Offshore Wind

Offshore investors face an increasingly wide choice of projects as Baltic and, more recently, French waters open up for development.

By Jason Deign in Barcelona

Chris Anderson sums up the trouble with the UK’s offshore ambitions with a story about a small town near his company’s headquarters in Lowestoft, England.

“I was reading that one town not far from here could have lots of jobs from the wind industry,” says the chief executive officer of marine consultancy 4C Offshore. “But the county council is doing its utmost to halt the installation of underground grid connections.”

Planning farces of this nature are not just found in the UK, of course; most wind industry insiders worldwide would probably be able to relate similar tales.

But for Britain it is arguably more important than ever to show it is serious about offshore wind, because investors have an increasingly wide range of alternative markets in which to spend their cash.

The latest is France, where three bidders—EDF, Iberdrola and GDF—this month threw their hats into the ring for an initial 3 GW of power to be installed at five sites off the country’s Atlantic coastline, anywhere between Saint-Nazaire and Le Tréport.

The €10bn, 600-turbine project is pretty bijou compared to the UK’s ambitions to have 18 GW of offshore power in place by 2020. But observers worry that British policymakers are not doing enough to kick-start its offshore industry, which could lead to it falling behind other markets.

“In the UK we need to be installing two foundations, two towers and two nacelles every day to meet our targets,” says Anderson. “And that’s not happening.”

Grid connections

One of the problems cited in the UK is that of grid connections. The government has eased the planning constraints around these, but only in exchange for getting the developer to do a lot of the legwork instead. It is not clear whether this is making things any easier for developers.

Another challenge is the upgrading of port facilities to meet the requirements of the offshore wind industry. The Government has pledged money to support this, but Anderson says the sums involved are “A drop in the ocean.”

Finally, there is the issue of political will. Insiders say the way the UK’s coalition leadership has pulled the rug from under the country’s nascent solar industry has raised concerns about how firmly it will stand by its commitment to wind energy.

Marc Mühlenbach, Europe wind energy advisory analyst at IHS Emerging Energy Research, says discussions about reducing UK Renewables Obligation Certificates for onshore developments are not helping instil confidence in the long-term future of the offshore market.

However, he points out, similar rumblings have been heard elsewhere, including in Germany where there have been ministerial calls for new funding structures for onshore wind power.

And he believes a UK failure to get 18 GW in the water by 2020 would not necessarily have adverse effects on the industry. “I think that was always going to be difficult just because of the time it takes for the supply chain to scale up,” he says. “I never thought it was going to be met.

“But it’s not punitive; it’s an ambitious benchmark. It’s the cumulative 2020 targets that the UK is going to be accountable for and I don’t know if they need 18 GW from offshore to reach that. Even if you get 18 GW by 2022, the supply chain will keep maturing.”

New markets

New markets such as France, where an additional 3 GW will come up for tender in 2015, have the advantage of offering the pick of the best, lowest-risk sites.

However, the French market is not without its drawbacks: there is a suspicion that foreign manufacturers may be locked out of the bidding, and its tariff is not the most lavish in the world.

Turn to Germany and the tariffs are much more generous, which could give backers a much quicker return on their investment. But Germany, like the UK, has yet to overcome grid connection challenges.

As a result, Mühlenbach concludes, all the offshore markets in Europe currently offer pros and cons for investors. “Given the current frameworks, or the renewed framework in the case of Germany, there is a case to be made in all of them,” he says.

“Clearly, there are financial players that are targeting all of these markets. And these players are all risk-averse. If they are going into a market, that is very indicative.”

Helene Aagaard, head of media relations at Dong Energy, confirms that Britain remains an attractive destination for offshore developers and financiers. “The UK is our biggest market besides Denmark,” she says. “As long as there is a stable framework there, we are committed.”

Plus, she notes, irrespective of the policy framework, supply chain infrastructure and other factors, there is one thing that the UK coast has and which the offshore industry relies on more than anything else: “You’ve got great wind over there.”

To respond to this article, please write to the editor: Rikki Stancich
Image credit: Domdeen