Taking offshore wind in its stride

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With long stretches of coastline, plenty of wind and two decades of experience with wind turbines on land, Scandinavia leads the world in offshore wind power development, with 420 MW in operation and a further 1000 MW or so on the way

The early ecstasy over offshore wind power is fading fast as obstacles in the form of technology failures, infrastructure difficulties, lack of financing, bureaucracy and politics surface with monotonous regularity. Projects in the first of two rounds of offshore construction permits in Britain is moving forward far more slowly than expected and the start date for construction of second round projects is still over the horizon. Belgium has cancelled its flagship 100 MW Seaenergy project and Germany, with its grand plans for tens of thousands of offshore megawatt, has quietly retreated to the back of the room while it waits for 5 MW turbines and deep-water solutions. In the United States, anti-wind groups and wealthy summer-home owners at Cape Cod, Massachusetts, continue a fierce campaign against the 468 MW Cape Wind offshore proposal, attracting a deal of negative publicity to the wind industry.

There are exceptions to the offshore wind industry's tale of woe. In the Netherlands, construction on the long awaited 108 MW Near Shore Wind Farm is to start this year (Windpower Monthly, July 2005) and in Britain the first offshore wind farm to use 3 MW wind turbines is now online, the third of the round one projects to be finished. But it is in Scandinavia, Denmark, in particular, that the most notable exception is seen. In Denmark large scale offshore wind farms are not just talked about, they are built by government. Next in line are 200 MW extensions to both the 160 MW Horns Reef wind station off the west coast of Jutland in the North Sea, and the 165 MW Nysted wind farm, off Lolland-Falster in the Baltic Sea.

And it is in Denmark that local communities have taken on the role of project sponsors of offshore wind farms, continuing the co-operative tradition of wind turbine ownership long a feature of the Scandinavian wind power market. Ordinary people, not professional investors, own both the 23 MW Samsø wind station in Denmark's sheltered inland waters and half of the 40 MW Middelgrund wind farm just off Copenhagen.

It is also in Denmark that major, expensive technical failures in the first big offshore project in exposed waters have been taken in their stride as part of a steep learning curve. The failures of the Vestas turbines at Horns Reef caused far more uncertainty among potential investors in offshore wind power overseas than they have ever done in Denmark. The technology failures in the Middelgrund station off Copenhagen (Windpower Monthly, April 2005) have also failed to rock future plans. .

All in all, the Scandinavians take little issue with offshore wind developments. "The coastlines in Sweden, Norway, Finland and Denmark are so long that it makes it relatively easy to find good sites that do not bother the local people," says Bjarne Lundager Jensen, director of the Danish Wind Industry Association. In general, he says, Scandinavians are positive towards renewable energy and believe building wind turbines at sea is a good idea.

Swedish scepticism

Sweden started off strong with ambitious plans for offshore wind, but stopped some years ago to take a more careful approach. Together with Norway, Sweden is working on the formation of a cross-border market for renewable energy, driven be a requirement for electricity retailers to acquire green energy certificates to demonstrate their compliance with targets for the proportion of renewable energy in their supply mix. Market players blame Sweden's offshore stall on the delay in implementing the green certificates market.

The arrival of Swedish state utility Vattenfall firmly in the middle of the offshore wind sector may make a difference (Windpower Monthly, July 2005). As part of a major merger and acquisition deal among Scandinavian utilities, it now owns several major offshore developments, including 60% of Horns Reef in Denmark, the just completed 90 MW Kentish Flats development off the south-east coast of England and the 640 MW Swedish part of the Swedish/German Krieger's Flak project. In Sweden, four projects with a combined capacity of 890 MW also seem likely to start building within the next three years (table).

The Swedes, however, do not seem as forgiving of the start-up problems suffered by the offshore wind industry as the Danes are. "You have to learn to walk before you can run. And from what we have seen from the bigger parks, I don't know whether we can walk yet," says Michael Henriksson, chairman of the Swedish Wind Power Association.

