VIP Shipper Club library – Barometer Rising

ISSUE 3 / 2017

ISSUE 3 / 2017

BAROMETER RISING

Southern Europe’s Tentative Wind Moves

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BAROMETER RISING Southern Europe’s Tentative Wind Moves

BY MARK WILLIS

T

he last decade has witnessed a dramatic rise in global renewable energy output, with the European Union in particular leading the way in development and installation of low-carbon emitting wind, solar, hydro, tidal and other technologies.

Alongside commitments agreed at the 2015 Paris Climate Conference, the EU has set a legally binding goal of achieving 20 percent of final energy consumption from renewable energy sources by 2020.

(Of course, U.S. President Donald Trump’s pronouncement that he would pull the U.S. out of the deal greatly impacts the agreement.) The bloc’s 28 member states have also subsequently agreed to an even

more ambitious future goal of 27 percent renewable energy mix by 2030, as well as a 40 percent cut in CO2 emissions from the levels of 1990, requiring continued wholesale expansion in renewable energy investment over the coming decade.

An update from the European Commission, the EU’s executive body, stated that most member states are on track to meet the 2020 target, with 16.4 percent of total regional energy needs accounted for by renewable energy in 2015, according to available data.

With its legacy of long-term historical public investment, hydropower remains the largest single renewable energy source of European electricity

Construction of Wikinger offshore wind farm, in the German Baltic Sea. Credit: Iberdrola

HEAVY LIFT LEADERS.

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generation, accounting for 38 percent in 2015. However, the latest EU statistics also highlight a dramatic rise in wind power energy production, which, having quadrupled from 2004 to 2015, now accounts for about one-third of regional electricity produced by low-carbonemitting technologies.

While slightly less than 10 percent of total wind energy output last year, EU offshore wind development has also expanded rapidly over the last decade, sprouting from total output of 700 megawatts in 2014 to 13 gigawatts by 2016, according to figures provided by Brusselsbased trade association WindEurope.

Highlighting the extent of this recent investment boom, WindEurope data also showed a nearly three-fold acceleration in offshore energy production as a proportion of conventional onshore wind farm energy output during 2012-2016, rising 15 percent compared with 6 percent in the previous five-year period.

Alongside ambitious renewable energy targets, the main drivers of Europe’s offshore wind farm investment boom over the last 10 years have been technological advances, increased cost efficiency and industrial policy.

Crucially, individual country priorities towards the best means of meeting EU carbon reduction commitments have also been a major determining factor behind offshore development. Unsurprisingly, countries with the optimum climatic and maritime conditions bordering the North Sea have been the greatest regional investors, and this is where project cargo and breakbulk companies should focus future business drives.

ENERGY GOALS TO HIT

“EU renewable energy goals have driven market entry of renewables, but not specifically offshore wind, which has primarily been led by national decisions on how best to achieve their share of future targets, and other national objectives, in the long term,” said Colin Morgan, partner at Everoze, a technical and commercial consultancy in the energy sector. “There are also important business drivers, with the large Europe-wide power utilities that enjoy a competitive advantage against smaller independent firms in large offshore projects lobbying hard,” he added.

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MOVE TOWARDS RENEWABLES Net electricity installations in the EU from 2000-2016

GIGAWATTS Wind 142.6 Solar PV 101.2 Natural Gas 93.5 Biomass 9.6 Large Hydro 7.9 Waste 2.7 CSP 2.3 Other Gas 0.5 Small Hydro 0.4 Geothermal 0.3 Peat 0.1 Ocean 0.0 Nuclear -15.5 Coal -37.3 Fuel Oil -37.6 Source: WindEurope

UK, Denmark, the Netherlands, and Belgium have been particularly prominent investors over the last decade.

Together, these countries account for the vast majority of Europe’s offshore output and investment.

“The North Sea Colin Morgan has strong winds, Everoze shallow waters, suitable seabed conditions for foundations and good connectivity to major centers of population, so it’s only sensible that the countries bordering it have invested most heavily,” Morgan said.

