2010 sees up tick in offshore wind energy finance

According to the European Wind Energy Association’s (EWEA) latest report, “European offshore wind industry - key trends and statistics 2010”, a positive trend in 2010 was the arrival of new financial investors – pension funds - into the sector, with two notable transactions in the second half of the year.

Two major deals come to financial close in 2010: Thornton Bank C-Power (325 MW) and Trianel Wind Farm Borkum West II (200 MW). Both projects use turbines of 5 MW or more, signalling that financing institutions are willing to invest in the large turbines likely to dominate the sector in the coming years.

"Finance remains a big challenge but we are seeing improvements with more banks and other financing institutions ready to invest in large offshore wind projects,” said EWEA’s chief executive, Christian Kjaer.

In September last year, Danish labour-market fund PensionDanmark chose to buy 30% of Dong Energy’s Nysted offshore wind farm at a cash consideration of DKK 0.4 billion ($0.07 billion). PensionDanmark became the first pension fund to enter into a direct agreement with a major Danish industrial partner within this area.

In December last year, a consortium of PGGM and Dutch Ampère Equity Fund, managed by Triodos Investment Management, entered into an agreement with Dong Energy whereby the consortium acquired a 24.8% stake in the 367MW Walney Offshore Windfarm. Dong Energy will retain a 50.1% stake and SSE will retain the 25.1% stake it acquired from Dong Energy in December 2009.

2010 saw a flow of investment announcements from utilities, which have continued to increase their balance sheet commitments to the sector.

Also, national and international finance institutions such as the European Investment Bank (EIB) and export credit agencies have been critical for the development of the sector during a critical juncture.

They are likely to remain active in the sector in the near future, providing critical liquidity at a low cost, and will help ensure that a smooth transition can be engineered towards a more mature market when commercial banks are able to do large transactions without them.

The European Wind Energy Association (EWEA) also highlighted that with 308 new offshore wind turbines installed in 2010 - an increase of 51% in installed wind power capacity on the previous year - offshore wind power experienced a new record growth in Europe.

In total, 883MW of new capacity, worth some €2.6 billion, were installed in 2010 in nine wind farms in five countries, making a total of 2,964 MW. The UK leads the European region, with a total installed offshore wind capacity of 1,341 MW. The UK is followed by Denmark (854 MW), The Netherlands (249 MW), Belgium (195 MW), Sweden (164 MW), Germany (92 MW), Ireland (25 MW), Finland (26 MW) and Norway with 2.3 MW.

Key trends in 2010 included:

• The average offshore wind farm size in 2010 was 155.3 MW, up from 72.1 MW the previous year;
• Average water depth in 2010 was 17.4m, a 5.2m increase on 2009, with projects under construction in water depth averaging 25.5m;
• Average distance to shore increased in 2010 by 12.7 km to 27.1 km, substantially less, however, than the 35.7 km average for projects currently under construction.

EWEA forecasts that between 1,000 and 1,500 MW of new offshore wind capacity will be fully grid connected in Europe during 2011. In all, 10 wind farms, totalling 3,000 MW, are currently under construction. When completed, Europe’s installed offshore capacity will increase to 6,200 MW. Also, according to the Association, 19,000 MW are currently fully consented.

UK PM backs European Supergrid plan

UK Prime Minister David Cameron has reiterated the UK’s support for plans to explore linking up green energy projects in the North, Baltic and Irish Seas.

The PM shared that energy ministers will work together through the North Seas Offshore Grid Initiative and share experience with ministers in the Baltic Energy Market Interconnection Plan (BEMIP) to ensure planning, market, regulatory and technical challenges are properly addressed and the right framework created for industry to invest in future projects.

The UK is working with nine other European countries as part of the North Seas Offshore Grid Initiative, following an agreement signed in December last year. These countries include the UK, Ireland, Sweden, Denmark, Germany, the Netherlands, Luxembourg, France, Norway and Belgium. A progress report on work towards an offshore grid will be presented to the North Seas Offshore Grid Initiative (NSOGI) Ministers in June of this year.

Last month, Ministers from 10 European countries bordering the North Sea agreed upon the construction of a new offshore electricity grid. The Memorandum of Understanding, signed by Ministers and the European Commission in Brussels, is the starting point to create a new offshore grid and to tear down unnecessary and costly barriers to electricity trade between EU Member States: EU governments have agreed to cooperate on identifying and eliminating barriers to cross-border electricity trade; Ministers also agreed to simplify complex and lengthy authorisation procedures, which today hinder the planning and construction of a transnational offshore grid.

As per the political declaration on the North Seas Countries Offshore Grid Initiative, the plan is to build on existing collaborative initiatives in the Pentalateral member countries, will use the results of research (such as EWIS, Tradewind, Windspeed, Offshore Grid and ISLES) and will be informed by other multilateral initiatives, in particular the Kriegers Flak project in the Baltic Sea. Furthermore, the result of this work will provide joint input from the North Seas countries to the planned European Commission’s Communication on a Blueprint for a North Sea offshore grid.

