affect banks’ returns. He added that support from banks had brought in new types of investors into offshore wind, who still looked at the returns they could get from offshore wind farms as opposed to dry investments like government bonds.
“What is really important to them is not the price – they are also investing in government bonds – but the perception of risk… The more you can de-risk, the easier it will be to attract these people,” he said. The overall message from the session was there was no shortage of money in the sector, but that reducing risk would help developers get it at cheaper levels.
Zero-subsidy risks: Risk was the theme of the second of the event’s two finance sessions, on Wednesday. The discussion here revolved around the risks facing ‘zero-subsidy’ projects.
Lars Meckenstock, director of asset commercialisation at E.On Climate & Renewables, said the reliance of those projects on changes in prices was out of the industry’s control, and so greater exposure to power prices on the open market would affect risks facing projects. But merchant risk is one of the issues discussed in many of the sessions this week, and we look at more of the thoughts on this topic in our Wind Watch column on Monday.
Thanks for reading – and, if you have any thoughts on any of the above, please get in touch.
The Chinese wind market is as mysterious as it is large. We know its size (169GW installed capacity at the end of 2016) and its potential, but we rarely hear insights from its key players.
The Offshore Wind Energy 2017 conference in London this week enabled us to do just that. At the ‘Market Developments in China’ session on Tuesday, we heard about the opportunities that growth in offshore wind in China might open for European investors.
The country currently has 2GW of operational offshore projects, according to latest Bloomberg New Energy Finance figures – both inter-tidal and nearshore – and has a target of reaching installed capacity of 5GW by 2020 with at least 10GW under construction.
It also has an ambition to be the world’s largest single offshore wind market within ten years, which will of course make overseas companies sit up and take notice.
During the session we heard from Zhang Yi, general manager of SPIC Jiangsu Offshore Wind Power. The State Power Investment Corporation (SPIC), which was established in June 2015 through the merger of China Power Investment Corporation and State Nuclear Power Technology Corporation, is one of China’s five largest power generators.
Zhang revealed the company plans to expand its presence in the offshore wind sector in China, and said he would welcome future partnerships with European businesses. The firm has installed 500MW of offshore wind capacity so far – the 100MW Binhai North H1 and the 400MW Binhai North H2 projects – and is planning a further 600MW to be completed by 2018: the 300MW Binhai South and the 300MW Dafeng schemes.
These would bring its total capacity next year to 1.1GW, and SPIC then aims to double that in the following two years. It has received approval for three projects this year: the 400MW Rudong H7, the 400MW Rudong H4 and the 300MW Sheyang H1 wind farms. All these projects are due to be completed by 2020.
However, Zhang said one challenge for realising its plan would be the lack of an established local supply chain, and the barriers to overseas firms seeking to enter the market.
Overseas firms often struggle with laws and regulations in China and its lengthy bureaucratic procedures. Also, the country has become more internally-focused in the past few years to boost its economic growth, preferring to support local players. But Zhang said he would be very happy to welcome European companies in China, including in the projects on which SPIC is working.
There is an irony here. Zhang explained that China’s fledgling offshore market would need investment from overseas experts, including developers, manufacturers and contractors. But, when it comes to the money needed to take projects to financial close, China has the capital and willingness to invest in offshore wind developments in its home market and in Europe.
Indeed, the increasing presence of Chinese capital in European schemes has shown that appetite. More cross-border investment in both directions could strengthen future relationships between the two regions.
Rifu Huang, deputy dean of offshore wind at China Three Gorges, made a similar invitation at the conference as he invited European businesses to enter into long-standing profitable relationships with their Chinese partners. China is showing an interest in offshore wind, but it is likely to take some relationships with experienced players from Europe to help the market realise its full potential.
Much of the talk at the Offshore Wind Energy 2017 conference in London this week has been about Danish utility’s Dong Energy ‘zero-subsidy’ offshore projects, and how the market should adapt to those.
Much of the talk at the Offshore Wind Energy 2017 conference in London this week has been about Danish utility’s Dong Energy ‘zero-subsidy’ offshore projects, and how the market should adapt to those.
But the company also got people talking yesterday as it launched a battery system, which it is set to integrate into its 90MW Burbo Bank project in Liverpool Bay. It presented this at its ‘Offshore Wind Power Research and Innovation’ side event.
Specifically, Dong will link Burbo Bank, which has been operating since 2007, to a 2MW battery system on land near Liverpool, supplied by Swiss technology firm ABB. This will be the first time that an offshore wind farm is integrated with a battery system designed to maintain a stable output frequency at 50Hz on the grid.