SOUTHERN EUROPE LAGGARDS

WIND TAKES SECOND PLACE

Share of installed EU capacity in 2016, in gigawatts

Natural Gas

Wind

Coal

Large Hydro

Nuclear

Solar PV

Fuel Oil

Other

Biomass

Regeneration of coastal communities damaged by the loss of shipbuilding, oil and gas, and fishing industry employment in the North Sea has also seen national governments encourage burgeoning wind farm investment, according to Morgan.

Reflecting their coastal location, and the suitability of the North Sea to offshore wind farm development, Germany, the

Yet, while offshore wind farm development has taken off in the North Sea, it has proven somewhat disappointing in other parts of the EU, with the countries of Southern Europe bordering the Mediterranean Sea coastline most notably failing to replicate the progress of Germany and the UK. Bordering the Atlantic and Mediterranean, Spain highlights how massive renewable energy investment and a substantial coastline do not necessarily translate into offshore wind energy development. It has instead focused on onshore wind farms and is now the second-largest European producer of wind-powered renewable energy with installed capacity of 23.1 gigawatts at the end of 2016.

The major factors behind Spain’s lackluster offshore performance are the country’s deep surrounding Mediterranean Sea waters, which are unsuitable for installation of conventional wind turbines, and the abundant supply of resources for onshore development, according to a spokesperson at Iberdrola, a Spanish utility company and major investor in European wind farms.

“Since good onshore resources are plentiful and there is land availability, we believe offshore wind will not develop properly in Spain, as there is no need for it,” he said.

Differing government priorities on how best to achieve reduced CO2 emissions ISSUE 3 / 2017

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Credit: Iberdrola

have also limited offshore wind energy expansion in Southern Europe, and may continue to restrict investment over the coming decade.

NUCLEAR PRECLUDES WIND INVESTMENT

Jérôme Jacquemin Everoze

Anoucheh Bellefleur Energy Transition

In the case of France, continued major investment in domestic civil nuclear power since its establishment in the 1980s has cemented its status as one of the few European electricity exporters, and delayed the country replicating the move of EU members, such as the UK and Germany, into other low carbonemitting energies, including wind.

“France’s predominantly nuclearpower generation is a good cop in terms of climate change, so maintaining the status quo was a sensible option, with the government only deciding to promote onshore renewables from 2005 onwards,” said Jérôme Jacquemin, partner at Everoze.

Similar to Spain, French waters in the Mediterranean and North Atlantic are also deeper and less suited than those in the North Sea for the installation of conventional wind farm turbines.

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GERMANY POWERS AHEAD

EU onshore and offshore wind capacity, in megawatts

Germany 5,443 France 1,561 Netherlands 887 UK 736 Poland 682 Finland 570 Sweden 493 Ireland 384 Italy 282 Portugal 268 Greece 239 Austria 228 Denmark 220 Lithuania 178 Belgium 177 Romania 52 Spain 49 Croatia 34 Estonia 7 Latvia 2 Source: WindEurope

Anoucheh Bellefleur, wind energy officer at the Franco-German office for Energy Transition, highlighted that significant topographical differences between German and French waters have stymied investment and reduced profitability potential.

“In Germany, offshore wind farms are built in the North Sea and the Baltic Sea, which are shallow waters, and where foundations of less than 50 meters depth can be erected as far as 100 kilometers from the shore with bearable costs,” she said.

“In France, however, offshore wind farms are developed in the North Atlantic Sea and the Mediterranean Sea, which are deepwater seas, and where foundations must be erected at deeper sea levels, which significantly increase construction costs.”

While conditions are less advantageous than the coastal waters of neighboring Germany, or the EU countries with North Sea coastlines, France has nevertheless moved to gradually develop a nascent offshore sector in recent years, with six wind farm projects totaling 3 gigawatts awarded in tender rounds during 2011-13. Still in the construction phase – these projects are not due for completion until 2020-2023 – these wind farms offer up potential project cargo work in the country.

