Huge stakes at sea on global rush for wind power
12 April, 2021
Global competition for offshore wind power is indeed sizzling hot that license auctions now resemble the coal and oil competitions of simply a few years in the past, plus some of the names are familiar also as global oil majors move aggressively into renewable energy.
The get among top fossil fuel producers to make fast inroads into lower-carbon businesses comes as more and more countries roll away plans to improve wind power in order to reduce their carbon footprint.
The price of securing sites to build up has increased to levels that some top wind farm operators say are unsustainable and that will hurt consumers by traveling up power prices.
Governments worldwide are anticipated to give a record amount of tenders for offshore wind sites and capacity this year, with more than 30 gigawatts (GW) on the market.
That is almost around total existing global wind capacity of 35 GW, and the tenders are shaping up to come to be the best ever.
Several European oil firms including Total, BP and Shell intend to rapidly increase their renewable power portfolios, reducing reliance about coal and oil to satisfy investors who want to see practical long-term low-carbon business plans and governments which are demanding reductions in emissions.
The oil majors, with deep pockets, are willing and in a position to pay up for a foothold available in the market, despite the fact that margins are many smaller than for his or her traditional operations.
At a leasing round held by the Crown Estate before this season for seabed choices around the coast of England, Wales and Northern Ireland, BP and German utility EnBW paid an archive price tag to secure two sites, representing 3 GW.
Developers pay an total annual option fee just before taking a final investment decision (FID), which regarding BP and EnBW might total around 1 billion pounds ($1.38 billion) made in four annual payments of 231 million pounds for each of the two leases.
Traditional offshore wind developers, Iberdrola, Orsted and SSE all confirmed to Reuters they had been unsuccessful in the leasing round.
The prior Crown Estate offshore round was held greater than a decade ago when the market was a fraction of its current size and structured without option fees, an extra cost developers will will have to recoup.
"Someone will have to pay and it’s probably, at least partly, the consumer," explained Duncan Clark, Orsted’s UK head.
Some analysts also said the substantial fees threaten to erode the huge cost reductions the market has achieved in the last decade.
Mark Lewis, Chief Sustainability Strategist at BNP Paribas, said the Crown Estate option cost would add around 35% to project development costs, assuming today's construction costs.
BP said the fee was justified by the prime location of the two Crown sites: found in the Irish Sea, found in shallow water, near to the shore enabling shorter, cheaper connection cables, and next to each other enabling cost efficiencies across both jobs.
"Not every resource base was created equal," BP’s low carbon strength chief Dev Sanyal told Reuters, adding that those elements made the business confident of reaching the 8-10% gain it has place for renewable projects.
EnBW said the prices achieved reflect the various intrinsic benefit of the respective tasks.
HOT TENDERS
Some in the market fear a knock on effect with Ben Backwell, CEO of the Global Wind Strength Council (GWEC), telling there aren't enough tasks currently to meet up demand.
"So you are likely to create an over-heated market when what we want to find is more opportunities made available," he said.
A price cap at a Crown Estate Scotland tender of Scottish seabed leases taking place this year has already been hiked tenfold.
Orsted, Iberdrola and SSE almost all verified to Reuters they expect to get into the Scottish round, even though neither BP, Total nor Shell would directly confirm their involvement to Reuters, analysts said it could be surprising in the event oil organizations did not participate.
Projects from the latest Crown Estate auction will never be built until 2027-2030, when advancement costs are anticipated to have fallen further, in least partly offsetting higher fees.
Announcements about larger turbines, for instance, show the pace of technology development remains very active, said Julien Pouget, senior vice president renewables in Total, which won a good lease found in the Crown Estate auction with Macquarie’s Green Purchase Group.
"(That) will make us optimistic on the potential regarding price reductions," he said.
While Britain offers a guaranteed return on plenty of renewables, the total amount has fallen sharply, tracking lower development costs.
At a 2019 auction for contract for distinctions (CfD), which assurance operators the very least price for energy sold, a record low price of 39.65 pounds every megawatt hour (MWh) was achieved, some 30% lower than the previous auction held in 2017 and less than current average electricity prices.
The next CfD auction is expected at the end of 2021, prematurily . in the development procedure for the latest Crown Estate lease winners.
NEW MARKETS
Although Britain may be the world’s most significant offshore wind market, with around 10 GW of capacity, opportunities elsewhere are increasing and tenders are anticipated to be keenly fought.
European countries including Denmark, Poland and France are anticipated to hold auctions this season, with more regions likely to build up capacity.
In america, President Joe Biden wants to deploy 30 GW of offshore wind electric power by 2030. There are 13 projects in advancement, with a combined ability of around 9.1 GW and expected to come online by 2026.
Iberdrola is already involved in tenders found in Rhode Island and Massachusetts through it has the U.S. arm Avangrid, while BP sealed a$1.1 billion deal last year to get 50% stakes in two U.S. advancements from Norway's Equinor.
In Asia, Japan programs to set up up to 10 GW of offshore wind capacity by 2030, and 30-45 GW by 2040, with analysts expecting tenders for a total of around 3 GW of capacity to be held this season.
Iberdrola, which bought Japanese developer Acacia Renewables this past year, said it all expects to take part in tenders there.
“Asia is going to be a huge market for renewable progress globally and we due to a global player desire to be actively participating in that,” said Jonathan Cole, managing director in Iberdrola Renewables' offshore wind division.
However, professionals cautioned new areas cannot charge as many for seabed leases or be prepared to offer such good deal support as Britain.
"We have a mature industry on Europe and the united kingdom but it's not there yet on Asia, or perhaps the U.S.," GWEC's Backwell said.
"Each region has to build up its industry and expertise before they can expect to start to see the most competitive prices."
Source: japantoday.com
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