In a report produced for the German wind station operators' association, Wirtschaftsverband Windkraftwerke, KPMG says the potential internal rate of return (IRR) from investment in German offshore wind power does not match that available for the same investment in the UK, France and Spain. The UK tops the list of returns with an average IRR of 13.4%, followed by France at 11.8% and Spain at 11.4%. Germany's IRR is just 1.2%. That is better than the 0.3% available from government sponsored projects in Denmark, where earlier this year Dong Energy announced its exit from participation in a planned 200 MW extension of an existing 168 MW facility off the southern Baltic Sea coast at Nysted, citing poor expected returns. That project is now solely owned by the Swedish division of Germany's E.ON. As for Sweden's offshore market, KPMG believes the IRR is minus 5%.
KPMG points out that the UK market is set to become more attractive to investors under plans to grant offshore producers 1.5 Renewables Obligation Certificates (ROCs) for each megawatt hour generated, up from 1 ROC/MWh now. ROCs are sold to electricity retailers who under the Renewables Obligation must supply a rising proportion of their power to customers from renewable energy sources. The extra ROC income would raise the IRR range in the UK for offshore projects increase from 6.7-19.6% to 12.1-26.7%, says KPMG.
Even if Germany's purchase price is raised to EUR 0.14/kWh, its range comes in at 4-11.3%. Adding another cent to the rate to make it EUR 0.15/kWh, as proposed in recent discussion on the reform of Germany's renewable energy act, will not change the relation significantly, KPMG adds.
The report stresses that with the offshore market requiring wind turbines of at least 3 MW rated capacity, the sector faces severe turbine supply shortages. While planned offshore wind projects in Europe total 16,792 MW by 2011, manufacturers will deliver just 5111-6171 MW in the intervening period, or about the equivalent of the UK's offshore ambitions, which alone total 5969 MW. This could put Germany's planned 5369 MW offshore pipeline at risk, it says.