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Offshore wind grows

by Jerome a Paris Sat Jan 22nd, 2011 at 08:29:22 AM EST

The 2010 statistics for offshore wind came out this week, and they look pretty good:

With 308 new offshore wind turbines installed in 2010 - an increase of 51% in installed wind power capacity on the previous year - offshore wind power experienced a new record growth in Europe. In total, 883 Megawatt (MW) of new capacity, worth some 2.6 billion, were installed in 2010 in nine wind farms in five countries, making a total of 2,964 MW.

(...) 2010 saw an improving financing environment with private banks, financial institutions like the European Investment Bank (EIB), utilities and pension funds backing the sector. Two major deals completed in 2010 highlighted the brighter financial outlook: Thornton Bank C-Power and Trianel Wind Farm Borkum West both came to financial close.

Amongst the projects completed this year was Belwind, the financing of which I played a role in, as well as Thanet, the current "largest offshore wind farm in the world (soon to be dethroned by Greater Gabbard, whose first turbines were connected to the grid this week and where the pictures illustrating this story were taken, by me, during a site visit last summer).

With 315 MW of today's existing fleet having being built with project financed, and an additional 194 MW having been refinanced, roughly 20% of offshore wind is on the books of banks for the long term already; the financings closed late lat year ensure that at least the same will be true for the next couple years, and one can expect a bigger proportion in future years. In other words, money will be there to make the planned investment pipelines a reality. Enquiring minds will note that there was a financing in December to which I did not participate - the Borkum West one. I did work on the file last year in my previous job, but was not there for its successful conclusion, and can thus no longer claim to have been involved actively in all deals! This is of course good news, as it simply underlines that the sector is broadening and deepening, with many new entrants and more people with the relevant experience. There will be work for lots of old-fashioned bankers in the sector in coming years.

And the offshore leader is indisputably the UK, which is somewhat ironic for a country that doesn't do industrial policy. And while it is true that the wind farms currently being built are largely manufactured outside the UK (Thanet, in the Thames estuary, was even installed out of Dunkirk, France), there now is a definite move by all industrial players towards creating facilities in the country. My google alert for "offshore wind" increasingly includes, in addition to the traditional NIMBY articles from the US, items about industrial investment in various parts of the UK (such as the recent announcement by Siemens to locate new facilities in Hull) - which means that offshore wind is associated with "jobs" as the main public narrative, rather than with bird deaths or subsidies.

Germany, which also has a huge pipeline of projects, several of which are under construction already, is not yet very visible in the statistics, but the country can enjoy the fact that it provides a lot of the equipment for the industry - in addition to several turbine manufacturers for the sector (Repower, Areva - but not Siemens which is really a Danish company in this sector), many German components provide critical sub-components like the gearboxes, transformers, generators or the cranes and tractors which are needed to move all these heavy pieces of metal around...

Strangely enough, while the Europeans are moving to large scale offshore wind, the US are worried about their gap with China, which has built one 100 MW offshore wind farm so far, but has made many grandiose announcements about their offshore investment plans. When one considers that one third of the existing onshore wind fleet is not even connected to the grid, and that the rest is beset by poor operational performance, one can only wonder how offshore turbines will perform over there... But of course, why would one worry about dominance of an industry of the future by declining, stagnant Europe?

Part of my Wind Power series

(link) where I posted this as the first comment:

The above is obviously not offshore, but it's the first turbine of Siemens's new direct drive turbines (in this case, a 3MW machine; they are also working on a 6MW one) which will also be produced for offshore use.

I wanted to show it because there have been a lot of scare stories about rare earth metals and the grip China has on these; direct drive turbines are one of the industrial products which could need such metals in its generator, but it needs to be said that such metals are in no way indispensable - other metals can do the job as well - you may lose a tiny bit of performance, but nothing that really changes the economics of the equipment, so the manufacturers are reasonably relaxed about it.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Jan 22nd, 2011 at 08:57:11 AM EST
great Jerome, sei un grande!

excellent news about the rare earths too, i guess this was part of the 'china is b-a-d & s-c-a-r-y' narrative.

 evviva l'aeolica!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sat Jan 22nd, 2011 at 02:35:18 PM EST
[ Parent ]
Spectacular !!  Finally some good news.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Sat Jan 22nd, 2011 at 09:01:14 AM EST
Good stuff.

