With the possible exception of Britain, nowhere is more effort and money being poured into preparing the way for massive development of offshore wind energy, from permitting huge projects and getting cabling sorted out, to designing and building a generation of multi-megawatt turbines purpose-built for operation at sea (pages 51-56). E.ON Netz and Vattenfall Europe Transmission have taken market soundings and expect to receive demands for links to shore from the developers of 1.6 GW in the North Sea and 1.3 GW in the Baltic Sea by the end of 2011. If all goes according to plan, the first turbines in a 60 MW test field 40 kilometres into the North Sea should start to go up next autumn.
Why, though, did it take six long years for the industry to get even this far, given that the first of 19 projects granted building permits to date -- representing a combined capacity in excess of 6 GW -- received its go-ahead back in 2001? The answer lies in the sensitive ecology of the short German coastline. The Wattenmeer national park along the North Sea coast is virtually a taboo area for industrial activity and similar restrictions apply to Baltic Sea coastal waters. The ecology problem is compounded by an unavoidable conflict between wind farms and shipping interests around busy north European ports.
All things considered, if offshore wind power is to happen in Germany, it has to be way out to sea in deep waters, increasing the cost and the size of the technical challenge. With that made clear, it fell to a plethora of agencies with no prior experience of permitting large power plants at sea to undertake a job which they were ill prepared for. It takes time to scale barriers of such magnitude. In the end, the federal shipping office took control, limiting the first round of permits to pilot projects of up to 80 turbines each.
Along the way, the federal government has regularly put in a steering oar. As well as setting purchase prices for offshore electricity, its biggest contribution is a law, passed in December, requiring transmission system operators (TSOs) to provide cables to shore at cost to be met by consumers. Provided an offshore plant has started serious construction by the end of 2011, the TSO has to link it to shore as soon as it is ready to go online. The government, by removing transmission responsibility from the offshore generator, instantly slashed up to 25% of the cost of building wind stations in German waters, launching an industry.
The TSOs, as demonstrated by their thorough sounding of what needs to be done by 2011, are taking their legal responsibility seriously. E.ON Netz has had a 25-strong team on the job since the law was passed. But the 2011 horizon is cause for concern. The government argues that the deadline, enshrined in the Energy Industry Act, is to make project developers and TSOs get a move on. The indications are that it will be extended, provided cables are being laid at fair cost and projects are getting built. The deadline, however, being in a just passed act, is unlikely to come up for review before 2009-2010, at the earliest.
The risk of cables becoming costly stranded assets if the wind industry does not deliver on time is real. Vattenfall is expecting to spend a good deal more than EUR 700 million on transmission for the four first projects. Consumer interests, however, are being protected by the transmission regulatory office, the Bundesnetzagentur. Its oversight is likely to be stringent, also of federal government efforts to clear the way on land for new transmission lines to feed offshore wind from the coast to load centres.
The risk is real
So just as the government is trusting in the wind industry to deliver, investors are putting faith in government and its agencies to stay on the case. Both sides will need to keep their side of the bargain if offshore wind is not to become a new nuclear-costs debacle, with vast extra bills sent to an unsuspecting public. In Germany, unlike the set-up emerging in the UK, it is consumers, not investors, shouldering the transmission risk.
Not that investment in German offshore wind is without risk. Even pilot offshore stations are coming in at 400 MW each, with independent power producers and energy majors making significant financial commitments. The generation businesses of E.ON, Vattenfall and Denmark's Dong Energy have all bought German offshore project companies. As well as the risk of the government backtracking, they may not be able to secure wind turbines and offshore cables. Demand for both is outstripping supply, to the extent that E.ON has ordered a cable even before requesting a permit to lay it (page 54). With both the UK and Germany relying on offshore wind to meet their emission reduction targets, supplies will be tight. The German government, aware that the industry focus is currently on Britain's lucrative market, has proposed raising its offshore power purchase price to EUR 150/MWh. Time will tell which projects get built where -- and at what cost.