Clarksons Renewables Newsletter

Week 32

The US Senate and the House of Representatives have passed a USD 433 billion climate bill called The Inflation Reduction Act of 2022. The bill includes USD 369 billion in climate investments, and analyses show that this can reduce the greenhouse gas emissions in the US by 31 – 44% by 2030 from 2005 levels. The country’s Paris Agreement pledge is a 50 – 52% reduction. The bill includes “transferability” of tax credits through their sale to a third party that then would be able to monetise them. According to tax lawyers, this would create a tradeable market for the credits, potentially bringing in new investors across the clean energy industry. Tax credits, worth up to 30% of capex for projects that begin construction before 2026, will be given for zero emission investments and production to, among others, support the manufacturing of domestic wind components and domestic vessel construction. The bill totals more than USD 100 billion tax intensives for clean energy investments and production. According to an analysis by the REPEAT Project, this could drive up to USD 3.5 trillion in investments in American energy infrastructure over the next decade. Different versions of the bill have experienced more than a year of repeated failures, with Senator Joe Manchin from the coal state West Virginia rejecting climate spending measures twice in 2021. He surprisingly announced that he would support this scaled-down version two weeks ago. In exchange, he won concessions that the Department of Interior, for the first time, will offer at least two million acres of land and 60 million acres of offshore acreage for lease to oil and gas producers annually for the next decade. Despite this, it is estimated by Energy Innovation that for every ton of new emissions generated by the oil and gas provisions, at least 24 tons of emissions will be prevented by the bill’s clean energy provisions. The Inflation Reduction Act of 2022 was approved 51 against 50 in the Senate, with Vice President Kamala Harris casting the tie-breaking vote in her role as president of the Senate. On Friday, the act was also approved by the 435-seat House of Representatives, where the Democrats have a slim four-seat majority. President Biden will sign the bill into law next week. The Democrats announced that they have agreed to introduce another bill later this year to streamline the permitting of clean energy infrastructure projects. The country’s goal is 30 GW of offshore wind power by 2030. The country’s first utility-scale project, Vineyard Wind, will begin offshore construction next year, and a wave of new projects will come by mid-decade. According to Clarksons Research, nearly 39 GW of offshore wind capacity is under development in the US.

California Energy Commission (CEC) adopted the recently announced increased offshore wind targets for the state on 10 August, including 5GW of floating wind by 2030 and at least 20 GW of offshore wind within 2045, up from the initial target of 15 GW. With the new goals speeding up the energy transition, the state will initially power 3.75 million homes with clean energy and 25 million by mid-century and make the state a national leader in offshore wind. Next up for the CEC is to study the economic benefits of offshore wind for seaport investments and workforce development needs and create a roadmap to develop a permitting process for offshore wind energy facilities and transmission infrastructure. This will be part of a strategic plan for offshore wind development in California delivered to the Legislature by June 2023, which the CEC was directed to create in September 2021.

The outgoing Massachusetts Governor Charlie Baker signed legislation on 11 August that expands the state’s offshore wind mandate from 4 GW to 5.6 GW. In addition, the legislation scraps the previous price cap by eliminating the stipulation that each procurement round must come in at a lower price than the previous auction, which led to a lack of interest in the last auction. Future procurement rounds will now favour bids that include supply chain investments, mitigation of environmental and stakeholder impacts, and organised labour contracts. Moreover, the law establishes an offshore wind industry investment programme that will enable the Massachusetts Clean Energy Centre (MassCEC) to authorise tax intensives in consultation with the Department of Revenue over the next decade. MassCEC will also be able to make funding available through the Offshore Wind Industry Investment Trust Fund for R&D, port development, grid upgrade, and training and education for the local workforce, in addition to supporting the municipalities in procuring offshore wind power directly from developers. The Act puts the Department of Energy Resources in charge of the solicitation process to bring more gigawatts of offshore wind than the 2.5 GW already procured.

