Power of three: Equinor bets on Poland to join 'core' offshore wind clusters off US and UK
Norwegian oil giant's executive vice president, Pål Eitrheim, outlines company’s strategy to Recharge that aims to gain competitiveness through scale in wind at sea
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The energy major earlier today announced it has been awarded contract for difference (CfD) support for a combined 1.44GW of offshore wind capacity off Poland by the country’s energy regulator – for the Bałtyk 2 and Bałtyk 3 projects it is developing jointly with state utility Polenergia.
“We want to develop what we call clusters… Poland does have the potential on our side to become a new core area as we go forward,” Eitrheim said in an exclusive interview, adding that the cluster strategy is part of a plan outlined at the company’s last capital markets day to strive to become a “global offshore wind major.”
“We want to use the offshore competence that we have to drive that development. And we want to build scale in some select areas, because we believe that that will create value for the company as we go forward.”
Equinor’s first two clusters will be the Dogger Bank megadevelopment in the North Sea, where the first three phases of the project are targeting a combined capacity of 3.6GW, and the 3.3GW Empire Wind / Beacon Wind off New York in the US Atlantic.
The Polish areas are particularly promising for Equinor due to a series of factors that boost the play’s commercial attractiveness: water depths are moderate, at 25-40 metres, as is the distance to shore, 20-37 kilometres. plus wind speeds of 9-10 metres per second are among the best in the world.
Government support via the CfDs is given for a period of 25 years, which Eitrheim pointed out is the longest period granted anywhere in Europe. German offshore wind projects, by comparison, only receive support for 20 years, and in the UK for only 15 years.
“The combination of the contract lengths and the price level will allow us to create value offshore Poland,” the Equinor chief said.
The support level for Bałtyk 2 & 3 at some $84/MWh is generous in global terms, but, of course, Poland so far has no wind turbines in the water, and as a virgin market for offshore wind needs to accept higher initial support levels in case things don’t immediately go smoothly during the development and construction phase.
The Eastern European country, however, has the advantage of already having an industrial supply chain in place, including tower manufacturers and efficient ports that for years has catered for offshore wind projects in nearby markets, including Germany’s.
Entering the Polish offshore wind market at an early stage – by taking over half of Polenergia’s stake in the Bałtyk proejcts already in 2018 – has certainly paid off for Equinor as that enabled the company to receive the relatively high CfD rate without even having to bother with an auction.
“It is an example of early access at scale,” said Eitrheim.
Developers faced a higher risk than in more established European offshore wind markets, as it wasn’t clear that Poland’s governing Law and Justice Party (PiS) would become such an enthusiast of wind at sea.
Only a few years back, PiS, which has a strong right-leaning voter base in Polish coal regions, had shown general hostility towards renewables and pushed through the so-called distance law that almost choked off onshore wind developments.
To beef up its Polish cluster, Equinor and Polenergia are also developing the 1.5GW Bałtyk 1 project, which is at an earlier stage of development and so not entitled to CfD support as part of a first 5.9GW of pre-developed offshore wind projects targeted by Poland. Instead, Bałtyk 1 will have to participate in regular offshore wind tenders the country has planned for later this decade.
Taken together, the Bałtyk projects represent almost 3GW in capacity, making them into a cluster of substantial size.
As for Bałtyk 2 and Bałtyk 3, Eitrheim expects the arrays to feed first power into the Polish grid in the mid-2020’s, “around 2026”, but admits that the exact date is not set in stone, saying: “I stress the fact that this is very early and we have a lot of planning and preparation work to do.”
Building on the first multi-gigawatt batch of projects that are now gaining CfD support without having to go through an auction process, Poland plans to hold competitive tenders for another 5GW of future offshore capacity to have almost 11GW installed by 2040.
Eitrheim welcomed the firm numbers in terms of volume and capacity, but thinks more could be possible. “The technical resource potential in the Polish part of the Baltic Sea is bigger than the ambition. So, hopefully, there is some upside in the future,” he said.
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