Wind energy will play a key role in helping Europe break away from Russian fossil fuels and increase its energy independence, but slow permitting and strains on the supply chain need to be tackled if Europe wants a fast rollout of wind power, according to Sven Utermöhlen.
Sven Utermöhlen is the CEO of offshore wind at RWE Renewables. He spoke to EURACTIV’s Kira Taylor during the WindEurope conference in Bilbao.
The European Commission aims for at least 60 gigawatts (GW) of offshore wind production by 2030. What are RWE’s plans to increase offshore capacity in Europe? How much investment are you putting in, and when do you expect those investments to start generating electricity?
We are investing €50 billion gross in our core business by 2030 – that is €50 billion for climate protection. Offshore wind is one of our focal points in our growth strategy: by 2030, we intend to triple our pro-rata offshore wind capacity from 2.4 GW to 8 GW worldwide.
We will be announcing the completion of our Triton Knoll Offshore wind farm in the UK soon, and we have recently started the offshore construction works for Kaskasi, off the German coast. These offshore wind farms will have a total installed capacity of 1,200 MW. In addition, we are progressing with the 1.4 GW Sofia Offshore Wind Farm in the UK.
We are also driving a global offshore wind development pipeline of 10 GW with secured offshore rights. For example, the 1,000 MW project Thor in Denmark or FEW Baltic II in Poland.
Our offshore development activities are focused on North America, the Asia Pacific region and especially attractive markets in Europe.
The European Union and the member states are increasing their own national targets and providing further growth opportunities. Countries like Germany, the UK and the Netherlands have raised their offshore targets and will also raise their auction volumes. I understand Belgium and Ireland are talking about that as well.
All this will provide further growth opportunities, and that means that we will also expand our renewables pipeline and, particularly, our offshore wind business further.
In total, the EU aims for 40% of its energy mix to be provided by renewables by 2030 – the European Parliament even wants to aim even higher, at 45%. What support is needed in terms of policy from the EU and national governments to achieve these targets?
What is vitally important is that mechanisms are being put in place that continues to stimulate investments. Especially in the current situation with the war in Ukraine, there are stresses and strains on the supply chain and raw material prices. How to reflect that in policy and auction regimes to ensure the investment signals remain in place needs to be considered going forward.
Generally speaking, it is essential that, firstly, the auctions happen fast because the lead times are relatively long in offshore wind. With the lead times in offshore wind usually being somewhere between five and 10 years, those additional volumes need to be auctioned in the next two to three years at the latest, or none of those additional volumes will be in operation by 2030.
Then there is another very important aspect: auction designs and regimes should not only be based upon financial or price criteria, but they should also consider qualitative criteria, such as sustainability, the capability of the players, their ability to deliver on these projects, and their contribution to the European economy. This is crucial to make sure that the projects will be delivered. The one thing we see in a critical light would be negative price components, especially if they are uncapped. This will lead to price increases on the consumer side.
Let’s have a deeper look into the latest developments in Germany. The German government’s so-called “Easter Package” is another step towards a faster energy transition. Significantly higher expansion targets for onshore and offshore wind power as well as for photovoltaics, more speed in grid expansion and a new, high priority for renewable energies: the German federal government is thus continuing what it announced in the coalition agreement.
But there need to be improvements when it comes to the conditions of offshore expansion. In particular, the planned negative bidding component would simply increase the cost of green power for industrial consumers – the opposite of what we need. And also, the “Contract for Difference” route for pre-surveyed areas without inflation indexation and restrictive bid ceilings will clash with currently unpredictable cost development in the area of raw materials.
In addition, according to the current status, green electricity from pre-surveyed areas for offshore wind farms cannot be marketed to the industry because it remains trapped in the “Contract for Difference” system. Large quantities of green electricity would then not be available to industry at all.
A closer look at other best practice models within Europe could be helpful. Decarbonisation of the industry is one of the biggest challenges on our way to reaching the European climate targets and making the energy transition happen. Offshore wind power should play a central role in this.
During this conference, we heard a lot of concerns about the supply chain. What are you looking for from the European Union and national governments to fix this?
The wind industry is determined to deliver, even in challenging times. But we need the right government policies more than ever.
Prices are significantly higher at the moment – the raw material prices in particular and the price of certain components, such as cast iron parts – and price predictions have become significantly more uncertain. At this time, it is very difficult for companies in the supply chain to predict where prices will go, which means that if they are asked to make offers for delivery in four or five years from now, it’s very difficult to predict their costs.
So governments need to look at how that uncertainty on the cost side can be reflected in auction systems and potentially on the revenue side because simply putting the risk on developers also won’t work. We need to think about mechanisms that allow us to take investment decisions, even though those cost uncertainties are much higher now. And we definitely need to look at this as a medium-term topic – it’s not going to be a short term issue.
Regarding the supply chain, it needs to expand. It needed to do so beforehand, even without the Ukraine war, to deliver the much bigger volumes of wind that we want to deliver. And it probably needs to grow even further now because of the disruptions due to the war in Ukraine. What the supply chain needs are investment and stimuli to expand the industrial base in Europe.
