The Offshore Wind opportunity for Ireland

Transcription

1 The Offshore Wind opportunity for Ireland Renewable Energy Summit, Dublin, December 2016 Magnus Brogaard Larsen, Market Development, DONG Energy Wind Power 1

2 DONG Energy today % share of capital employed as of 31 December 2015 Key figures 2015: DKK 70.8 Bn revenue DKK 18.5 Bn EBITDA ~6,700 employees Wind Power 75% Danish utility 16% Oil & Gas 9% Global leader in attractive offshore wind market Solid track-record in delivering large scale projects Cost-of-electricity being systematically reduced Robust and highly visible build-out plan Differentiated partnership model Attractive pipeline options post-2020 #1 power distribution network in Denmark #1 residential and industrial energy sales position in Denmark #1 in Danish heat and power generation with a strong and increasing biomass position REnescience: Innovative bioenergy technology for waste treatment Focused position with activities in Denmark, Norway and UK Low-cost, low-risk core assets Managed for cash to support renewable growth Strong hedging position 2

3 DONG Energy Wind Power overview DONG Energy Wind Power asset portfolio, build-out plan and pipeline options Isle of Man West of Duddon Sands Burbo Bank Extension Bay State Wind Ocean Wind Walney Extension Walney 1&2 Barrow Westermost Burbo Bank Rough Lincs London Array Gunfleet Sands 1&2 Operational Under construction Pipeline options Hornsea 2&3&4 Hornsea 1 Race Bank Borssele 1+2 Cluster 1 Gode Borkum Wind Riffgrund 2 1&2 Borkum Riffgrund 1 Horns Rev 1&2 Vindeby Gode Wind 3&4 Nysted Anholt APAC Taipei office Middelgrunden DONG Energy Wind Power at a glance The largest offshore wind portfolio globally in attractive offshore wind markets Differentiated competitive position resulting from integrated business model At the forefront of reducing cost of electricity from offshore wind Solid track-record in delivering large and complex projects Robust and highly visible 3.7 GW build-out plan leading to 6.7 GW installed capacity in total by 2020 Numerous and attractive pipeline options post-2020 with 8.1 GW of secured project rights Wind farm capacity GW Mid-2016 in operation in development/construction 3,0 3, Expected capacity 2020 DONG Energy target 6,7 6,5 Source: Bloomberg New Energy Finance (BNEF) 1. Excluding small-scale demo sites 2. Wind farms where DONG Energy provides operations and maintenance 3

4 Offshore wind is a large scale renewable technology with growth rates exceeding other renewables Fastest growing renewable technology in OECD Installed capacity CAGR, % Offshore wind offers multiple advantages 1 Offshore wind 25% Utility size power generation 800 MW wind farm will power more than 660,000 Irish homes 3 Solar PV 1 14% 2 Rapidly declining cost Industry maturity, volume and technological development reduce LCoE 4 3 Onshore wind 7% Offers +45% Capacity factors 2 Significantly higher than onshore wind and solar PV 4 Hydro 0% Limited visual impact on landscape Wind farms are built far from shore Source: Bloomberg New Energy Finance (BNEF) 1. Sum of utility-scale PV and small-scale PV 2. Capacity factor is a performance indicator measuring to what degree a wind farm has produced according to the farms capacity (actual production / (capacity x hours in period)) 3. Average electricity consumption pr. household 5,300 kwh, see: 4. According to BNEF, long-term offtake price required to achieve a required equity hurdle rate for the project

