News Analysis: Windmills of fortune

Global offshore wind projects coming online today are already delivering power at almost half the price of those finished in 2012, thanks to falling costs. This trend has emboldened GCC utilities in their quest to add wind into the region’s energy mix.

The UAE has been a driving force in funding wind power overseas
The UAE has been a driving force in funding wind power overseas

The GCC has traditionally looked to solar for renewable energy, given the high irradiance levels in the region. But a wind of change is blowing across the region as more countries now take up wind energy as a viable alternative to solar.

Saudi Arabia is already moving a step closer toward the construction of its first utility-scale wind-power project.

The Kingdom’s energy ministry has shortlisted 25 companies in a tender to build the 400MW (megawatt) plant at Dumat Al Jandal in the Kingdom’s northwestern Al Jouf region.

Saudi Arabia plans to develop 30 solar and wind projects over the next 10 years as part of a $50bn programme to boost power generation and cut its oil consumption. The country will produce 10% of its power from renewable energy by 2023, according, Khalid Al-Falih, Saudi Arabia’s minister of energy, industry and mineral resources.

“As we enter the second half of 2017, we remain committed to ensuring our ambitious program remains on-track to deliver the value and opportunities targeted,” Al-Falih was quoted as saying in a statement issued earlier this year.

Last October, Saudi Arabia received offers to supply solar electricity for the cheapest prices ever recorded, marking the start of a programme to diversify the oil producer’s domestic energy supplies away from fossil fuels.

Abu Dhabi’s Masdar and Electricite de France SA bid to supply power from a 300-megawatt photovoltaic plant for as little as 6.69736 halalas a kilowatt hour, or 1.79 cents. If awarded, that would beat the previous record for a solar project in Abu Dhabi for 2.42 cents a kilowatt-hour.

The plant will be the first awarded under the renewables programme, which targets 9,500MW of electricity generation capacity using solar and wind by 2030. The project is set to start producing power by June 2019, according to the bid.

Saudi power-plant developer ACWA Power made the second-lowest bid at 8.7815 halalas per kilowatt-hour, and a group led by Marubeni Corp. made the third-lowest bid. Masdar, officially named Abu Dhabi Future Energy Co., and EDF are already partners in an 800MW project in Dubai.

In Oman, the Oman Power and Water Procurement (OPWP), the company responsible for procuring new capacity for power and water and for purchasing and selling them, is looking for consultants to undertake an assessment of the wind resource availability. This is expected to give a push to the Sultanate’s initiatives to diversify its energy mix through the use of renewable in its energy supply.

The company has announced that its energy procurement process would be made more flexible, and it estimates that there is the need to contract for approximately 1,936MW of generating capacity for 2022.

The assessment of the wind resource would include provision of equipment/sensors, installation, operation and maintenance and data validation services. The consultant would have to cover multiple sites within the Sultanate. This assessment would prove beneficial to support future development in the wind energy sector.

In September, a power purchase and electricity agreement for the 50MW Dhofar Wind Power Project in Oman was signed between Rural Areas Electricity Company and OPWP as well as Oman Electricity Transmission Company.

The $105mn project with 13 wind turbines is expected to be operational by the end of 2019. The project with an annual capacity of 160 GWh is expected to supply electricity to 16,000 homes and offset 110,000 tonnes of carbon dioxide.

In 2015, Raeco launched a 307kw solar project in Al Mazyona in Dhofar which has since reduced emissions by 433 tonnes and saved 155,000 litres of diesel.

Meanwhile, the revised and flexible procurement process is to get maximum visibility and provide initial advance information about the future power procurement process until 2022. The Power 2022 procurement process is to allow those players with expiring contracts and potential bidders for new plants to participate in a tender round.

It would be in two stages with the first looking at the extent to which existing generators with expiring contracts might be eligible to be granted new contracts.

Oman Power and Water Procurement would then determine the extent to which it would be necessary to procure new generating plants. In case there arises the need to have new power plants, the second stage would be initiated.

The UAE has been a driving force in funding wind power overseas, but the green energy source has found itself in the doldrums closer to home. The country’s obvious solar potential has also had the effect of putting other renewables in the shade.

Attention has focused on the wind potential offered by locations such as the power-hungry Northern Emirates and islands such as Sir Bani Yas, while at the same time technology to produce power from lower wind speeds improves.

Such technological developments are especially relevant for the UAE, which typically lacks the gales that drive the largest of existing wind farms in Europe and North America.

Masdar has taken a lead in investing in wind projects overseas. After wind-mapping the country, it is also scouting possible locations for turbines at home.

The Mubadala Development unit has more than $1bn invested in energy projects around the world. It is also a key player in the emirate’s attempt to achieve 7% renewable energy capacity by 2020. Dubai’s renewable target is 5%.

Masdar is one of three major investors in the Middle East’s first utility-scale wind power project in Jordan. The 117-megawatt Tafila Wind Farm is expected to increase the country’s total power capacity by 3 per cent and is estimated to cost about $290mn.

The UAE wind-mapping project is about identifying the best locations for potential turbine sites. Among the places that look initially favourable is Sir Bani Yas Island, where Masdar has already presented plans to the government for a 30MW project.

But finding the wind is only half of the problem. The cost of erecting the turbines and their gigantic blades can be prohibitive without the right infrastructure.

To that extent, identifying commercially viable locations for wind power in the UAE is more challenging than doing the same for solar projects, where there are fewer variables to consider.

“The commercial viability of a wind project depends on the wind project itself, the specifics of the project and where it is located,” says Ahmed Al Awadi, former head of business support at Masdar’s clean energy unit.

