Accept the Competitive Challenge and Keep the Wind Blowing

TALKING POINT

Accept the competitive challenge and keep the wind blowing

Auctions are becoming the standard instrument for granting state support in almost all European markets. In economic terms, this is the right step to take as it subjects renewables to market forces and rewards the most efficient projects. This was evident in the latest UK Government Contract for Difference (CfD) auction round, designed to support renewable energy projects being delivered in UK waters. One of the winners in the latest CfD auction round, September 2017, was innogy’s Triton Knoll offshore wind farm, located off England’s east coast. PES invited Richard Sandford, innogy Director of Offshore Investment & Asset Management, to give us an insight into this offshore project.

Thornton Bank wind farm (picture credit: C-Power N.V. Tom DHaenens)

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additional investment during the longer operational phase. This will enable the delivery of some of the lowest cost energy generation, with the cost of offshore wind continuing to fall at an unprecedented rate. ‘In the UK, offshore wind is now cheaper than the levelised cost of gas and nuclear according to recent figures released by the Department of Business, Energy and Industrial Strategy,’ Richard said. ‘This shows how economies of scale, increasingly extensive experience of installation and operations, and technological advancements are combining to help drive down costs.’ Triton Knoll has been successfully developed through a joint venture by innogy and Statkraft. However in October 2017 innogy took over Statkraft’s 50 per cent share in the offshore wind project and has become its sole owner. Both sides have Richard Sandford agreed to maintain confidentiality regarding the purchase price. ‘Triton Knoll’s auction success confirms the ‘With full control over Triton Knoll, we will excellent work we have done in recent now develop the project further towards years, and proved that we can successfully final investment decision in mid-2018,’ hold our own in a very competitive market Richard said. ‘From the outset, we have environment,’ Richard said. ‘Thanks to our worked collaboratively with our supply extensive know-how in the development as chain partners, to ensure that the business well as the construction and operation of case we submitted to the CfD auction is complex offshore projects, as well as our fully backed by our supply chain, and so is varied research and development activities deliverable, effectively from the point of we have succeeded in further reducing the having won a CfD. Thanks to this we have costs for offshore wind energy in the UK.’ already been able to announce a wealth of The industry pulling together to reduce preferred suppliers across our entire costs and drive innovation project, with UK firms playing a strong role in its delivery.’ innogy’s 860 megawatt Triton Knoll offshore project was allocated a CfD at a price of The prices in the latest UK auction round £74.75 per megawatt hour over 15 years. were far lower than most expected and The project is expected to trigger a capex show that developers are finding innovative investment of around £2billion into much ways to weave grid-build risks into needed UK energy infrastructure, with lower-cost project structures. innogy for

Nordsee Ost wind farm (picture credit: innogy SE)

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Greater Gabbard wind farm (picture credit: innogy SE)

example used its experience in generator- connection. Offshore construction is UK could be role model for emerging lead transmission system construction and expected to start in 2020. According to offshore markets offshore supply chain learnings to reduce current planning, commissioning of Triton ‘The offshore industry in the UK is very transmission risks and costs for its Triton Knoll is expected in 2021. proactive at working together with supply Knoll project. UK Government can help to continue chain and industry bodies, Government ‘The Triton Knoll team worked hard to development of offshore wind and politicians to deliver its aims. At reduce all costs associated with project national level we already have a number of For the UK to maximise the potential from delivery to lower the levelised cost of working groups and robust initiatives to this industry and its domestic supply energy. We have, for example, explored a help us achieve this. They focus on: chain, in terms of economic growth, jobs, dynamic rating system to optimise the accelerating economic growth around port and exports, it needs to give investors the export system and achieve more facilities; reducing consenting risks during certainty that comes with the guarantee megawatts through the network. We have planning processes; developing and and knowledge of future auctions. That been able to design out elements of the building on innovation; and building the certainty and long term vision enables the infrastructure thanks to advanced power supply chain and skills network of the supply chain to take decisions for the flow modelling; and we have minimised future. This could be a role model for future about their own investments, and infrastructure at both our onshore and emerging markets in Europe and growth and the development of new skills. offshore substations,’ Richard explains. worldwide,’ he said. As Hugh McNeal from RUK recently ‘With our contractors, we are also looking at confirmed, the UK’s offshore wind sector ‘We have considerable experience in innovations within our foundations design is a world leader in a global renewable developing projects and in designing, which we fully anticipate will reduce the energy market currently worth $290 billion constructing and operating renewables weight by at least half of those previously a year. assets both independently, and together deployed offshore, even though we will be with project partners and investors. In ‘The Government can help us by continuing installing some of the largest and most terms of offshore wind, innogy is one of the to hold competitive auctions for future powerful turbines currently on the market.’ world leaders. Our journey in the sector projects and by putting wind power at the started more than 13 years ago when we Triton Knoll has already been fully heart of its upcoming Industrial Strategy, as commissioned the first commercial scale consented. In 2018, onshore works are it has done with its latest CfD allocation offshore wind farm in the UK which we scheduled to begin to provide the grid round announcement,’ Richard stated. developed, built and now operate.’

