A big tangle of knots to untie in Germany

Google Translate

With only a short coastline, shallow water sites are relatively rare in Germany and most of its proposed development will need to be way out to sea. But the economics of deepwater development dictate use of truly huge wind turbines -- and they are not yet on the market

xMuch talk of massive German offshore development in the pipeline has so far resulted in very little hardware in the water. Developers blame the slow progress on the vagaries of permitting, though they seem to be in no great hurry to speed things along. On the one hand, the long procedures for offshore siting construction permits have relatively fixed time limits, so a developer knows when a decision can be expected. But getting a permit for an offshore cable connection is a different story. It can take so long that developers fear the time limits on their construction permits will expire.

xFederal shipping office Bundesamt for Schifffahrt und Hydrologie (BSH), responsible for construction and cable permits in the German exclusive economic zone, seems to take a benevolent view on extending the deadlines where necessary. The 240 MW Butendiek plant, one of the most advanced offshore projects, has suffered a 12 month delay in getting cables permitted. The company is in talks with the BSH over lengthening its construction authorisation, which, as things stand, is valid only until June.

xDeciding where to set the new deadline is like looking into a crystal ball, however. Cable permits are not granted until a developer has signed private contracts with all land owners across whose property the cable passes. Butendiek has signed 160 contracts but one is outstanding: a parish on the island of Sylt is objecting to the wind station, which would be just visible from its shores. If common ground cannot be found, Butendiek will take the parish to court. The legal proceedings could stop progress for another two to three years, since neither cable permitting nor financing can be completed while court cases are ongoing.

xxfinancing tangle

xxThe Butendiek project has a written confirmation from network operator E.ON Netz that its system can absorb generation from the wind station, but an electricity feed-in contract has not been signed. E.ON is waiting for progress on cable permitting before making a move, it seems, yet Butendiek cannot complete a financing prospectus for its project until the feed-in contract is wrapped up.

xWithin this tangle, Butendiek's Wolfgang Paulsen still hopes to close financing in the autumn, after which components and materials will be ordered -- starting with 80, Vestas 3 MW turbines. The company hopes to raise EUR 100 million in equity from the many citizen investors who by buying into the early stages of the project have paid for its development to date. If these investors choose not to pitch in with another EUR 5000 per stake, "there is a waiting list of other private investors," says Paulsen. "It's too early to say what the expected rate of return will be," he adds. Banks KfW and HSH Nordbank are arranging to finance another EUR 300 million of investment. Negotiations are underway over federal and state guarantees that would make financing easier, says Paulsen.

xApart from the small 60 MW Prokon Nord wind station in the North Sea, no German offshore project has yet been granted all cable permits (Windpower Monthly, March 2004). Plambeck Neue Energien hopes to start building the 77 turbine pilot-phase of its Borkum Riffgrund offshore project in the North Sea in 2006, but it has been awaiting cable permits from federal and state authorities for several months, says spokesman Rainer Heinsohn. The cable route in Germany's exclusive economic zone is the responsibility of the BSH until it reaches the 12 nautical mile zone and moves into the jurisdiction of the Lower Saxony state ministries for agriculture and the environment, the Wattenmeer national park administration and the state mining office. "There is discussion between the authorities," says Heinsohn.

xThe Lower Saxony environment ministry stresses that this is the first time any of the four authorities have had to deal with this kind of permitting, but there is a political interest in bundling the offshore cables from several projects into one favoured route -- from the North Sea via the island of Nordeney to shore. "The regional planning procedure for this route should be completed by the end of the year," says Jutta Kremer-Heye from the environment ministry.

xWith Danish utility E2 as joint venture partner in Borkum Riffgrund since October 2003, finding the money for the EUR 550 million pilot phase of the project is not expected to be a problem. "E2 has experience with five offshore wind stations in which it has stakes or is operator," points out Heinsohn.

