Offshore wind power could become a reality in New Zealand by 2030. Photo / File
Offshore wind power could become a reality in New Zealand by 2030. Photo / File
Inflation has hit some overseas offshore wind projects hard, but NZ Super Fund partner Copenhagen Investment Partners (CIP) is confident the industry can weather the storm.
The fund and CIP formed a partnership in 2022 to explore the potential for large-scale offshore wind energy in the South Taranaki Bight.
Theproject is still gathering data - a process that will take about two years.
If all goes well, New Zealand could be generating power from offshore wind by 2030.
While a decision on whether offshore is feasible is still some time away, other projects around the world have run into trouble due to rapidly escalating prices.
The Financial Times reported last month that Danish wind developer Ørsted - the world’s largest offshore wind developer - said it would “pause” dividends for 2023-2025, cut 600 to 800 jobs around the world and exit offshore markets including Norway, Spain and Portugal.
Ørsted is trying to restore confidence after shares tumbled last year as it abandoned two United States offshore wind projects due to rising costs and recorded higher-than-expected impairments, the FT said.
CIP is the world’s largest dedicated fund manager for greenfield renewable energy projects, investing in onshore and offshore wind projects, along with solar, hydro, batteries, advanced biofuels, among others.
About one-third of what it does is tied up with offshore wind projects.
The company has about 30 billion euros ($53.5b) in funds under management and has an ambition to grow that to 100b euros ($177.7b) by 2030.
“In doing that, we will need to have built a robust pipeline of more than 120 gigawatts of greenfield renewable energy projects to work with,” CIP partner Michael Hannibal told the Herald.
“We have more than 70 gigawatts under development for wind - more than 50 gigawatts in offshore wind and the remainder in onshore.”
Hannibal says CIP has a track record of engaging early in markets to see if offshore wind can play a part in the energy mix of individual countries.
Offshore wind typically has a higher baseload - or continuous - factor because it blows more consistently at sea than it does on land.
He also says offshore wind can offer more “complementarity” to other forms of renewable energy.
In Taranaki, the joint venture is using a floating measuring device to record data - a process that will take two years.
CIP has been in talks with the Ministry for Industry and Employment over the framework required for assessing the feasibility of offshore wind.
New Zealand is looking to Australia’s feasibility licensing system as a guide.
The chances are that rules will be similar to those that apply to offshore oil and gas explorers.
Inflation pressures notwithstanding, Hannibal said the interest in offshore wind had developed significantly, with new markets opening up.
Locally, if all goes to plan, then New Zealand could be getting offshore wind power by 2030-32.
He acknowledged that inflation had taken a toll - with turbine prices alone going up by 30 per cent in short order.
“If you look at what has happened offshore, then there has definitely been some stumbling blocks.”
“In the US, a couple of developers have left their projects as a consequence of several factors, including a structural challenge.
Wind turbine prices have shot up by 30 per cent. Photo / File
“We in CIP are building projects - including the first large-scale projects in the US - and we are installing offshore turbines right now in Taiwan and Korea.”
He said some players, who had locked in their offtake - what they could get from the income stream - were caught out by sharply rising costs and supply chain constraints.
Hannibal said CIP had taken in a different approach - locking in suppliers and offtake - so that they jointly tackle the challenge of inflation and supply shortages as they arise.
“We are building our projects based on a different approach whereby we locked in the suppliers to jointly take on the challenge of inflation supply chain issues.”
The sector had become more expensive because of inflation and raw material prices.
Participants have had to recalculate their approach to new projects.
“It looks like things are lining up again,” Hannibal says.
“And if they don’t line up, then we delay the investment decision.”
Hannibal says the model for offshore wind is robust and is capable of withstanding the inflation pressure that the sector currently faces.
He says about US$1.7 trillion ($2.8 trillion) is invested in renewable energy a year - about the same as what is invested in oil and gas.
“That will have to be closer to US$5.4 trillion ($8.8 trillion) per year if the planet is to meet its Paris Agreement targets,” Hannibal says.
“The world is moving quickly, but not quickly enough.”
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.