PD&MS has been contracted for the operations and maintenance to support Vattenfall’s European offshore wind portfolio for an undisclosed sum over three years. The agreement includes options for a further two-year period. The contractor will support Vattenfall’s offshore wind farms in the UK, the Netherlands, Sweden, and Denmark. Vattenfall’s portfolio in these countries consists of the 604 MW Kriegers Flak offshore wind farm in Denmark and the 1.5 GW Hollandse Kust Zuid offshore wind farm in the Netherlands. In the UK, the company is developing Aberdeen offshore wind farm and planning the construction of Norfolk Vanguard and Norfolk Boreas. In Sweden, the company bought a majority stake in two offshore wind projects some months ago from Zephyr, with a combined capacity of 2.8 GW.

Seaway 7 has been awarded the contract to commence early works on the engineering, procurement, installation, and commissioning of inter-array grid cables at the Moray West offshore wind farm. The contract is valued at between USD 50 million and USD 150 million. The Oslo-listed company’s final scope is under negotiations and may include supplying and installing approximately 125 kilometres of 66 kV subsea power cables and respective cable protection systems. The company will use vessels from its cable lay fleet to work on the project in 2024. Moray West is located on the east coast of Scotland in the Moray Firth, about 22.5 kilometres from the Caithness coastline. The 882 MW farm will feature 60 Siemens Gamesa turbines, and it is expected to reach a financial close in the coming months and deliver its first power in 2024. The farm is developed and majority-owned by Ocean Winds, a 50-50 joint venture between EDP Renewables and ENGIE, with Ignitis Group holding a minority share in the farm.

Wood Thilsted has been contracted by US Wind to lead the engineering of MarWin and Momentum wind projects off Maryland and provide technical support to US Wind. The contractor will provide the foundation design for US Wind’s flagship MarWin offshore wind project and support the development of Momentum offshore wind farm, with the development area totalling a capacity between 1.1 and 2 GW. US Wind, majority owned by Renexia, delivered the construction and operations plan to the Bureau of Ocean Energy Management last December for the areas developed by the company offshore Maryland. The plan calls for up to 121 turbines, four offshore substations, and four offshore export cable corridors located 16 kilometres off Ocean City. The state of Maryland has been an early mover in offshore wind, with its latest awards securing that the state will meet its total offshore wind goal of 2 GW by 2030.

Outer Dowsing Offshore Wind, a TotalEnergies and Corio Generation joint venture, has selected Offshore Design Engineering Ltd. (ODE) to deliver Owner’s Engineer support to the pre-front-end engineering design stage for its 1.5 GW Outer Dowsing offshore wind project. ODE will conduct concept development and selection for components such as wind turbine foundations, onshore and offshore substations, and inter-array cables, in addition to supporting the definition of the project’s Employer’s Requirements. The views from the recently submitted scoping report and data from ongoing surveys will be used to guide the design and layout of the wind farm and its associated infrastructure. The Outer Dowsing offshore wind project is located 54 kilometres off England’s Lincolnshire coast, and the formal submission for development consent is planned for late 2023.

RWE and Northland Power have agreed to co-develop a fourth offshore wind project in Germany. The 225 MW project planned for the N-3.7 in the German North Sea will have the same shareholding ratio as the previous three projects, with Northland Power acquiring a 49% stake and RWE, the sole developer for the project, with 51%. The transaction is pending formal closing. All four projects are located north of Juist island, and two of them have already been successful in auctions. Invitations to tender for the other two projects have been scheduled for 2023, according to RWE.

GE Renewable Energy has taken delivery of its first of two crew transfer vessels (CTVs) dedicated to the operations and maintenance of the Saint-Nazaire offshore wind farm. The delivery announcement was made by Louis Dreyfus Armateurs and Tidal Transit, which were selected by GE Renewable Energy in December 2020 to provide the two vessels for the wind farm. The delivered CTV is named Inno’vent, the first CTV entirely designed and built in France. The ship is designed by MAURIC and constructed by OCEA, and both the CTVs will sail under the French flag. They are equipped with batteries for hybrid mode and are outfitted with a foil to reduce fuel consumption and improve performance, reducing CO2 emissions by about 15%. The CTVs measure 26.7 metres in length and 9.4 metres in breadth, with a draft of 1.8 metres. The vessels will transfer 24 technicians to maintain the turbines on the farm, including a crew of three. They will have a service speed of 25 knots and a cargo capacity of 10 tonnes. The 480 MW Saint-Nazaire offshore wind project features 80 GE Haliade 150-6 MW turbines. It is owned and operated by Eolien Maritime France, a consortium of EDF Renouvelables, Enbridge, and the Canada Pension Plan Investment Board. Once commissioned later this year, the farm will be France’s first operating offshore wind farm.