“The Northern Emirates are mountainous, and so in order to build your plant you may have to build additional infrastructure to accommodate the vehicles that would take the blades there.”

Modern blades made for the largest wind turbines are vast. The largest rotors made by Siemens extend more than 150 metres, competing with the wing span of an Airbus A380 superjumbo. One sweep of such a rotor covers more than 18,600 square metres, or two-and-a-half football fields.

Another factor is the relatively weak wind speeds available throughout the UAE. However, research and development into generating power at much lower velocities than was viable last decade has yielded positive results in the past five years.

“At first sight the country doesn’t look very windy, but there are locations where it makes sense to develop wind powers,” says Nicholas Fichaux, former programme officer for resource assessment at the Abu Dhabi-based International Renewable Energy Agency.

But even in the absence of formal government-supported utility-scale wind farms, small private turbines are already operating in the country where grid power is lacking.

“You see quite a lot of turbines already on the road to Liwa,” says Mr Fichaux. “You tend to see a small solar panel and a wind turbine beside it. I was surprised because you may not think there is enough wind in the desert, but there is.”

While weak wind speeds usually represent one of the biggest challenges for the industry locally, at the global scale the headwinds tend to be economic in nature.

Jordan and Morocco are success stories for renewable energy developers. The stakes are higher for them, as they import the majority of their energy needs. Morocco had 979MW of wind and solar power installed in 2015, making up 12% of its energy mix, which it plans to increase to 52% by 2030.

Egypt, the most populous country in the Arab world, has struggled to increase its wind sector to meet its goal of adding 2GW of wind power to its grid by 2023. The country introduced a renewable energy feed-in tariff (FIT) to help incentivise investors. However, the fluidity of the Egyptian pound and liquidity issues within the country deterred some investors.

But the country has set its sights on becoming a regional manufacturing hub for wind energy despite delays in its renewable energy targets.

Multinational companies such as Siemens and General Electric are looking to develop wind energy manufacturing plants in Egypt while a local company, El Sewedy Electric, is keen to revive pre-revolution plans.

The North African country wants to install 2,000MW of wind energy by 2022, as part of its 4,300MW total goal of renewables that also include 2,000MW of solar and 300MW of hydropower. Egypt had planned to have renewables make up 20% of its total energy mix by 2020, but that target has been pushed back.

Last month saw the formal unveiling of the world’s first commercial-scale floating wind farm, a renewable energy project which paves the way for the development of wind energy resources in areas beyond the reach of existing offshore wind technologies.

The completion of Hywind Scotland, together with this month’s inauguration of the Dudgeon Offshore Wind Farm off the coast of eastern England, brings the total power generating capacity of the UK-based renewable energy projects in which Masdar is an investor to more than 1GW (gigawatt).

Floating around 25kms off the coast of Aberdeenshire in water depths of 95-120 metres, Hywind Scotland is now supplying electricity to an estimated 20,000 British households. The project’s five wind turbines, each with a capacity of six megawatts (MW), were secured into place in August after being towed across the North Sea from Norway.

Across Europe, the price of building an offshore wind farm has fallen 46% in the last five years – 22% last year alone. Erecting turbines in the seabed now costs an average $126 for each megawatt-hour of capacity, according to Bloomberg New Energy Finance. That’s below the $155 a megawatt-hour price for new nuclear developments in Europe and closing in on the $88 price tag on new coal plants, the London-based researcher estimates.

As nuclear power costs spiral, prompting a $6.3bn writedown at reactor maker Toshiba Corp. and delays at Electricite de France SA’s plant in Flamanville, the investment needed to build offshore wind capacity is plummeting.

In Denmark, where the government shoulders much of the development risk, Vattenfall AB last year agreed to supply power from turbines in the North Sea at $64 a megawatt-hour in 2020. Dutch and German auctions due this year provide “ample opportunity” to beat that record low price, says Gunnar Groebler, the utility’s head of wind.

The industry even is taking hold in the U.S., which for years shunned the technology as too costly for a place that historically enjoys lower power prices than Europe.

A federal auction in December for rights to develop wind farms off the coast of Long Island resulted in a bidding war. Rhode Island has commissioned one plant, and developers are also considering work in Maryland, New Jersey and North Carolina.

The U.S. government’s official goal for now is to install 86GW of turbines at sea by 2050. That’s six times the 14GW of capacity now in place worldwide, according to the Global Wind Energy Council.

All told, a record $29.9bn was invested in offshore wind in 2016, up 40% from the year before, according to Bloomberg New Energy Finance. It expects investment to grow to $115bn by 2020. What’s driving installations is an expected 26% drop in the costs, making offshore wind increasingly competitive with land-based turbines and solar and nuclear power -- even without subsidy.

In years past, grid managers were reluctant to rely on fickle winds for power that flows only about 45% of the year. That is changing too. Battery costs have fallen 40% since 2014, making them a realistic way to help balance fluctuating flows of renewable energy to the grid.

Offshore wind projects coming online today are already delivering power at almost half the price of those finished in 2012 thanks to larger turbines and greater competition. That’s emboldening developers to promise supplying power for even less, suggesting the industry will break more records this year starting the a contest in Germany in April, says Deepa Venkateswaran, analyst at Sanford C. Bernstein Ltd.

Europe’s lingering low-interest environment may add downward pressure on bids in Germany’s offshore auctions, EON SE Chief Executive Officer Johannes Teyssen said in January. The utility will join bidders as it seeks to add as much as $1.58bn a year to its clean energy portfolio.


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