ISSUE 3 / 2017

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ITALY LESS ATTRACTIVE

The absence of offshore wind farms in Italy is also attributable to the deep coastal waters that have rendered the Mediterranean Sea less attractive to public and private wind farm-related investment. The Italian government only recently awarded the country’s first offshore wind farm license, with a small 30-megawatt development scheduled to take place over the coming years near Taranto in southeastern Italy.

Davide Astiaso Garcia, secretary general of the Italian Wind Energy Association, or ANEV, outlined how his organization is working towards the installation of other developments over the next several years.

“ANEV has established a Working Group to assess the potential offshore wind power feasibility for Italian shorelines, pinpointing the best sites with

regards to wind speed, distance from the coastline, water depth, and other kinds of limitations like environmental constraints, sea bottom typology, main ship routes,” he said. “There are many available sites, and we estimated an offshore potential in the Italian coastlines of about 750-800 megawatts.”

As in Spain, however, expectations are that any future offshore development in Italy will pale in significance compared with current leading regional country producers.

FRANCE’S BETTER PROSPECTS While Southern European countries Spain and Italy are unlikely to meaningfully boost offshore wind output over the future horizon, analysts are more sanguine over investment prospects in France, which is likely to provide the best future opportunities for breakbulk

and project cargo operators.

Having tendered 3 gigawatts of offshore wind farms from 2011-2013, the Paris government announced a new multi-year energy program in October 2016, which included a target of tendering further offshore wind farms with future output capacity of 500 megawatts to 3 gigawatts by 2023. Pre-qualification for tender of one site was initiated in early 2017.

Dependent on the success of existing projects and on the associated job creation, it is possible that additional tenders may be announced towards the end of this decade.

“There is room for another 4-5 gigawatts of bottom-mounted to be constructed post-2025 if industry testify to a notable cost signal in the current tender,” said Jacquemin.

Bellefleur added that the French government has also “engaged a legal and

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25/05/2017 14:50

ISSUE 3 / 2017

administration simplification work” to answer the needs of the players in this sector, which should encourage future offshore investment.

Legislative simplification measures introduced include incorporating around a dozen former required environmental permits into a new single contract, procedures to accelerate legal appeals against selected and authorized wind farms, and measures to accelerate tendering based on technical and financial criteria.

In addition, there is a new legal obligation for network operators to ensure grid connection for offshore wind farms within 18 months, with financial penalties paid to the offshore wind farm operators in case of grid connection delays attributable to the operator.

“These reforms have allowed the tender process to be simplified, reducing the timeframe for the offshore wind farm construction phase and clarifying the risk allocation. This has contributed to de-risking offshore projects,” Bellefleur said.

“Commercial scale projects are due to follow before 2025 and may be a game changer depending on the outcome of these pilot projects,” Jacquemin concluded. BB

Mark Willis is a Dublin, Ireland-based freelance journalist specializing in politics and economics.

IBERDROLA BRITTANY NOD

As one of several recent development announcements, Iberdrola has recently received planning consent for a new 496-megawatt offshore wind farm in the Saint-Brieuc bay on the Brittany coast, with construction set to commence in 2021.

While the final investment decision will be taken in 2018-19, the project is likely to entail €2.5 billion of investment, and incorporate 62 88-megwatt wind turbines capable of powering the annual electricity consumption of 850,000 people, according to an Iberdrola spokesperson.

In addition to conventional future offshore development projects, such as Saint-Brieuc, the French government has commissioned a number of floating offshore turbine pilot schemes in the Atlantic and Mediterranean seas, including in the Gulf of Lion, where waters are too deep or lack necessary ground conditions for conventional wind farms, but enjoy strong wind conditions.

Depending on the effectiveness of such schemes – which have already been deployed with some success in Portugal and Norway – floating offshore wind farms could witness further expansion over the future decades. www.breakbulk.com BREAKBULK MAGAZINE 21