Gamesa settles on Scotland for R&D centre

Wind turbine manufacturer Gamesa proposes to establish its marine wind technology centre in Scotland. Glasgow has been identified as the preferred location for the facility, subject to final agreements on financing.

This could see the creation of 130 jobs in Scotland’s largest city.

The company is also developing a Memorandum of Understanding (MoU) with Scottish Enterprise, Dundee City Council and Forth Ports plc to advance a further potential development in Dundee. It would focus around manufacturing, logistics and operations and maintenance (O&M) activities in the Scottish port.

All this remains conditional upon the development of offshore wind power projects in the area and the availability of sites for prototype offshore wind turbine generators. If implemented successfully, Gamesa’s offshore plan could represent an investment of €50 million in Scotland.

The announcement comes just a few months after Gamesa unveiled its industrial plan for offshore wind power in the UK, where it plans to invest over €150 million through 2014.

In addition to its offshore technology centre in Glasgow and a potential industrial, logistics and O&M base in Dundee, Gamesa’s offshore wind strategy for the UK includes construction of a blade production plant (location, under study) and engaging in offshore logistics from a number of UK ports, around which it will locate its wind turbine O&M operations.

Gamesa’s offshore wind business headquarters will be based in London, from where it will engage in sales, project development, finance and management activities.

Gamesa estimates that the construction and development of its offshore wind business in the UK will create over 1,000 direct jobs and another 800 indirect jobs at local suppliers.

Spanish regulation puts brakes on wind sector growth

Despite ending 2010 with 20,676.04 MW of accumulated installed capacity, slightly ahead of the target of 20,155 MW stipulated in Spain's 2005-2010 Renewable Energy Plan (PER), Spain’s wind industry grew at its slowest rate since 2003, according to the Spanish Wind Energy Association (AEE).

In total, 1,515.95 MW were installed in Spain, an increase of 8% over the previous year, the slowest growth since 2003 in absolute terms.

The Association emphasized that it had already warned of this situation because of the impact of the new Pre-Allocation Register, which started functioning in mid-2009. In addition, the uncertainty generated by the lack of a new regulatory framework that will establish the rules of the game from 2013 onwards, and the economic crisis have caused the suspension of orders and job losses, mainly in the industrial sector.

There are fewer than 3,000 MW in the Pre-Allocation Register for 2011 and 2012, according to AEE. Thereafter, it is the remuneration that the facilities will receive or the system that will be used remains unknown, which slows down the installation of future wind farms. This is important as Spain, like all European Union countries, must comply with the objective of reaching final energy consumption from renewable sources of 20% by 2020, a goal in which wind energy is essential. According to forecasts in the National Renewable Energy Action Plan (NREAP) sent by the Government to Brussels, Spain is expected to have 35,000 MW of onshore wind and 3,000 MW of offshore wind, by 2020. It is necessary, without further delay, to clarify the sector’s future regulatory framework to meet these objectives.

Region-wise performance:

Castile and Leon was in 2010 for second year in a row, the region that installed more wind power, with 917 MW, 60.4% of the new installed capacity in Spain, followed by Catalonia with new 326.87 MW, and Andalusia with 139.41 MW. Thus, Castile and Leon continues to lead the ranking of total installed capacity by regions, followed by Castile-La Mancha (with 6 MW installed in 2010) and Galicia (54.80 MW).

Many regions (Andalusia, Aragon, Canary Islands, Cantabria, Catalonia, Extremadura and Galicia) held tenders in 2010 and awarded wind power capacity above 7,000 MW. However, in the absence of the new regulatory framework, when or how this power could be installed is unknown, according to AEE.

For its part, Gamesa said it has consolidated its lead role in the Spanish wind energy market, installing a total of 760.7 MW in 2010. This represents a market share of 50.18%, 15.7 percentage points higher than in 2009, when Gamesa accounted for 34.4% of the market.

Gamesa is also No. 1 in Spain by accumulated installed capacity to date (end of 2010), with a total of 9,846.34 MW, or 47.6% of the total MW installed in Spain to date (end of 2010).

Among developers, Iberdrola Renovables continues to lead the Spanish ranking, with a total of 5,168.50 MW. It was the company that installed more MW in 2010, with the addition of 289.22 MW. Also, over 200 MW were installed during the year by EDPR (249.78 MW) and Govade (232.52 MW). In the ranking of total installed power, Acciona continues in second place with 4,036.82 MW, followed by EDPR with 1,862.92 MW.