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‘Since that time the industry has gone through a positive learning curve around supply chain, leading to more collaboration as companies become more capable and experienced. Design is more reliable and technology has adapted to meet the industry’s requirements. Installation is often quicker for both for foundations and turbines,’ Richard explained. And innogy has gained a lot of experience as well: Today innogy already operates renewable energy plants with a total generating capacity of roughly 3.7 gigawatts, including over 900 megawatts from offshore wind. Across Europe innogy has six offshore wind farms in operation, two currently in construction, and a number in development. In 2015, the company inaugurated the 576 megawatt Gwynt y Môr, in North Wales, which, at the time, was the second largest offshore wind farm in the world. Recently they announced 100% ownership of Teesside B, one of the four Forewind projects. In the years 2017 to 2019 the company intends to invest €1.5 billion to €1.7 billion in renewable energies. ‘A large proportion of our planned investment in growth is intended to flow into renewable energies. We are succeeding in continuing value-driven growth in our core markets and beyond,’ Richard said. innogy is looking at entering new markets, including for example, in the US. And it’s not just focused on offshore wind, but is also looking at solar and onshore. ‘The US market is one of our key strategic growth areas and we believe that our experience and expertise can help realise the country’s renewables potential.’

www.innogy.com Nordsee Ost wind farm (picture credit: innogy SE)

About innogy SE and Poland. In renewable power innogy is one of the major operators in generation, the company is also active in Europe. innogy plans, builds and operates innogy SE is Germany’s leading energy other regions, e.g. Spain, Italy and the plants to generate power and extract company, with revenue of around €44 MENA region (Middle East, North Africa), energy from renewable sources. billion in 2016, more than 40,000 with a total capacity of 3.7 gigawatts. employees and activities in 16 countries innogy’s aim is to take the expansion of across Europe. With its three business As a leader of innovation in future- renewables in Europe further in the short segments Grid & Infrastructure, Retail oriented fields like eMobility, they are term, both on its own and working with and Renewables, innogy addresses the represented in the international hot-spots partners. innogy believes that working requirements of a modern, decarbonised, of the technology industry such as Silicon together in this way is the key to making decentralised and digital energy world. Valley, Tel Aviv, London and Berlin. innogy the energy transition a success. Currently, Its activities focus on its 23 million combine the extensive expertise of its the company is particularly strongly customers, and on offering them energy technicians and engineers with represented in its home market, Germany, innovative and sustainable products and digital technology partners, from start-ups followed by the United Kingdom, Spain, services which enable them to use to major corporates. With planned capital the Netherlands and Poland. energy more efficiently and improve their investments of around €6.5 - €7.0 billion At the moment innogy is focusing on quality of life. (2017 - 2019), innogy is building the power continuing to expand its activities in market of the future and driving forward The key markets are Germany, the United onshore and offshore wind power. The the transformation of the energy market. Kingdom, the Netherlands and Belgium, company is also looking at entering new as well as several countries in Central With an installed capacity of more than markets and technologies, such as Eastern and South Eastern Europe, 900 megawatts in offshore wind and with large-scale photovoltaic plants. especially the Czech Republic, Hungary over 1900 megawatts in onshore wind,