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Offshore Wind Journal

Collaboration could further reduce offshore wind costs

Tue 06 Nov 2018 by David Foxwell

Collaboration could further reduce offshore wind costs
The cost of offshore wind energy could fall further if there were more collaboration between countries, analysis by IFRI suggests

Shared projects, shared tenders and joint R&D projects could see low-cost offshore windfarms and interconnectors criss-crossing the North Sea, but Europe should beware of the effects of Brexit and potential competitors investing in the market

Recent months have seen growing recognition that cross-border collaboration in offshore wind can advance the roll-out of renewable energy in the North Sea, enhance energy security and continue to drive down the cost of energy.

In mid-July, a Franco-German declaration was signed in Paris that could see the countries collaborate on offshore wind and other renewable energy initiatives. Both countries will launch initiatives to realise a part of their respective national renewable energy deployment through joint pilot projects, such as offshore wind in the North Sea.

The declaration said France and Germany would work on requirements for implementing a test project for cross-border renewable energy auctions, increase their interconnection capacity, and strengthen networks that currently constrain capacity. France and Germany also agreed to work together on batteries and other forms of energy storage and strengthen co-operation on hydrogen produced from renewable power as an energy carrier.

As highlighted in a recent feature on the Belgium offshore wind industry, extra-national collaboration is already being discussed between the UK, Netherlands and Belgium. Trilateral ‘cluster’ projects under discussion include Nautilus, a second interconnector between the UK and Belgium, and a proposal to connect a large offshore windfarm in UK waters to Belgium or the Netherlands. Projects like this are growing in number and coming closer to realisation.

Dutch transmission systems operator TenneT has proposed a European electricity system based on a North Sea hub on an artificial island to which numerous offshore windfarms could be connected and transmit electricity to North Sea countries; and Denmark, Germany and the Netherlands last year signed an agreement to press ahead with plans for a pan-European electricity transmission system in the North Sea. It has even been suggested that before long, country-specific offshore windfarms and transmission assets “will no longer be relevant.”

The latest organisation to highlight the benefits of cross-border collaboration is the Institut français des relations internationales (IFRI). Michel Cruciani, author of an IFRI report, L’essor de l’éolien offshore en mer du Nord: un enjeu stratégique pour l’Europe, said purely national policies enacted in countries in the region such as the UK, Belgium, Denmark, Germany and the Netherlands had undoubtedly encouraged deployment of offshore wind, but cross-border, international co-ordination could guarantee the integration of “massive” wind production at the least cost.

“Undoubtedly, offshore wind in the North Sea is already a success story but it is now time to develop a broader, more strategic vision, looking at how to make the most out of this incredible potential and also derive lessons for the other European shores,” he said.

Speaking to OWJ, Mr Cruciani said collaboration between countries could take several forms, including collaboration to unify tendering procedures, the duration of contracts, the level of financial support, premiums and decommissioning requirements. “This would simplify the assessment of projects by financial actors, and thus lead to a reduction in the cost of capital,” he said.

Collaborative tendering involving all EU member states – including countries that do not have access to the North Sea – could also take place, Mr Cruciani suggested, a procedure anticipated in the Clean Energy Package being adopted in the EU. “It would accelerate the decarbonisation of the economy, because the North Sea is a very important source of renewable energy at a reasonable price,” he said.

Collaboration on interconnectors could also have significant benefits. “All variable energy sources require a high network density to provide optimal operating conditions. By synchronising the development of offshore windfarms with the realisation of interconnections, we reduce the risk of network congestion and adverse effects on prices,” Mr Cruciani told OWJ.

Mr Cruciani and his colleagues at IFRI also anticipate collaboration in other areas, such as floating offshore wind. Like the French and German Governments, he anticipates collaboration on energy storage and ways to convert renewable energy from intermittent sources into energy carriers such as hydrogen and ammonia.

However, as Mr Cruciani pointed out, collaboration of the types that could significantly reduce the levelised cost of energy from offshore wind will not be easy, and there are potential barriers. “All studies converge on the need to strengthen interconnections if offshore wind is to be built out at much greater scale,” he said. “Currently, all windfarms are connected to the mainland, but in future a common hub between windfarms could be connected to an interconnector. Others have argued in favour of a ‘meshed grid.’ The consortium considering a large hub located in the North Sea suggested that co-ordinated planning of investments and using a central hub could reduce the cost of an interconnector by 30%.”

Brexit complications

The problem is, he said, that for the time being support schemes and the level of support vary between countries and “co-ordination of decisions will become even more difficult with Brexit.” In leaving the EU, the UK will no longer be bound by common commitments on renewable energy, its grid operators will no longer participate in European clearing mechanisms, and its electricity market may adopt different rules to those in place in Europe. The EU is also possibly losing a very active participant in European offshore wind research programmes.

“It seems likely that innovations in co-ordination will come from industry rather than political bodies, “ Mr Cruciani said. “Everything suggests that Brexit will complicate or even make it impossible to set up a purely political governance scheme.”

Asian investment

As a recent report from Wood Mackenzie Power & Renewables highlighted, Chinese operators remain the leaders of the global wind asset market. The report, Global Wind Power Asset Ownership 2018, noted Chinese asset owners continue to dominate the global wind power sector following the merger of former top-ranked power producers. In offshore wind, four large utilities dominate the capital-intensive market, typically developing and selling off around 50% of their projects to a more fragmented pool of institutional investors. The growth of the offshore wind sector will affect asset ownership in Asia Pacific from 2022 onwards, boosting the utility market share in Japan and South Korea.

Mr Cruciani highlighted the growing investment in the European offshore wind industry extra-European actors in Japan, South Korea and China. As highlighted previously by OWJ, Sumitomo Group has invested heavily in Belgian offshore windfarms, and Mitsubishi has invested in the offshore wind market in the Netherlands and the UK. “Chinese players are also active in the European offshore wind market,” Mr Cruciani said. These include China Resources Corporation, China Three Gorges Corporation and China Yangtze Power Corporation.

“For all of these stakeholders, acquiring know-how in Europe will facilitate the penetration of international markets. Such know-how includes technical skills, but also the economic and legal set-up of projects,” Mr Cruciani concluded, noting that several of the countries investing in European projects will almost certainly want to use the experience they gain in the fast-growing export market for offshore wind in countries such as Australia, Brazil, India, Taiwan, Turkey, the US and Vietnam.


EU supports floating wind technology

Portuguese company Windplus will has secured a €60M loan under the InnovFin Energy Demonstration Project programme to install a floating windfarm off the coast of Portugal. Windplus is a subsidiary of EDP Renewables, Repsol and Principle Power.

Located 20 km off the Viana do Castelo coast, the project will speed up the commercial roll-out of a novel technology based on the WindFloat platform. The loan is being granted by the European Investment Bank (EIB) and supported by the European Commission through the Energy Demonstration Projects facility, a thematic investment programme under InnovFin – EU Finance for Innovators, which works with funding from the EU's research and innovation programme Horizon 2020. The project will also receive funding from the EU’s NER300 programme and the Portuguese Carbon Fund.

The floating windfarm will consist of three wind turbines on WindFloat foundations that will be anchored to the seabed at a depth of 100 m. The windfarm will have an installed capacity of 25 MW.

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