Danish Utility To Build World's First One Gigawatt Offshore Wind Farm
February 03 2016 - 8:43AM
Dow Jones News
By Kjetil Malkenes Hovland
Denmark's Dong Energy, part-owned by Goldman Sachs, is going
ahead with the world's largest offshore wind farm, the Hornsea
project off the coast of northeast England, making it the first of
its kind to have the capacity to produce more than one gigawatt of
electricity.
The 1,200-megawatt project, located 120 kilometers off the coast
of the county of Yorkshire, will be the first offshore wind project
is set to power more than a million British homes, the company
said. The project will receive U.K. government support in the form
of a fixed tariff for the first 15 years of production.
"We are excited about building this huge wind farm and pushing
the boundaries of the offshore wind industry," said Dong Energy
Chief Executive Henrik Poulsen. The company hasn't disclosed the
size of its investment.
The move by Dong Energy, which is preparing for a public listing
next year, represents an increasingly big bet by the utility on
offshore wind power amid plummeting prices for oil and gas.
Dong Energy gave the green light to the 660-megawatt Walney
Extension project in the Irish Sea only last October. Walney
Extension is for now the world's biggest offshore wind project, set
for completion in 2018, two years ahead of Hornsea.
The global offshore wind market experienced a record year by
installed capacity in 2015. Consultancy FTI Intelligence has
projected installed generation capacity to nearly quadruple to
31,200 megawatts in 2019 from 8,179 megawatts in 2014.
But growth in the near term may be slower than in the recent
past, FTI Intelligence says. One problem is the investment required
to connect new offshore facilities to the mainland grid, a problem
for the U.K. and Germany in 2016.
Another issue is that, despite a rapid cost reduction in recent
years, offshore wind power projects are still roughly twice as
expensive as onshore wind, and require subsidies to compete with
fossil-fueled power plants. In the past, massive up-front costs and
volatile government subsidies have led some companies to drop
projects, like RWE AG's 2013 exit from the Atlantic Array wind farm
in the U.K.
The Hornsea project is a shot in the arm for the
renewable-energy business of power-equipment maker Siemens AG.
The German industrial group is the exclusive supplier of
7-megawatt turbines for the wind farm. Dong chose a combination of
Siemens 7-megawatt turbines and competing 8-megawatt turbines from
MHI Vestas, a joint venture between Japan's Mitsubishi Heavy
Industries and Denmark's Vestas Wind Systems, for the wind farm in
the Irish Sea.
Dong Energy last month wrote down the value of its oil and gas
business by 16 billion Danish kroner ($2.33 billion) due to weak
prices, lower reserves and project challenges. The company said it
would keep its oil arm when the company is listed by March next
year, partly to fund renewable investments.
Write to Kjetil Malkenes Hovland at
kjetilmalkenes.hovland@wsj.com
(END) Dow Jones Newswires
February 03, 2016 08:28 ET (13:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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