As a matter of interest, any idea how much debt is now in place in respect of completed offshore wind installations?

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sat Jan 22nd, 2011 at 12:06:57 PM EST
I know the amount to the euro...

Rounded public figures are as follows (initial debt only, long term tranches only, some of these amounts are already being repaid):

Q7: EUR 200M
CPO1: EUR 125M (now fully repaid by CPO2)
Belwind: EUR 550M
Boreas: GBP 350M
ie about EUR 1.25 bn outstanding

And on project in construction
CPO2: EUR 900M
Borkum West: EUR 500M

so altogether more than 2.5 bn outstanding or committed.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sat Jan 22nd, 2011 at 12:17:14 PM EST
[ Parent ]
That's peanuts - which means this industry can still grow by several orders of magnitude.

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Jan 22nd, 2011 at 12:19:05 PM EST
[ Parent ]
You've played an important - perhaps vital - role in the start of millennial transformation (unusually hyperbolic for me, but I believe it).

I don't think, though, that I would depreciate China's role and importance. I've been involved in several house-building and remodeling projects over the last decade. Chinese-made tools, plus plumbing and electrical parts, were just beginning to saturate our markets when I started, and the quality was poor to useless. I've had to replace various light systems, switches, faucets, etc.; and I've installed new, but similar, devices in more recent projects. The improvement in essentially identical items is marked with subtle improvements in design as well. I predict that you'll see the same progress in turbines.

Meantime, go Europe!

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Sat Jan 22nd, 2011 at 01:58:15 PM EST
Wind power is a bit of a paradox to me. On one hand it's good to see more of it as compared to say coal power but on the other, it seems that we're missing something. I guess I've come to this because I see a lot of parallels between wind power now and hydro power at the time of water wheels, particularly in that both were/are essentially free forms of power with no obvious side effects or constraints, aside from the obvious energy input requirements.

Water power of course progressed from water wheels using only a portion of the energy available to dams capturing all of it. So individually the water wheels had little impact but when you increased the scale enough, the impacts became very significant. With the lack of apparent physical constraints on wind, I can see something similar happening. Is this something at all discussed in the industry?

by Jace on Sun Jan 23rd, 2011 at 12:00:49 AM EST
The effects of sourcing all viable wind sites should be weighed against the effects of climate change.  The loss of say the gulf stream would be far more harmful than the fraction of a percent change in wind speed produced by a wind farm.

One way to consider it is to look at the magnitudes of energy involved.

by njh on Wed Jan 26th, 2011 at 12:51:47 PM EST
[ Parent ]
"One way to consider it is to look at the magnitudes of energy involved."

That's my point. When water wheels were being developed, I bet no one thought that they'd ever be able to put a hydro-electric dam (the ultimate water wheel) on the Colorado River due to the energy involved. While the technology with wind power is somewhat different, the attitude seems to be very much the same: it's free energy and there's lots of it. When an attitude like that predominates, progress is all important and impacts tend to be overlooked especially when they're new.

by Jace on Fri Jan 28th, 2011 at 09:58:30 AM EST
[ Parent ]
And like hydro, as we start to notice problems, we back off (chinese not withstanding).  That's true of every energy source we use.  I believe it is better to use one with no known side effects (wind, solar, to a lesser extent nuclear) than to continue using those with big problems (coal).

Your point is of course completely correct - we must monitor and research the costs.  But at this point I believe the balance as in favour of wind.

I feel comforted by the fact that strong powers are against wind and they haven't found any show stoppers yet.  You can be sure that the anti wind faction would jump at even the slightest evidence there was an issue.

by njh on Fri Jan 28th, 2011 at 09:24:52 PM EST
[ Parent ]

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