Aside from these concerns, what are the biggest challenges facing your industry at the moment, and what solutions are you looking for?
Ensuring the security of supply and diversifying energy supplies are the top priorities – particularly through the expansion of renewables. To accelerate the build-out of wind energy, key decisions need to be made now.
For onshore wind, the permitting challenges are very severe – across most countries. The timelines for permitting need to be shortened significantly, and some of the frameworks can certainly also be simplified – the new German government has just published proposals to simplify permitting for onshore wind. Several of their proposals sound very promising. Similar measures need to be taken across Europe to simplify permitting processes for onshore wind. Of course, this also has to do with raising local acceptance. We as an industry need to work hand in hand with the local communities and municipalities in which we operate.
For offshore wind, local acceptance from people living nearby is not the issue. But we do have challenges with regard to permitting due to the ambitious build-out plans. We need to intensify dialogue with stakeholders for the same or adjacent offshore areas. That includes the topic of nature protection and the coexistence between offshore wind and other users of the sea, like fisheries or shipping.
On the one hand, we need to clarify and simplify some of the rules and procedures to ensure shorter timeframes for environmental impact assessments and consultation with the various stakeholders. We also need to have a dialogue around the very positive effects of offshore wind on the environment. For example, some studies show that, where offshore wind farms are in operation, after only a very few years, the population of certain marine species increases in the vicinity of these wind farms.
What has been the impact of the war in Ukraine on the rollout of renewables? There is concern about how it might impact the industry, but there is also more of a push for renewable energy. What’s your take?
There is an even louder call for a faster and bigger rollout of renewables because the topic of security of energy supply and independence has taken on such a significant priority. And indeed, it is true that renewables and wind can play a very important role in providing energy security.
The challenge is that, at least in the short to medium term, the war has led to disruptions in the supply chain and those increased raw material prices. That obviously makes the faster delivery of even more renewables capacity an even greater challenge. However, the wind industry is determined to deliver. And we at RWE are continuing to expand our green core business at full speed.
How important is wind power as an energy source in Europe, given the war in Ukraine?
It’s vitally important. Renewable energies, in general, are very important for energy security, and wind power is one of the two big pillars of that, the other being solar. If you look at the potential for renewable energy across Europe, then probably wind energy has the single largest role.
Obviously, it varies country by country, some countries have a very favourable solar resource, but then, of course, there are other countries in the north and northwest of Europe where wind energy plays an even bigger role.
Meanwhile, the North Sea and the Baltic Sea in Europe are the best places to build offshore wind anywhere in the world. The combination of relatively shallow waters and outstanding wind speed is unique. That is something that we absolutely have to utilise as Europe because it is a unique opportunity.
The European Commission has outlined its plan to reduce Europe’s dependency on Russia, called REPowerEU. What is your view of that? Do you think it’s good? Do you think more is needed? And what can your contribution to it be as RWE?
We definitely welcome that initiative by the EU Commission. We believe it’s the right direction to go in. What we can do as RWE is to deliver on the Growing Green strategy that we published last year with our €50 billion investment until the end of this decade.
The vast majority of that will go into renewables, especially wind energy, both on and offshore. Another important cornerstone for us is the ramp-up of hydrogen projects as soon as possible. Delivering on that strategy is our contribution. Obviously, with the increased targets for wind power and renewables in the EU, we will certainly seek to participate in those additional growth opportunities.
You mention RWE’s plan to invest in renewables. What do the next ten years look like in terms of investments? What renewable energy technology are you focusing on?
The focus on renewable energy is mainly split into the offshore and onshore wind. There is also a significant element on solar photovoltaic. Together, those account for 90% of the overall investments in the growing green strategy. The remainder is on flexible power generation, hydrogen and storage.
And what does the ratio of renewable and fossil fuel projects in RWE’s portfolio look like in 2030?
At RWE, we are driving the energy transition more rapidly than most other companies, targeting net-zero by 2040. We have a clear path to climate neutrality: we are responsibly phasing out nuclear and coal and continue to invest in green growth, including flexible generation, which will be switched to green hydrogen as soon as possible.
With our extensive investment and growth strategy, we will expand our powerful, green generation capacity to 50 GW internationally by 2030. Our growth is sustainable: more than 90% of our investments until 2030 will flow into sustainable projects according to the EU taxonomy.
Finally, you’ve just been elected chair of WindEurope. What are your main goals for this?
I am honoured to be elected to represent the full value chain of wind energy in Europe – an industry contributing to building a low-carbon future.
I want to help the wind industry manoeuvre through these challenging times, which are indeed characterised by the conundrum of the growth outlooks, which are bigger than ever and arguably bigger than we ever dreamed of. At the same time, there are parts of this industry and parts of the supply chain whose situation, given the Ukraine war, has become even more complicated.
WindEurope, as an association, needs to help the industry get through this situation by having the right dialogue with policymakers, stakeholders and society and providing the right arguments, the right information, the right education around our industry so that we meet the goals we share with the EU and national governments across Europe.