Energy Transition

Vattenfall CEO sees 'general concern about profitability of energy transition'

Anna Borg points to project cancellations or delays by Swedish utility and peers

Vattenfall CEO Anna Borg.
Vattenfall CEO Anna Borg.Photo: Vattenfall
European Editor, Recharge

Vattenfall CEO Anna Borg said there is a growing concern about the “profitability of the energy transition”, highlighting project cancellations or delays by the Swedish utility and others.

The company last month halted its 640MW Kriegers Flak offshore wind project at the Baltic Sea border with Germany and Denmark – although Vattenfall in 2022 had obtained one of the rare and sought-after final permits for it from Sweden’s central government.
“There is an increase in concern in general about the profitability of the energy transition. We have seen a lot of discussions around that in the media, and also a lot of examples [of projects] being delayed,” Borg said at a press conference on nine months results.

“I think it is important to reflect that this kind of major transformation is never straightforward. There will be ups and downs, and timing is extremely important.”

The Swedish Kriegers Flak array for years was supposed to be linked to already operational wind farms on the German and Danish sides of the sea border, but those countries either provide free grid links or – for projects starting operations some years ago – pay support for the electricity produced, while Sweden doesn’t.

Swedish transmission system operator Svenska Kraftnät instead by 2029-32 was supposed to provide a grid link up to a certain collection point at sea in the area and to several other locations off Sweden, but those plans seem delayed.

Asked by Recharge whether the Swedish government is doing enough to provide the grid link points as promised, Borg said that would need to be answered in a dialogue between the government and the TSO.

“What we can conclude is that there is no outlook right now for us to have a transmission grid at sea for offshore wind, and that is what determines our sort of investment decision.”

Prerequisites for wind at sea are different from market to market, but it will be difficult for most offshore wind projects to have a good enough profitability without a grid at sea, she added.

“We can also see that offshore wind has been built in countries where there is a solution to that. So basically, I think if you want a lot of energy production at sea, you also need the infrastructure, ie. the transmission grid.”

Vattenfall currently is also checking how “changing prerequisites” at Denmark’s next offshore wind tender would affect the profitability of Vattenfall projects. The Danish government last year announced it would take a 20% stake in all future offshore wind projects, and operators will have to pay the state a concession fee under a new tendering system.
The Swedish company last year also halted other projects, such as the giant Norfolk Boreas project off the UK, which it found to be unviable and later sold to German utility RWE.
Other dramatic project cancellations came from Danish peer Orsted, which last year took a $4bn hit from scrapping its Ocean Wind 1 project in the US.

Vattenfall itself booked an impairment of SKr0.3bn ($28m) related to halting Kriegers Flak.

To boost profitability, Vattenfall is trying to close more power purchase agreements (PPAs) with large industrial firms, Borg explained, such as it did recently with German metals giant Salzgitter, which will buy part of the output of the utility’s Nordlicht wind farm in the North Sea.
(Copyright)

Related

Published 31 October 2024, 10:41Updated 31 October 2024, 10:41
EuropeSwedenVattenfallAnna BorgOrsted