Energy firms plan to invest billions in Irish Sea wind projects
New wave of Irish Sea developers hope generate and sell power by 2025
An offshore wind farm off the coast of England, operated by Innogy Renewables.
After years of neglect, energy companies plan to sink almost €6 billion into the Irish Sea over the next half decade or so on offshore wind projects. Big players such as Norway’s Statkraft and Germany’s Innogy are queuing up to build wind farms off the Republic’s east coast with the capacity to supply electricity to hundreds of thousands of homes and businesses.
In 2018, Innogy, a renewable player spun out of German giant RWE took a stake in Dublin Array. This is a plan to build turbines with a total capacity to generate 600 mega watts (MW) of electricity - enough to power 600,000 homes - close to the capital. It was originally conceived by Irish company Saorgas, which remains a partner.
Innogy Renewables chief operating officer, Hans Bünting, estimates that the project will cost €1.2 billion to €1.5 billion. The group will probably recruit a finance partner or partners for Dublin Array. Recently, Australian bank Macquarie signed up to work with Innogy on a large offshore project in the UK.
Belgian operator Parkwind is joining with State-owned ESB to revive the Oriel wind farm project, a 330MW development off Co Louth effectively mothballed earlier in the decade. That will cost about €700 million. Individual investors who originally backed the project in the early years of this century are still on board.
South of this, Statkraft plans a 500MW scheme on a site off the Dublin coast that it acquired when it bought Irish operator Element Power. The Scandinavian generator’s chief executive, Christian Rynning-Tønnesen, estimates the cost at €1 billion. However, Statkraft is unlikely to shoulder much of this, as it plans recruiting a partner to do much of the building and ultimately operate the facility.
New wave of Irish Sea developers
Fred Olsen Renewables has a foreshore licence for a 1100MW wind farm close to the Codling Bank around 13km off Bray, Co Wicklow. This could cost €2 billion. That group is seeking permission for a second, similarly-sized project next to the first. Most of these plans have been around for almost 20 years in one shape or another but a new wave of Irish Sea developers hope to be generating and selling power by 2025.
None of these businesses is small. Frankfurt-listed Innogy is worth around €23 billion and is active in 16 European countries. One territory is the UK, where it has several offshore wind farms, including a stake in the Galloper plant off the Suffolk coast, in which the ESB also has shares. Global energy giant Eon is bidding to take over Innogy in an asset swap deal with RWE.
Norwegian state-owned Statkraft last year earned €6 billion supplying enough renewable energy across Europe and other markets to power around 60 million homes. Fred Olsen Energy is part of the Norwegian shipping giant, Fred Olsen. The energy division has assets of €1.4 billion and provides rigs and craft to the oil and gas exploration industry as well as investing in renewables, and owns Belfast’s storied Harland & Wolff shipyard.
Parkwind has 550MW facility generating electricity in Belgian waters with a further 550MW on the way .
It’s an impressive cast, but this has happened before. A decade or so ago, investors lined up to back offshore power plants in the Irish Sea. They declared that the winds buffeting the Republic could make it the “Saudi Arabia of renewable energy” generating electricity, jobs and wealth.
Only it didn’t happen. Unlike Saudi oil wells, wind farms required financial support. Those backing the various Irish Sea projects hoped the Government would extend a guaranteed price scheme, renewable energy feed-in tariff (REFIT), which was underwritten by homes and businesses, to the offshore industry. Onshore plants had already benefitted from the scheme.
Eamon Ryan, the then Green Party Minister for Communications, Energy and Natural Resources, favoured extending the subvention to offshore. However, his successor, the Labour Party’s Pat Rabbitte, decided against this.
It was 2011, the depths of the recession, many households were struggling with energy bills and Refit was getting expensive. Between October 2010 and 2011, families and employers contributed €157 million to the scheme through a public service obligation added to their electricity charges. Backing big offshore projects risked radically increasing this burden. An alternative plan to facilitate wind players export power to Britain foundered on problems at the UK side. So the Irish Sea went untapped.
Meanwhile, the industry grew everywhere else. Figures from Renewable UK say there are close to 2,000 turbines around Britain’s coast supplying the equivalent of 15 million homes and cutting 26 million tonnes of greenhouse gas emissions a-year. Virtually every big European power company is involved.
So what has suddenly changed here? Bünting explains that new technology has made wind farms more viable. Around 15 years ago, individual turbines could produce 2MW, which has since gone to 9.5MW and even 12 to 15MW in some cases. “It means fewer turbines and higher output,” he says.
Nevertheless, there is likely to be a subsidy. While Refit is no longer available to new projects, the Government has a replacement, the Renewable Electricity Support Scheme.
A spokesman for the Department of Communications, Climate Action and Environment explains that it will work as a competitive auction. Power companies bid to get Government subsidies. The most cost-effective projects - those needing the least cash - will win support. “Round one of this scheme will be open by the end of the year and will be technology neutral, meaning it will be open to all forms of renewable electricity projects - including offshore wind farms,” the spokesman says.
The scheme’s final design will not be known until Brussels ensures it does not infringe EU state aid rules, but it is unlikely to differ much from similar systems used in other member states. Bünting notes that a recent auction in Germany was “zero-subsidy”. The Irish version may not go this far, but most observers believe that it will require far less cash from businesses and homes than Refit.