Henriksson shares a common concern about offshore wind power: he feels it is still too expensive, and the costs seem to be going up, not down. It does not help that the technology used is often in an early stage of development, not thoroughly tried and tested before it is sent to sea, he says. "The new offshore parks are big, and there is a lot of money involved in the investment. Before you invest a billion Swedish kroner or euro or dollar, you must know the technology works, that there is a market with long term rules -- such as green certificates -- and so on. The economy must be there. These are some points that still must fall into place."

Up to the politicians

"All energy is produced by a political will, and then you can use whatever technology you like -- nuclear, wind power, hydropower -- that's not the important thing," Henriksson continues. "If the politicians want offshore wind to be there, they can make the framework to make this happen. But if they just say they like it and it would be nice, it will be very, very tough to build."

The deregulated market in Sweden creates a special challenge for offshore wind. "The market's main issue is not to take responsibility for society," Henriksson says. "The market's main responsibility is to earn money. Government help in offshore wind -- maybe some type of subsidies or loan guarantees -- is very tricky in a deregulated market."

Henriksson points out that the next two offshore wind developments in Sweden, the Lillgrund and Utgrunden II projects (table), owned, respectively, by Vattenfall and Sydkraft, received a couple hundred million Swedish kroner each in investment subsidies. "Vattenfall earned SEK 12.6 billion in its first half year of 2005. And they need this subsidy to make Lillgrund viable? Is there any chance they will build something offshore without a subsidy?" Vattenfall, despite its recent march into the offshore wind industry, declined to be interviewed for this article.

"This government money was initially meant to help out research and technical development for pilot projects," Henriksson continues. "The next wind farm coming up is maybe ten times the size of Lillgrund. Should we subsidise that one, too? In the present budget, that would be very tricky."

Danish wind consultant Birger Madsen says cost is the biggest concern offshore, particularly in light of its market potential in the EU emissions trading scheme (ETS). The ETS, which swung into gear at the start of 2005, puts a monetary value on individual companies' own reductions of carbon dioxide emissions (CO2). Each country and its obligated participating companies have a set amount of CO2 allowances -- the ETS currency -- determined by the Kyoto agreement.

Currently, onshore wind offers an enormous competitive advantage for the CO2 quotas it can bring -- with small-scale hydro as possibly the only real competitor, Madsen says. "Offshore has the same advantages regarding CO2 quotas, but if the standard price for offshore is 50 percent higher, it ends up competing with many other emission-free technologies," he says -- a more difficult competitive situation.

Driving down costs

Lundager Jensen could not agree more. "The main challenge is to drive down the expenses on offshore wind, thereby producing cheap kilowatt hours at sea," he says. Lundager Jensen lists three topics that are top priority for the Danish wind industry. The first is to establish more uniform procedural standards for European offshore developments. "Many projects take much too long to realise, due to the different authorities' procedures," he says.

The second is to design a transparent and uniform environmental impact assessment (EIA). "I hope we can tap experience from Denmark, where the EIA is very comprehensive," Lundager Jensen says. The third problem area takes aim at the cost of transmission and grid connection. "All around Scandinavia and Europe, the transmission system operators (TSOs) deal with grid connections differently," he says. "It takes them a long time to agree that something can be connected, and it becomes easily expensive. We are met with all sorts of demands. We need, therefore, to look at how we can design a fair, common framework in the EU for connecting the big offshore wind parks to the network in the future."

Transmission is a well-known constraint in the UK, where more than 1000 MW of projects in the second round of projects permitted for development on Crown Estate's land have as yet no place or means to take their energy ashore (Windpower Monthly, September 2005).

Meanwhile, the Danish state is paying for the next 400 MW of offshore development in two further demonstration plant, Horns Reef II and Nysted II. "Operation of Nysted and Horns Reef has brought a lot of experience, which [Denmark] can use offensively when building new wind farms offshore," says Lundager Jensen. The desire is for costs to come down to the point when government sponsorship is no longer necessary for offshore wind to compete in the open power market. This is not unthinkable, Jensen says. "If we continue to see the price of energy rise, as it is doing now, plus the tougher demands to reduce greenhouse gas emissions, combined with a reduction in the costs of offshore wind, then we'll hopefully find a situation where it will be attractive for private investors to get involved."

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