Frequency response is a mechanism used by National Grid to help manage grid stability. It is required because the frequency of the grid changes continuously, but it must remain close to 50Hz to ensure a stable output. If the frequency deviates from these limits, it would disrupt businesses and consumers connected to the grid.
James Sun, senior asset manager at Dong Energy, presented the project, called Project X, and explained how offshore wind farms could help to support the grid. He said that there are three main reasons.
The first one is that offshore wind schemes are usually large-scale projects. This means that a battery system linked to a large project can provide fast and less expensive frequency support than alternative systems. Burbo Bank may be a relatively small offshore wind project, but it is bigger than most onshore in the UK.
Second, as this battery system could be linked to offshore projects that are already connected to the grid, it would avoid the hassle of having a battery system that has to be connected to the grid itself.
And finally, as the energy mix worldwide increasingly relies on renewables, including offshore wind farms, investing in this new kind of technologies could ensure that renewables can help the grid to deliver a stable output.
That is the theory. The technology must now be installed and tested – but, if Dong can prove that offshore wind can help to stabilise grid output, that will be another argument in favour of more support for the sector. We await the results with interest.
Wind Watch
Wind Watch is published every Monday and Friday.
In the meantime, have you checked out the latest posts on our blog? If not, you should. This is where we put the analysis that we can't fit in our newsletters and special reports.
You can read all of our blog posts for free. Check them out now! Here is a taste of our latest post...
In London, as in Paris, the show must go on
By Richard Heap
In November 2015, the WindEurope annual conference took place in Paris three days after terrorists killed 130 people in the city, including 89 at the Bataclan theatre.
We wrote at the time that it was right for the event to go ahead. The world, and wind, cannot stand still. That was true of Paris just 19 months ago, and it is true of London now.
This week, WindEurope and RenewableUK are set to host their Offshore Wind Energy 2017 conference in London. It starts three days after terrorists killed seven people and wounded 48 in an attack on the bustling hub of London Bridge on Saturday night.
This comes just one week after a suicide bomber killed 22 people and injured 59 at a concert in Manchester; and little over two months since an attack on Westminster Bridge that killed five and injured 49.
“It is difficult to believe we are facing a similar situation again,” said the statement from the organisers yesterday, as they announced that the conference would happen as planned. We agree with both their sentiment and their decision. Terrorist attacks are scary, of course, but our risk of being harmed in one is small. Those of us in cities continue to live with this risk.
That means going about business as usual as far as we can: undaunted, uncowed and in the knowledge that the statistics are overwhelmingly in our favour...
In our newsletter on Monday we highlighted five of the major talking points we expected to see at the Offshore Wind Energy 2017 conference, run by WindEurope and RenewableUK, in London this week. And, at the end of the first day, all have featured heavily.
In our newsletter on Monday we highlighted five of the major talking points we expected to see at the Offshore Wind Energy 2017 conference, run by WindEurope and RenewableUK, in London this week. And, at the end of the first day, all have featured heavily.
Here are our thoughts on what we have heard on these topics so far:
Zero-subsidy developments: These were always going to be a big talking point, and it was great to hear Dong Energy’s offshore CEO Samuel Leupold give more rationale on how its three winning projects in Germany’s offshore wind auction were possible.
In short, it is a combination of faith in the evolution of turbines; long-term support offered by the German government; and the direction of power prices across Europe.
However, it is clear that, for the time being, zero-subsidy projects in Germany are the result of a unique set of circumstances and we should not expect them to be a general feature of the market by 2020. There will need to be more innovation across the supply chain if these projects are to be financially viable – and the industry’s plan to build 60GW of offshore wind farms in Europe in the 2020s would help with that.
Ever-increasing turbine sizes: The big launch of the day was MHI Vestas’s 9.5MW turbine, which is an improved version of its 8MW model, though we have also seen interesting launches from the likes of Seawind with a 6.2MW two-bladed concept; and Aerodyn’s ‘double-headed’ two-rotor design, which could get up to 15MW. It is clear that more innovative turbines could be as important as just getting bigger.
But we have so far not seen any bold predictions attaching a date to when we can expect 15MW turbines. With zero-subsidy schemes and plans for 60GW of offshore projects in Europe in the 2020s, the industry already has some big dates to aim for.
Evolution in the refinancing market: Developers are seeking to recycle their capital and this is opening up new opportunities for investors, which is something to which experts have alluded including the Crown Estate’s Offshore Wind Operational report yesterday, and this comment piece from UK Green Investment Bank’s Nick Gardiner.