xEnergiekontor also awaits cable permits for the 80 turbine pilot phase of its Borkum Riffgrund West offshore project, which received a construction permit in February 2004. "There are several authorities that have to agree amongst themselves and there are many interests at stake," says Cerstin Lange of the company. "They are also treading on new ground so all aspects must be carefully monitored, but there is also a danger of being overcautious. It's a fact that we wish permitting could progress faster, but on the other hand we are the piggy in the middle. But we still expect to start construction in 2006 or 2007," she says. "We are aiming to progress on several fronts at once, in talks with turbine manufacturers and with banks," she adds, although without full permitting there will be no financing, and without financing, turbine builders will make no firm supply offers.

xxlevel of risk

xxA government scenario foresees some 20.7 GW working offshore by 2020, with 5.4 GW already running by 2010. But areas of the North and Baltic Seas that are available for German wind energy mostly lie outside the 12 nautical mile zone and are generally more than 30 kilometres out to sea where water depths often exceed 30 metres. The depth and distance from shore take the industry way beyond its current experience, representing a level of risk that hugely increases financing and insurance costs.

xBanks will only accept general contractors that can provide at least 25% of the equity and the security to attract project investment of several hundred million euros. This type of company -- mainly energy utilities -- could number no more than ten. If 20 GW of offshore wind is to be installed within 14 years, spread evenly over time, this means these ten companies must build a 400 MW plant every 2.8 years -- or less, from 2010. It seems unlikely that the offshore ball will be really rolling before then. Whether the general contractors will be technically and financially in a position to have several projects going at once -- in view of the considerable expansion required in the conventional power station sector as well -- remains to be seen.

xStringent conditions issued by insurers may slow the kick-off. To maximise profits on projects far out to sea, plans are frequently for up to 80, 5 MW turbines. But insurance companies will only consider second generation turbines for offshore use. The first 5 MW prototypes went online at the end of 2004, so adequately tested models suitable for series production will not be ready until about mid 2007 at the earliest -- unless the insurers soften their demands or outside insurers are left out of the loop.

xAvailability of port and offshore transport capacity may also trail demand. A study on wind power integration from German wind energy agency Deutsche Energie-Agentur (DENA) points out that the annual average 120-day "weather window" will not provide sufficient time to get 20 GW of offshore capacity installed by 2020. Assuming up to three wind turbines can be loaded onto vessels each day and that the need for transport will grow, a substantial increase in port capacity will be needed. Yet investment is not yet being poured into port infrastructure. The government's 2020 installation target could, therefore, be unreachable.

xTo add to the uncertainty, developers are expected to face some difficulties in getting confirmation that the network can absorb the power produced from their plants. While the closure of the Brunsbüttel nuclear power station, scheduled for 2008 or 2009, will free up transmission capacity, Germany's nuclear phase-out law allows the owner utilities, Vattenfall Europe and E.ON Netz, flexibility to postpone decommissioning of the unit.

xThe financial incentives to develop offshore wind in German waters looked good a few years ago, but as time passes, their attraction is fading. The German renewable energy act, last amended in August 2004, sets out an initial premium payment of EUR 0.091/kWh for offshore wind power, payable for at least 12 years after a project is commissioned. Projects installed far out to sea and in deep water can receive an extension. For projects commissioned from 2008, the this initial pay rate drops by 2% and continues to decrease by that amount for each of the next two years for new projects.

xFrom the start of 2011, the rules are much less favourable. While a new project commissioned in 2010 will get EUR 0.0857/kWh for 12 years, a project started up the following year will be entitled to just EUR 0.0571/kWh. The DENA study questions whether offshore projects commissioned in 2011 will be economically feasible. It also highlights the unanswered question of what arrangement will apply if part of a project is commissioned in 2010 and the rest in 2011.

xIn recognition that offshore developments were moving much slower than initially expected, the renewable energy law amendment in August shifted the commissioning deadlines to allow more time for projects to come online and still be eligible for the favourable payments. The amendment also improved the premium rates. Another adjustment to the deadlines may have to be made in view of the slow progress. While the current Social Democrat/Green government may be inclined to push through such extensions -- assuming it gets back into power in 2006 -- it remains to be seen whether the Conservative government coalition, originally responsible for the renewables energy feed-in payment mechanism, will continue to show its support, should it win the next election.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Latest news