DEME’s vessel Orion has installed the 1,300-tonne offshore substation jacket and the 2,220-tonne topside for France's 500 MW Fécamp offshore wind farm. The ship is the newest member of the DEME fleet. The installation was completed on schedule on 11 August. Fécamp’s electrical substation was constructed by a consortium including Atlantique Offshore Energy, a marine business unit of Chantiers de l’Atlantique, GE Grid Solutions, and SDI. Atlantique Offshore Energy oversaw the topside and jacket design, manufacturing, and onshore commissioning. GE Grid Solutions delivered high and medium-voltage electrical equipment and protection control system design, manufacturing, and commissioning, while SDI was responsible for the transport and installation. The same consortium is to design, manufacture, and install the electrical substations for the Sain-Nazaire and Courseulles-sur-Mer offshore wind farms in France. Eolien Maritime France is developing the Fécamp farm, a joint venture between EDF Renouvelables, wpd offshore, and EIH S.à.rl, the latter owned by Enbridge Inc. and CPP Investments, and it will be fully commissioned next year.

Keppel Corporation Limited and Keppel Infrastructure Fund Management will jointly invest EUR 305 million to acquire a 50.01% stake in a special purpose vehicle that holds 50% of the Borkum Riffgrund 2 offshore wind farm. The vehicle is owned by Gulf International Holding, a subsidiary of Gulf Energy Development Public Company Limited. Orsted owns the remaining 50% stake in the wind farm. The transaction is expected to be completed in the fourth quarter of 2022. Keppel Infrastructure Fund Management intends to fund the investment with internal sources of funds, equity, debt capital market issuances, and/or external borrowings. Keppel Corporation Limited, through its wholly-owned subsidiary KRI, will also fund its share of the investment through capital contributions to the joint venture. The transaction marks Keppel Infrastructure Fund Management’s first investment in offshore wind and the second investment in the European renewable energy market. The company is almost tripling its renewable energy portfolio to over 700 MW. Borkum Riffgrund 2 is located 59 kilometres off the coast of Lower Saxony in the German North Sea. The 465 MW farm has been fully operational since 2019, and it operates under the German EEG 2014 market premium mechanism, which has a Feed-in-Tariff and guaranteed floor price till 2038. The farm has a 20-year power purchase agreement and an operation and maintenance agreement with Orsted until 2038.

The transaction combining Mainstream Renewable Power and Aker Offshore Wind has closed, resulting in a stronger renewable company with a 27 GW portfolio including solar and onshore and offshore wind projects. After the transaction, Mainstream Renewable Power is owned 58.4% by Aker Horizons, 24.9% by Mitsui & Co., Ltd., and the rest by Irish minority shareholders. Aker Offshore Wind’s portfolio of offshore wind projects includes the 1.2 GW KF Wind project in South Korea, 800 MW in Japan, 200 MW in the US, 3 GW across three Freja projects planned in Sweden, and 2 GW across two projects planned for Norwegian auction. Mainstream Renewable Power’s offshore business will continue to develop existing opportunities for fixed and floating offshore wind in several countries.

Contacts

Research

Jens Egenberg +47 92 02 01 70

Amanda Berland +47 47 66 81 57

Oslo

Frederik Colban-Andersen +47 91 82 28 04

Anders C. Hagen +47 91 80 07 61

Vegard Volls?ter +47 92 68 48 55

Espen Bj?rnson +47 90 94 44 39

Hamburg

Rouven C. Willner +49 174 933 0093

Tim B?rner +49 173 631 4996

Henning Leverkus +49 172 589 3520

David Matthews +44 790 095 6539

Aarhus

Gabriel Andersen +45 81 95 95 43

London

Neil Buchan +44 77 7139 5479

Mikkel Nielsen +44 77 4704 3014

Aberdeen

James Braid +44 780 840 3790

Olivier Candeel +44 788 422 5030

Chris Tweedie +44 773 606 6412

Houston

Jack Fitzgerald +1 713 235 7469

Shanghai

Jack Qiu: +86 13 8117 88836

Singapore

Tilly Manley: +65 9665 1034