The main finance tracks are tomorrow so we expect to have more to report at the end of day two. But one key trend as the industry moves away from subsidies is that the offshore wind sector could be even more the domain of big utilities. The firms, such as oil and gas giants, have the strong balance sheets that let them to take a risk on market power prices.
North American momentum: There is momentum in the North American market but its future success depends in large part on policies coming out of Massachusetts and New York – moreso than the whims of President Trump.
At a session this afternoon with Gardiner and Jonathan Cole from Scottish Power Renewables, the overwhelming message was that Europe would dominate the offshore development market for the next decade, and that the US would be the next big offshore market as long as we see supportive policies at state level. If we see these policies by the end of this decade then the US will be the next leader.
But Taiwan coming up strong: With the US reliant on state policies, other speakers argued there is a great opportunity for Taiwan to establish itself as an offshore wind leader. Sebastien Brunel, commercial operations leader at GE Renewable Energy said he saw “strong potential in Taiwan and, more and more, Japan and Korea”.
This growth partly relies on the evolution of floating offshore turbines, a topic that Irene Rummelhoff from Statoil discussed in her keynote speech. This technology could open up all of the world’s coastlines to new developments. It is a thought that will get many in the industry salivating if it can be made commercially viable.
That would also prove right the speakers who raved about the exciting prospects in offshore wind in the next ten years. It has certainly left us keen to get stuck in again tomorrow – after some networking, of course! Thanks for reading.
We all know MHI Vestas and Siemens Gamesa are locked in a race to deliver the biggest and best offshore turbines — but who has the best offshore wind simulator? This is one of our big questions at this week’s Offshore Wind Energy 2017 conference in London, so we decided to try them both.
We all know MHI Vestas and Siemens Gamesa are locked in a race to deliver the biggest and best offshore turbines — but who has the best offshore wind simulator? This is one of our big questions at this week’s Offshore Wind Energy 2017 conference in London, so we decided to try them both.
The MHI Vestas simulator and its red gantry has been an ubiquitous feature of recent events where we have seen the company exhibiting. We have not found time for it before, so there was an extra buzz as we put on the white safety vest, attached ourselves to the gantry and put on the VR headset.
It started confusingly as I was at first addressed by a young guy behind us and, at that point, my desire to not turn around in case I looked like a complete idiot was just too strong. When I did look at him, he was like a boring non-playable character from a video game — and with graphics that wouldn’t pass muster on my PS4. He didn’t even explain what special abilities I’ve got. Amateur!
But the content itself was interesting. Getting to see inside the nacelle and experience the realistic Liverpool Bay rain has increased my respect for the remoteness of the physically tough work that is undertaken by those tasked with maintaining these huge machines. Frankly, it also made me feel a bit ashamed that I needed to loosen the safety belt to squeeze into it before starting.
For the final scene I was among a forest of offshore turbine towers, and that’s when I really wanted the video game to kick in: “Wait! There are bad guys behind that tower. I need to take them out!” So great was my immersion that I managed to walk off with the white vest to listen to MHI Vestas launch its new 9.5MW turbine — and enjoy a glass of the complimentary Champagne, of course.
And then I headed straight to Siemens Gamesa, which had its sit-down simulator of offshore wind maintenance. I put on my VR headset and it hooked me immediately as Mr. Cool-Guy McAmerican — that’s probably his name — led me to a helicopter and flew me out to an maintenance vessel.
As we took a flythrough of the scheme, the weather was far better than the MHI Vestas simulator. I also saw a workboat at the base of one of the turbines with what I swear was my digital self in the MHI Vestas simulator. Unfortunately, Mr. McAmerican also hadn’t told me about my special abilities or weapons so I couldn’t take myself out with a virtual rocket launcher. Shame.
So which was better? I’d say MHI Vestas edged it. It’s always useful to get a sense of the scale of these machines ‘up close’, but they both taught me something important: if anyone makes a video game where I can fight around an offshore wind farm, I’ll be front of the queue — or probably the only one in the queue.
Offshore wind has made remarkable progress in the last year. Utilities have kept smashing price records, while the market has gained a foothold in Asia and North America. And, as you read in today's news, Australia could soon get in on the act too.
This week’s Offshore Wind Energy conference in London is a good chance to take stock and work out where the sector goes now. But what will be the biggest talking points? Here are five trends that will fuel conversation from tomorrow until the end of Thursday:
1) Zero-subsidy developments: An obvious one. Last year, we were wondering how the industry would reach its target of a levelised cost of energy on new projects of under €100/MWh by 2020. Over the last year we have seen that target beaten by the likes of Dong Energy, EnBW, Shell and Vattenfall; and the zero-subsidy projects that won Germany’s first offshore auction gained major attention. These were the 900MW He Dreiht by EnBW, and Dong’s 240MW Borkum West 2 and 240MW OWP West.
