France awards first large floating wind contract; Iberdrola to triple offshore wind assets

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Larger floating wind farms will allow developers to drive down costs. (Image: REUTERS/Violeta Santos Moura)

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France awards first large-scale floating wind contract

A partnership between Germany’s BayWa r.e. and Belgium’s Elicio has won France's first state-backed power contract for a commercial-scale floating wind farm.

The companies won a Contract for Difference (CfD) at a price of 86 euros/MWh ($93.5/MWh) for their 250 MW Pennavel project, located in the Atlantic Ocean off the north-west coast of France. CfDs offer developers a fixed long-term income that is crucial to attracting investors.

Ten different consortia bid in the auction, indicating strong interest from developers.

Pennavel will be the biggest floating offshore wind farm in Europe. Four smaller floating offshore wind projects have been built in Europe for a total capacity of 200 MW, including two in the U.K., one in Portugal and one in Norway.

Spain, Portugal, Norway, Greece and Italy are also keen to develop floating wind projects but several national auctions have been delayed due to regulatory issues and political upheaval.

“By 2030, Europe can now expect to have at best 3 GW of floating wind in operation. And that requires the relevant auctions to be completed by 2025,” industry group WindEurope said in a statement.

            Installed offshore wind capacity by country

                                      (Click image to enlarge)

Source: U.S. Department of Energy's Offshore Wind Market Report, 2023 Edition (August 2023)

BayWa r.e. and Elicio are also developing a 960 MW floating wind farm off the north-east coast of Scotland, which is still in the planning process.

US federal regulator overhauls grid build rules

U.S. regulators have approved a policy package to boost interregional transmission investments which could reduce costs for offshore wind developers.

The new grid rules by the Federal Energy Regulatory Commission (FERC) require grid operators to plan large-scale transmission infrastructure projects over a 20-year timeframe to anticipate future needs. These plans will need to be updated every five years.

The rules aim to reduce barriers to grid investments by allowing grid operators to share the costs with the states and generators that will benefit from the new infrastructure.

The regulations also seek to ensure that grid operators make cost-effective investments, such as upgrading transmission facilities instead of building new ones.

                                 US power capacity in grid connection queues

                                                               (Click image to enlarge)

Source: Berkeley Lab, April 2024

Power authorities are looking to connect at least 20 offshore wind projects in the U.S. Northeast, many of which aim to start producing power by 2030. Several states have ambitious offshore wind goals and a state-by-state approach to transmission will mean higher costs for ratepayers, clean power advocates told Reuters Events last year.

The new policy package will help the nascent industry scale up operations, industry group Oceantic Network said.

“Bringing offshore wind power to the grid has always been a challenge and opportunity for the industry," Oceantic said.

"...greater planned and coordinated development that crosses state lines can greatly reduce costs, improve environmental benefits, balance the onshore grid, and importantly facilitate industry’s timely development,” the group said.

The new rules are part of President Joe Biden's goal to decarbonize the power sector by 2035.

To meet that target, the U.S. needs to more than double regional transmission capacity and expand interregional transmission capacity more than fivefold, according to a study published by the Department of Energy (DOE) in November.

Iberdrola set to triple offshore wind assets

Iberdrola plans to triple the value of its offshore wind assets in the coming years, Executive Chairman Ignacio Sanchez Galan told shareholders earlier this month.

Europe’s largest power utility has invested 6 billion euros ($6.5 billion) in offshore wind and has three operational projects, two of which are in the UK including a joint venture with Orsted, and one in Germany.

Iberdrola is also building offshore wind farms in the U.S., Britain, France and Germany.

"Once finished, there will be 17 billion euro assets in this sector, which also have guaranteed income," Sanchez Galan said, referring to offtake contracts that have been signed for the projects.

In addition, Iberdrola plans to develop around a dozen other offshore wind sites in countries including Brazil, Taiwan, Australia and Japan.

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Iberdrola said in March that offshore wind would account for about half of the 15.5 billion euros it plans to invest in renewables over the next three years.

On May 17, Iberdrola said it has agreed to acquire the remaining 18.4% stake in its U.S. subsidiary, Avangrid, for approximately $2.6 billion.

Avangrid is one of the largest offshore wind investors in the United States. The company is building Vineyard Wind 1 (806 MW), the U.S.' first large-scale offshore wind farm, and developing Park City Wind (800 MW), Kitty Hawk (3.5 GW) and Commonwealth Wind (1.2 GW).

Avangrid operates clean power assets in 24 states and sells power to 3.3 million customers in New York and New England.

EU net zero act favouring local content to enter into law

European Union governments have formally approved legislation to ensure that at least 40% of the bloc’s wind turbines, solar panels, heat pumps and other clean tech equipment is produced domestically.

The Net Zero Industry Act (NZIA) will enter force by early July, once it has been signed by the presidents of the European Parliament and the Council and is published in the EU's official journal.

Under NZIA, at least 30% of the volume of wind energy auctioned by public authorities must include pre-qualification and non-price award criteria that incentivises developers to source materials from EU suppliers. Permits for new wind manufacturing capacity must be issued within six to nine months, for most facilities.

The legislation is part of EU efforts to support domestic clean technology manufacturers in the face of surging exports and rising competition from Chinese rivals.

Thanks to government subsidies, Chinese solar panel makers now control 97% of the European market, EU anti-trust commissioner Margrethe Vestager said in April. Beijing is using “the same playbook” in other tech sectors including wind, Vestager said.

By 2030, the EU aims to supply 40% of products needed to reduce greenhouse gas emissions from domestic sources. These technologies include wind, solar, nuclear power, heat pumps, electrolysers and other decarbonising technologies, including carbon capture.

By 2040, the EU wants 15% of global production of these technologies to be based in Europe.

Reuters Events