Scheduled off the coast of England, the world’s largest offshore wind park will probably produce cheaper energy in the next decade than by burning coal.
A number of offshore wind projects won contracts to sell power at guaranteed prices at a US auction on Friday. The 39.65 pound price per megawatt-hour was 31% below the level at a similar auction two years ago.
Both utilities and, increasingly, energy majors, are planning to spend $ 448 billion by 2030 on an eightfold capacity increase.
Projects from developers including SSE, Equinor and Innogy won contracts in the acquisition of offshore wind power that will have the ability to generate as much as 5.5 gigawatts of power, the government said. This includes a joint SSE-Equinor project off the east coast of England to build the largest single offshore wind park in the world.
One of the winning areas, known as Dogger Bank, is off the Yorkshire coast. Three projects by Equinor and SSE were approved in the area for a total generation of 3.6 gigawatts. Another 1.4 gigawatt project developed by Innogy was also approved in the same area.
Equinor’s success at the auction is a major step in its transition to becoming a broader energy company than just a big oil and gas company. The state-controlled Norwegian company aims to invest as much as 20% of its capital in new energy solutions by 2030.
“Dogger Bank, along with the latest award for Empire Wind in the US, position Equinor as a major offshore wind,” said Pal Eitrheim, Equinor’s executive vice president for new energy solutions. “These projects provide economies of scale and synergies, making us an even stronger competitive force in offshore winds globally.”
The agreements give the projects a guaranteed buyer through what is known as a contract mechanism for distinction. If the wholesale level is lower than the set price, the government pays the developer the difference. If it’s higher, the company pays it. U.S. power ahead of the month is trading at 42.05 pounds per megawatt-hour, with a 34% decrease this year.
The guarantee helps developers secure financing and also make assets more attractive to institutional investors who want reliable returns. The next round of the US auction is set to take place in 2021.
SSE’s winning capacity will accelerate its shift away from a traditional vehicle into a renewable energy company focused on grids and networks. The Scottish company has agreed to sell its US domestic supply business to Ovo Energy Ltd.
The Crown Estate said Thursday it plans to open the first competition in a decade for sites around the British coast that could attract up to £ 20bn of investment in offshore wind.
The contracts also pave the way for investors to acquire shares in some of these projects. Earlier this year, Iberdrola sold a stake in its 714-megawatt East Anglia One project to Macquarie Group Ltd for £ 1.63bn. Projects that have government-backed purchase agreements support are often more attractive to investors who favor guaranteed prices./Investing.com