Wind power at sea is by far the most powerful of all renewables.
(Photo: AP)
Dusseldorf Amazon, Covestro, Fraport. Three companies that actually have nothing in common. Except that they are the first three companies in the world to get wind power from the sea without subsidies. The energy supplier Orsted won the chemical group Covestro as its first major customer for its offshore park Borkum Riffgrund 3 last year. Internet giant Amazon followed in mid-November.
Now the Baden-Württemberg energy group EnBW is stepping up with the airport operator Fraport. The logistics company draws 85 megawatts from the Nordseepark He Dreiht – when it is built. “PPA agreements of this magnitude enable a company like Fraport to be completely climate-neutral,” says EnBW board member Georg Stamatelopoulos in an interview with Handelsblatt.
PPAs (Power Purchase Agreements) are long-term power purchase agreements with a term of between ten and 20 years – and help energy companies to realize wind and solar power projects worth billions.
This is especially true for Borkum Riffgrund 3 and He Dreiht. These are the first wind farms in the world to be built without government subsidies. PPAs make the billion-dollar projects affordable in the first place. For Stamatelopoulos, however, the fact that customers are waiting in line before an investment decision has been made, as in the case of EnBW, shows that “wind power is very marketable”.
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He Dreiht will cost 2.2 billion euros and will ultimately produce almost one gigawatt of wind power. Ten percent of it goes to Fraport. But EnBW is already in talks with potential customers for the rest of the electricity. “PPAs are an important key to wind power that is economically viable under market conditions”, Stamatelopoulos is convinced.
Europe is catching up
In the USA and Canada, the agreements have long been part of everyday life. The front runners are the Silicon Valley giants such as Google, Microsoft, Facebook and Apple. Last year alone, according to Bloomberg New Energy Finance, PPAs with a volume of more than 23 gigawatts were concluded worldwide, most of them in North or South America and Asia.
But Europe is catching up. Experts report that demand “increased significantly” in the past year, particularly with a view to the goal of climate neutrality. The contracts not only secure the company’s own green electricity. They also serve as long-term protection – against rising electricity prices. Above all, however, they are finally promoting wind power into profitability. Where government instruments such as the “Renewable Energy Sources Act” (EEG) were previously necessary to enable the construction of offshore parks, PPAs are now accelerating the expansion of wind power at sea without any political support.
“In order to achieve the German climate protection goals, a consistent expansion of renewable energies is required. Green PPAs are a measure to promote Germany as a climate-neutral business location and at the same time give companies the opportunity to protect themselves against rising electricity prices, “believes Andreas Kuhlmann, head of the German Energy Agency (dena). PPAs are the link to “accelerate the expansion of renewables in a market-driven manner”.
Economic wind power
PPAs are only possible because the cost of wind power has fallen by more than 60 percent over the past ten years. For wind farm planners and operators like EnBW, this will finally open up a profitable business model in the future: On the one hand, they will market the offshore electricity generated via PPAs. By 2025, two of the planned five gigawatts of renewable output are to go to customers via direct purchase agreements.
On the other hand, they sell parts of their completed wind farms for hundreds of millions. In 2015, 49 percent of the Baltic 2 offshore wind farm went to the Australian financial investor Macquarie Capital for 720 million euros. Half of the He Dreiht wind farm with a capacity of 900 megawatts is also to be sold with the planned completion in 2026.
Fraport’s supply contract begins in the second half of 2026 and has a term of 15 years. Fraport will then cover a large part of the electricity from the 60 wind turbines, which will rotate around 90 kilometers northwest of Borkum and 110 kilometers west of Heligoland.
Renewable investments are always long-term, explains Stamatelopoulos: “After 15 to 20 years, a project like He Dreiht will pay for itself depending on the surrounding conditions.” EnBW then expects a return of between four and five percent.
The fact that the new federal government wants to abolish funding through the EEG 2023 should further accelerate the trend towards PPAs in Germany. And hopefully give offshore wind power even more momentum. With 35 gigawatts (GW) worldwide, it represents less than five percent of the total of 743 GW of installed wind power capacity. The International Energy Agency (IEA) even expects it to become the most important source of electricity in 20 years’ time.
By 2040, investments in offshore wind power could have reached over $ 1.3 trillion worldwide, writes the IEA. Global efforts to address climate change, increasingly cheaper systems and rising CO2 prices have already resulted in record numbers in the expansion of offshore energy over the past two years.
More: Rescue on the high seas: wind turbines are becoming a great hope in the fight against climate change