SSE supplier alliance to drive down offshore wind costs

Scottish and Southern Energy (SSE) has entered into a Memorandum of Understanding with Siemens, transmission substation and offshore grid connections contractor Siemens Transmission and Distribution Limited; seabed-to-surface engineering, construction and services company Subsea 7; Burntisland Fabrications, a provider of fabrications for the offshore energy industry; and engineering and design consultancy Atkins. The supplier framework will form an offshore wind alliance aimed at reducing the cost of delivered power from offshore wind farms. Under the agreement, the companies will collaborate on SSE’s offshore wind programme.

Over the next few months, the parties will work closely together to agree the formal commercial arrangements of the alliance before embarking on design activities.

In due course, the companies will co-locate activities covered by the new agreement in the Centre of Engineering Excellence for Renewable Energy established by SSE and the University of Strathclyde in Glasgow. For SSE, this move builds on its agreement last year with Mitsubishi Heavy Industries and Mitsubishi Power Systems Europe to cooperate on the development of offshore wind turbines.

Atkins shared that its proposed role will include the provision of expert engineering design advice.

Subsea 7 launches Offshore Renewables division

Subsea 7, a seabed-to-surface engineering, construction and services contractor to the offshore energy industry, has launched its offshore renewables division. The division is going to be based in Aberdeen, Scotland.

Subsea 7 will provide project management, engineering and construction services to support offshore developments in the global renewables industry. The new division will be led by Bob Dunsmore, Vice President, Renewables, Subsea 7.

With this move, the company is transferring its seabed-to-surface expertise, capabilities and safety and risk management processes and systems to specifically develop and execute work in this emerging market.

This new division of Subsea 7 has also signed a Memorandum of Understanding with Scottish and Southern Energy plc (SSE) under which Subsea 7 will form an alliance with SSE, Siemens plc, Siemens Transmission and Distribution Limited, Burntisland Fabrications and Atkins.

Siemens, Associated British Ports sign pact

German engineering conglomerate Siemens and port operator Associated British Ports (ABP) have signed a Memorandum of Understanding in connection with ABP’s proposed Green Port Hull development at Alexandra Dock, Port of Hull.

It has emerged that Siemens has chosen Hull as the preferred location for its UK manufacturing operations.

The parties have agreed to work together to develop plans for the construction of a new Siemens offshore wind turbine manufacturing and export facility at the Port with the aim of executing definitive agreements in 2011.

The development is being described as a major boost for the region.

Graham Stuart, MP for Beverley and Holderness, said he recently met with the ABP port director Matt Jukes and was told about the plans for the development of this area to host a number of green energy businesses.

 “This is both an ambitious plan and one which could really put the area on the map as a centre of excellence for renewable energy,” said Stuart.

The plans would see areas of the docks in Hull expanded and improved as well as land owned by ABP near Hedon being developed for renewable energy companies.

According to the Guardian, under the plan, ABP would build a £100m deepwater berth at the port capable of handling the new generation of large offshore wind turbines. It would be one of the biggest single investments ABP has made in Britain. Siemens also wants to build a new £80m wind turbine plant on the site.

Vattenfall to open London office

Swedish utility Vattenfall has chosen to strengthen the company's presence in the UK and plans to open up a new office in London.

The company says it will start to construct a huge offshore wind farm on an allocated UK North Sea spot after 2015.

Last year Vattenfall inaugurated the world’s largest offshore wind farm, Thanet, off the British East coast. Currently the company is developing seven onshore wind farms in the North of the U.K. and is building Ormonde Offshore Wind Farm in the Irish Sea.

Together with ScottishPower Renewables, Vattenfall has been awarded rights to develop up to 7,200 MW of wind capacity off the coast of East Anglia.

Alstom and EDF Energies Nouvelles to jointly-bid in French offshore wind tender

Alstom and EDF Energies Nouvelles announced their agreement to respond jointly to a call for tenders that the French government is planning to launch for offshore wind projects. France has set a goal of producing 23 per cent of its power needs from renewable resources by 2020, of which 6,000 MW will be from offshore wind power.

The proposed 600-turbine offshore wind farms are slated to be built on five sites between Saint-Nazaire and Dieppe/Le Tréport in a €10 billion project to be announced by France’s President Nicolas Sarkozy this week.

The Alstom-EDF EN agreement covers the future construction of offshore wind farms developed by EDF Energies Nouvelles and its partners and that will be equipped with offshore wind turbines manufactured by Alstom.

Under the agreement between the two groups, Alstom will be the exclusive supplier of 6 MW offshore wind turbines, (on the market from 2013 onwards). The offshore wind projects that fall under the alliance with Alstom are those being developed by EDF EN and its partners within a consortium. Alstom will be the exclusive manufacturer for all these projects.

EDF Energies Nouvelles brings experience acquired over several years in offshore wind energy, notably through two major projects, including C Power, a 325MW wind farm under construction off the coast of Belgium, of which 30MW are already in service, and the 67MW Teesside project developed in the United Kingdom, construction of which is currently starting up.