It was a strong signal to the industry and costs will undoubtedly fall, but we expect a great deal of talk this week on how sustainable these zero-subsidy projects are. Dong and EnBW based their bids on a number of key considerations, most notably that the cost of offshore wind energy is set to fall below wholesale power prices before these three projects are commissioned near 2025. In our view, zero-subsidy schemes will be the exception for a couple of years but sub-€100/MWh will be widely achievable.
2) Ever-increasing turbine sizes: To make projects financially-viable at those rates, we need further investment in developing larger offshore turbines – even as the 8MW turbines that are currently largest are still in their infancy. Dong Energy, for example, has said it expects 15MW turbines to be on the market by 2024.
However, it is not simply a case of scaling up an 8MW turbine, and manufacturers have a huge amount of work on to make turbines work efficiently for decades at such sizes. We expect a strong representation of manufacturers at the event, and the viability of moving towards 15MW machines will be a major talking point.
We have been surprised by the fast rate of technological evolution in the last five years. Manufacturers must now repeat the trick.
3) Evolution in the refinancing market: In recent years, we have seen more demand for non-recourse, off-balance sheet financing in offshore wind. Typically, projects in Belgium, Germany and the Netherlands have been built using this type of funding, while developers in the UK have more often built using corporate finance and then used non-recourse structures for refinancing. This has created a dynamic market for firms buying into operational and under construction projects.
As competitive auctions constrain the number of new projects coming through in the UK and Germany, we would expect investors to seek out more opportunities to buy into schemes that are already operational or in construction. What will these opportunities be?
4) North American momentum: Outside Europe, we expect most attention to be focused on the growing offshore wind market in the US, and whether this will be affected by President Trump's move to withdraw the nation from the Paris climate change agreement of late 2015. Dong is among those saying it's business as usual.
We certainly see momentum in the market after the completion of the 30MW Block Island by Deepwater Wind, and the influx of European firms including RES. There are also states embracing this sector, particularly along the northeast coast, as they seek ways to get electricity for major coastal cities. That support could make up for any hostility from Trump and his team.
5) But Taiwan coming up strong: Copenhagen Infrastructure Partners, Dong Energy, Macquarie and Northland Power are among the major overseas players that have entered Taiwan’s offshore market in the last year. In our mind, it is still behind the US because no schemes have been commissioned yet, and clearing that hurdle is a necessary step to show the market exists.
That said, Taiwan has strong wind resources, and the government has ambitious plans to install 4GW of wind farms by 2030, including 3GW offshore wind by 2025. It could yet overtake the US.
Will you be at Offshore Wind Energy? Would you like to discuss these or other topics? If so, get in touch with our team and we’ll see if we can arrange a time for a chat. See you there.
In November 2015, the WindEurope annual conference took place in Paris three days after terrorists killed 130 people in the city, including 89 at the Bataclan theatre. We wrote at the time that it was right for the event to go ahead. The world, and wind, cannot stand still.
In November 2015, the WindEurope annual conference took place in Paris three days after terrorists killed 130 people in the city, including 89 at the Bataclan theatre. We wrote at the time that it was right for the event to go ahead. The world, and wind, cannot stand still.
That was true of Paris just 19 months ago, and it is true of London now.
This week, WindEurope and RenewableUK are set to host their Offshore Wind Energy 2017 conference in London. It starts three days after terrorists killed seven people and wounded 48 in an attack on the bustling hub of London Bridge on Saturday night. This comes just one week after a suicide bomber killed 22 people and injured 59 at a concert in Manchester; and little over two months since an attack on Westminster Bridge that killed five and injured 49.
“It is difficult to believe we are facing a similar situation again,” said the statement from the organisers yesterday, as they announced that the conference would happen as planned. We agree with both their sentiment and their decision. Terrorist attacks are scary, of course, but our risk of being harmed in one is small. Those of us in cities continue to live with this risk.
That means going about business as usual as far as we can: undaunted, uncowed and in the knowledge that the statistics are overwhelmingly in our favour.
Yes, it is about showing our solidarity with others, but it is about more than that. Events like OWE 2017 help us to make a better future for ourselves and the world. There are deals to be done, jobs to be created, and an industry to be celebrated. Offshore wind has made huge strides in the last 12 months. We can’t let a few pathetic extremists detract from that.
And, if the move towards using renewable energy sources can help to limit any man-made aspects of climate change, then that could make a contribution in reducing any upheaval that leads to disputes over resources, mass migration and, yes, terrorism. That’s the hope.