5 Offshore wind shows rapidly declining costs across all markets Offshore wind costs incl. transmission costs over lifetime 1 Levelised revenue at the year of contracting, EUR/MWh, 2016 prices Walney 3.6 MW turbine is commercially attractive Anholt West of Duddon Sands Walney Ext. 6 MW turbine is commercially attractive Hornsea UK Germany Race Bank East Anglia Borkum Riffgrund II Horns Rev III Borselle I+II 8 MW turbine is commercially attractive Denmark Netherlands Offshore wind is expected to be cost competitive with traditional utility size generation by 2025 LCOE, FID , EUR/MWh, 2016 prices Cumulative capacity installed 1.5 GW 3.0 GW 3.8 GW Cost halved in less than a decade 5.0 GW 6.6 GW 1.5 doubling of installed capacity 8.0 GW 11,0 GW Industry 2020 cost target of 100 EUR/MWh achieved four years ahead of time Coal Baseload Offshore wind Industry aspiration PV Utility scale North Western Europe Gas Baseload Nuclear Baseload Market volume, scale and industrialisation drive cost reductions 5 1. The levelised revenue strike price and market income is used as a proxy for LCOE. The market income is based on public country specific wholesale market projections at the time of contracting. Discount rate of 3,5% (real) used to reflect the rate used by the European Commission for socioeconomic calculations. Adjustment of costs to account for differences in project scope compared to UK projects (primarily costs of transmission and extra development costs). Source: DECC; Danish Energy Agency; Energinet.dk; NEV; WindEurope 2: Sources: World Energy Outlook 2016 used for fuel and CO 2 prices ( 31/t 2030 and 53/t 2050). For technology cost data: IEA technology perspectives 2015 for coal & CCGT; BNEF for PV, DECC Generation Costs 2013 for nuclear and DEA Teknologikatalog 2016 for onshore wind. For offshore wind 80 /MWh represent a WindEurope industry agreement, UK scope and conditions. Discount rate of 10% nominal on all technologies. Capacity factors used: 93% for coal and CCGT(gas), 91% for nuclear, 36% for onshore wind and 12% for PV.

6 Capacity factors above 45% and high wind predictability make offshore wind a stable source of power Ireland average capacity factors among renewable technologies Offshore wind produces in almost all hours Duration curve, Denmark 2015 Source: Energinet.dk (Danish TSO) 45% 28% 100% 80% 60% 40% 20% 0% Offshore wind produces in 98% of all hours Offshore Wind (UK) Onshore Wind New offshore wind farms tend to exceed the above figure - The 2013 Anholt offshore wind farm had an average capacity factor of 51% between Source: BNEF; IWEA, ISEA, JRC, DONG Energy 1. Offshore wind data is based on average capacity factor of DONG Energy s OSW portfolio in Onshore wind and solar PV are based on BNEF data and represent gross US average. 9% SolarPV Hours in 2015 (total 8,760) Production Solar PVprofile Onshore w. observed wind wind Offshore speeds wind the Danish North Sea Jan Output (MW) Wind speed :00 15 Jan :00 18 Jan Source: Siemens; MHI Vestas: 4MW 120 Hours Note: Calculated by imposing hourly average wind speeds over technical specifications of selected WTGs 6MW 154 8MW 164 m/s

7 By 2025 offshore wind will be truly global Strong growth in established and new offshore wind markets Installed Capacity, GW +8 GW 14% ,9 +6 GW 27% ,6 +1 GW 45,5 33% , , New markets Europe # GW addition/year % CAGR Source: Bloomberg New Energy Finance (BNEF), H offshore wind market outlook 7

8 Offshore wind could be a significant contributor to the green transformation of Ireland towards 2020/30 Summary of benefits and industry enablers for offshore wind in Ireland. Large scale REN technology supporting green transformation and binding Offshore Wind - Ireland EU 2020* and 2030 targets Stable and predictable source of power (high capacity factors and stability) New industry in Ireland. Foreign direct investments, supply chain investments, jobs and innovation Longer term export opportunities to a global demand. Industry enablers - Ireland Ensure continued market by providing long term framework for Offshore Wind, Tap into the current European supply chain and reap the benefits of the latest cost developments The Irish industry and especially offshore industry will gradually take a larger portion of the market through supply chain investments both Irish and foreign Potential of building up competitive export capabilities and be positioned as a part of the global supply chain Dialogue between government and industry to ensure best practises on regulatory design and competition in all parts of supply chain. Use the North Sea cooperation on OWE (North Sea Declaration) as a lever to coordinate with and get inspiration from other OWE-countries Impact of an 800MW Offshore Wind farm (based on historical UK data)** ~ 3,5TWh / year (~10% of consumption) ~ 30% of 40% REN electricity 2020 target Direct investment construction ~ 2.3bn and O&M ~ 70m/year Jobs: +2,000 construction and 950 O&M * 16% FINAL ENERGY CONSUMPTION ** UK SOCIO ECONOMIC STUDIES (REGENERIS REPORT) ECONOMIC IMPACT OF OFFSHORE INVESTMENTS IN UK EAST AND WEST COAST 8

9 Q&A Public