No longer an offshore rush in Scandinavia -- Just three projects on the way for 500 MW

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Development of offshore wind power in Scandinavian waters continues cautiously, with no new wind plant online since 2004 and the combined capacity of truly offshore projects static at 420 MW. Just three projects, with a combined capacity of 510 MW, are to be built in the foreseeable future.

Next to come online will be Sweden's first major wind plant at sea, the 110 MW Lillgrund development of 48, Siemens 2.3 MW turbines, scheduled by utility Vattenfall for commissioning at the start of next year. It will be followed by the first of two, 200 MW offshore wind farms in Denmark contracted by the government, which from 2009 and 2010 will supply a further 2% of Denmark's electricity. Both Danish developments are extensions of existing wind farms, one at Horns Rev in the North Sea built in 2002 and the other at Rødsand, in the Baltic Sea between Denmark and Germany, built near the Danish town of Nysted in 2004.

Lillgrund, in sheltered waters in the Baltic Sea strait between southern Sweden and Denmark, was supposedly just the start of Vattenfall's offshore plans. Trolleboda at 150 MW should have followed in 2009, followed by the Taggen project, also at around 150 MW, soon after, with the big 640 MW Krieger's Flak provisionally scheduled for 2013. But German-owned E.ON sounded an ominous warning in January when the company said it is postponing Utgrunden II, the 24 turbine, fully permitted project in Sweden's south-eastern Baltic bay called Kalmarsund.

When E.ON inherited Utgrunden II with its purchase of French consortium Airicole AB in 2004, the energy conglomerate estimated the project would be completed in 2007 at a cost of SEK 1.4 billion (EUR 154 million). Now Lennart Fagerberg, CEO of E.ON Vind, says what he calls "the tremendous change" in price for offshore development has made the project's economics shaky. "It's no longer obvious that a project that looked great a year ago looks great now," Fagerberg says.

Gunnar Fredriksson of the Swedish Windpower Association says E.ON may also be smarting from the smaller government subsidy it received compared to the SEK 213 million (EUR 23 million) granted to Vattenfall for Lillgrund, which is expected to cost SEK 1.8 billion (EUR 198 million). At about half the size, Utgrunden II has so far been granted SEK 70 million (EUR 7.7 million).

Fagerberg declines to comment on whether the shifting costs of offshore wind will also scuttle E.ON's plans at Södra Midsjöbanken in the southern Baltic Sea for 200 turbines to be built during 2012 -- 2015. "For Utgrunden it is a purely economically driven decision," he says. "Costs are rising and some countries are giving more subsidies than others. The same project, built in the UK for example, might make sense where it wouldn't made sense right now in Sweden."

As soon as E.ON's news surfaced. the Swedish press went into overdrive repeating the company's lament; suddenly quite a few offshore projects seem to be on terra non firma [table]. Matthias Rapp of the Swedish Windpower Association admits there is a shift back to land projects in Sweden, but advises developers to hang on to the good projects and wait until turbine suppliers can once again meet demand, which should bring costs down. The offshore jitters may also force the government's hand on the financing of grid connections, he says. "If the government picked up the grid-related costs like other countries -- Germany, Denmark are two examples -- it would reduce the costs of offshore projects by 20-25% and put Swedish offshore on equal footing with its neighbours," Rapp says.

Danish determination

Compared to Sweden, the Danish government is showing more determination to see its offshore wind resource put to use. Horns Rev II will be sited 14 kilometres northwest of the existing 160 MW facility. It will be built by Danish energy company Energi E2, part of Dong Energy. At the end of last year, Energi E2 announced completion of the project's environmental impact study, which now lies with the national energy agency, the authority responsible for approving the project. Horns Rev II will comprise 95, 2.3 MW turbines and three large experimental machines. A contract with the turbine supplier is expected to be signed this summer with site work to start before the year is out. It is to start delivering power from May 1, 2009. Energi E2 won the government contract for the project by offering electricity for 50,000 full load hours, about 12 years of generation, for EUR 0.07/kWh. The government is stumping up for transmission costs, as it is with Rødsand II.

Rødsand II, to be built in the Baltic Sea between Denmark and Germany, is being developed by a consortium consisting of Energy E2, the Swedish division of German utility E.ON, and Denmark's Dong Vind. The consortium's winning bid offered to deliver power for 50,000 full load hours, about 14 years of operation, for EUR 0.067/kWh. The difference in the length of time the two projects must operate to achieve 50,000 full load hours reflects the stronger North Sea winds at Horns Rev compared to the inland waters of the Baltic Sea. The development schedule for Rødsand II runs a year later than for Horns Rev II and the Danish-Swedish consortium is currently working on its environmental impact study, which is expected to be offered up for public comment in the coming months. The project is to be built three kilometres west of the existing 168 MW Rødsand wind farm and produce electricity from 2010.

Norway dormant

If Sweden's uncertainty around offshore is currently great, Norway's is greater, with the government making no provision to develop its offshore wind resource. The mammoth 1.5 GW of capacity planned by Havgul AS at the Havsul I, II, and IV projects is still awaiting word from Norway's energy directorate, which said it would decide on whether or not to support the project last year. From the start, Havgul has said the development depended on the existence of a joint Norwegian-Swedish green energy certificate market, a plan scuttled by Norway before it got off the ground. Havgul says it will continue to develop the project in hope of selling it once all permits have been obtained.

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