Alongside that, it will allow scope for power-purchase agreements. Under these, individual businesses agree to buy all the electricity generated from a particular plant or project. This is popular with multinationals, which like to do such deals with renewable operators to help satisfy investors’ demands that they take steps against climate change.
On-line retailer Amazon recently agreed to back a wind farm in Donegal, developed by Invis Energy, a joint venture between engineer Craydel and €12 billion fund, Hg Capital. The web giant has done similar deals in California and Sweden.
Government policy is driving this. Richard Bruton, the Minister for Communications, Climate Action and Environment, has pledged that 70 per cent of the Republic’s electricity will come from renewable sources by 2030. The previous commitment was 55 per cent. Bünting and Rynning-Tønnesen both say this helped spark interest in investing here. “Ireland has big ambitions and a good wind resource,” Rynning-Tønnesen says.
Notwithstanding that, there is already doubt that the Republic will hit a target of getting 40 per cent of electricity from renewable sources by next year. It is close; the figure is more than 30 per cent, which Rynning-Tønnesen observes is “not bad”.
While the new players all cite policy as a factor, demand is the big draw. Investors are building electricity plants here because they believe they can sell the power generated to Irish people and businesses, whose appetite for energy is increasing.
Figures from electricity grid operator Eirgrid, show that demand could grow by up to 57 per cent. This year, Irish people will use slightly more than 30 terawatt hours (TWh), enough to power 30 million homes. That figure could exceed 40 TWh in 2027.
Demand in Dublin alone is likely to double over the 2018-28 period, meaning that the capital’s need for electricity will increase over 10 years at the same rate as over the previous century. Some of this is down to an expanding economy and population, but a chunk of it is due to the growing number of data centres locating here.
Eirgrid’s figures indicate that data centres, industrial buildings full of internet servers, will use around 31 per cent of those 40-plus terawatts that the country as a whole is expected to consume in 2027. Tech giants such as Amazon, Facebook and Google already have such facilities here.
Government policy encourages these businesses to locate data centres in the Republic as it helps to anchor their existing investments here. This is good news for renewable electricity suppliers, not only because it means increased demand for power, but because much of it will be from tech multinationals, whose preciousness about their green credentials makes them keen on power purchase agreements with such operators.
While the jigsaw’s pieces appear to be falling into place, some remain sceptical that projects will progress past being proposals. Some of Oriel’s original backers say that they have been waiting 15 or 16 years for a return but the prospect remains some way off.
Seeing Parkwind and ESB taking control gives them some cause for optimism but they note that the plan has been on the drawing board since the early noughties. “I am a little bit cynical about the whole thing,” says one, who hoped the wind farm would help fund his retirement when he invested in 2003.
Sceptics say the foreshore planning and licensing, governed by 1933 legislation, slows things down. Changes in the number of wind turbines needed could mean that projects with existing permits could have to re-apply. Bünting agrees that both this process and getting connections to the national grid could be quicker.
“We are working with maritime law that needs to be adapted for offshore wind, and there is no clear regulation on offshore grid connection,” he says. However, talks with Government and Eirgrid have left Bünting believing that the authorities are “very willing” to iron out these wrinkles.
Either way, he notes that the administration’s own decision to increase the Republic’s renewable energy targets has probably increased pressure to streamline foreshore planning. A spokesman confirms that the Department of Housing, Planning and Local Government is working on legislation designed to do just that.
Developers are not the only people who feel the law needs modernising. Helen Gelletlie, policy team member of Coastal Concern Alliance (CCA), a group set up as the first offshore wind farm proposals emerged, calls the regime totally outdated. She highlights poor accountability as a central flaw. It allows a Government minister make decisions after referring only to a committee. “Take Codling Bank, you had 1,100MW approved for Bray Head without a single submission from the public,” she says.
Gelletlie welcomes proposed foreshore licensing reform, but her group maintains that all projects should be assessed under the new laws, including those that already have permits. CCA is not objecting to them per se, but the way in which they were licensed. “It was done under legislation introduced almost 90 years ago before large scale industrial development at sea was envisaged,” she argues.
Environmental groups largely support renewable energy, including offshore wind, but say any likely impact on projects’ surroundings should be minimised. Oonagh Duggan, assistant head of division-policy and advocacy with Birdwatch Ireland - which has 15,000 members - points out that the organisation has created a sensitivity map detailing likely risks to birds that onshore wind farm developers use when choosing sites.
Duggan, who is on the Government’s offshore energy steering group, says that Birdwatch Ireland has piloted a similar map for offshore using six species and is seeking funds for a complete version. “We’re hoping to do a similar map for all seabird species to help with planning for offshore renewable technologies,” she says.
NTR, ESB and Eirgrid paid for the first map, which Duggan says indicates that the industry is prepared to take environmental responsibilities seriously. If that is the case, investors could still have to convince locals as projects become a reality. Bünting says Innogy works with locals in other European countries where it has built on- and offshore wind farms.
Innogy sets up funds that give cash to local groups and schools. The company also has schemes that offer shares in its assets to communities. “We like to leave some money within the community,” Bünting says. Statkraft too works closely with local organisations as it goes through planning.
But all that assumes that history won’t repeat itself and the Irish Sea’s new wave of investors don’t find themselves running aground before ever getting properly launched.