It is easy – trite even – to say we cannot let these attacks affect us. It is tougher in practice, and we can understand any reticence from those set to attend this week. We have partners and children, friends and families, who we want to see when we get home on Thursday. This desire to be safe will likely make us a little warier in busy public places, as we were in Paris.
But that does mean we will not use these places. I’m a Londoner, and I didn’t stop using the Tube the day after terrorists attacked the system on 7 July 2005. So be wary if you have to, and we look forward to seeing you at what promises to be an interesting event.
Kazakhstan is the world's ninth-largest country, with a mountainous region larger than Pakistan. And yet, despite favourable resources, it has been slow to see the potential in wind.
Understandably so. Since the country was formed in 1991 after the break-up of the Soviet Union, its energy mix has been largely based on its large oil and gas reserves, which were discovered in the late 1990s and early 2000s. The country also has a record of developing renewables projects, including hydro and geothermal.
Now it is looking at wind and solar, and it wants foreign money.
This earned the central Asian nation a place of 37th in EY’s latest Renewable Energy Country Attractiveness Index, a ranking of countries based on the attractiveness for renewables investors.
And EY's researchers are not the only people showing interest.
For example, the European Bank for Reconstruction & Development and the Asian Development Bank have committed to help Kazahkstan develop its energy sector. In December, the EBRD approved a financing framework of up to €200m to fund renewable energy projects totalling up to 300MW, including wind farms. The presence of state-backed investors and macroeconomic stability should help to bring in funding from commercial sources.
Kazakhstan's government is also backing renewables. In 2009, it adopted a law to support the development of renewables projects; in 2013, it introduced competitive feed-in-tariffs; and in 2015, it introduced a ‘green economy law’ to promote an energy transition. It has a target to get 50% of energy from renewables by 2050.
And it has the wind resources. In the north of the country, average wind speeds of between four and six metres per second are suitable for utility-scale wind farms. Not the best – we have data for other markets in our Emerging Markets report – but fine.
Yet there are reasons for investors to be sceptical on Kazakhstan, including – but not only – its energy and infrastructure systems.
Since the country declared its independence from Russia in 1991, power tariffs for both industrial and residential consumers have been kept intentionally below cost-return levels by the Kazakh government to regulate monopolies and control inflation. One side effect of this is that private investors have been driven away.
To attract investors, the government introduced its 15-year feed-in tariff for renewables in 2013. Despite that, the few renewables projects that have been planned so far, including the 50MW Yereymentau wind farm, have been financed only by state-owned companies or state-backed institutions like the EBRD. We have not seen private investors ready to take the plunge.
The country also shifted to a floating currency last year, which led to a steep fall in the value of fixed tariffs and further limited the potential return on investment.
In addition, up to 33% of generated power is lost because of poor infrastructure. The best locations for wind farms are in areas where there are no transmission lines and, even with commitment to invest to improve the grid, Kazakhstan does not have a supply chain for wind. For wind developers, this would mean that they would have to assume further costs in terms of transportation and logistics to bring their own manufacturing expertise in the country.
But, in our mind, the biggest issue for investors is corruption. Poor governance, lack of transparency and inconsistent enforcement of legislation, are the strongest deterrents to investors in the country. As a result, Kazakhstan ranked 131st among 176 countries in the Transparency International’s 2016 Corruption Perceptions Index.
Kazakhstan is still young, though. Its entire investment climate is governed by laws created in the last ten years, and the government is trying to give a better image of the country to foreign investors. Between 2014 and 2015, it enacted four pieces of anti-corruption legislation, which defined bribery and other corruption as criminal offences and set standards of conduct for public officials.
It is one to watch but, for now, there wouldn't be enough to entice us if we had money to spend. Those tempted must tread carefully.
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A Fully Green-Powered World? Steady on!
By Richard Heap
Is it possible to have an energy system based entirely on renewable sources? That was one of the questions that speakers grappled with during a session at the Financial Times Energy Transition Strategies conference in London, part of FT Clean Energy Week, on Wednesday last week.
And the answer was a resounding: ‘Well, hold on a minute.’
Renewables including hydro make up less than 5% of the global energy mix, according to the International Energy Agency. The figure is higher is you look solely at the electricity system but, even there, renewables only make up one quarter of the mix globally. Even if you agree that a 100% renewables world is possible, focusing on interim goals makes most sense.
That is not to say we should be unambitious. Lord Adair Turner, chairman of the Institute for New Economic Thinking and a group called the Energy Transitions Committee, said he was optimistic...