The Blog - Wind energy market analysis

Posted 05/04/2019

Ilaria Valtimora

   

Interview: João Metelo, CEO, Principle Power

João Metelo is CEO of Principle Power, which specialises on floating offshore wind. Principle Power is one of the hospitality sponsors at Financing Wind North America in Denver on 24th and 25th April. We caught up with João to find out more about the development of floating wind projects, trends in the sector and the biggest markets for new offshore wind developments.

Joao Metelo - Principle Power

 

What are the major challenges of developing floating offshore wind projects?

Right now while the industry is in its early stages, we are already in the course of deploying several megawatts of floating wind farms in several places around the world. We are on the verge of moving from the pilot stage to the commercial stage for large floating offshore wind projects. Additional effort on the industrialisation of the sector would be needed to bring down the cost of energy, though.

Also, floating is a different industry from fixed, it requires different approaches to construction and this will need to be factored in to reduce the levelised cost of energy. The push to have a global supply chain for floating offshore wind is set to be key as well as the global effort to produce floating offshore wind components at an industrial scale. The third challenge is a broader challenge in recognising floating wind as a major opportunity to support governments around the world with their renewable energy targets. This would be key to move directly and quickly from pilot farms towards commercial stage.

And what about project financing? Is it a challenge for floating offshore wind?

Floating wind farms today are fully financeable. Actually, we have had a lot of excitement from financiers and insurance companies about floating wind projects, due to the different way we do things. For example, we do much more work onshore and much less work offshore [compared with fixed offshore projects]. So, in some ways, we have a very positive attraction towards financiers and insurance companies, by reducing hi risk activities. Obviously, we have to keep working towards making commercially viable the projects. More and more banks feel confident about these projects, though. 

What do you think floating wind can learn from other sectors, including oil and gas and fixed-bottom offshore wind?

Well, of course, floating wouldn’t exist without fixed offshore wind. Also, the oil and gas sector has been developing floating systems for several decades now. 

So from the oil and gas sector we need to take a lot of the knowledge on operations; on health and safety; on how to operate and work with floating systems; and also how to industrialise them in large scale. Basically, how to drive experience of decades in floating infrastructure into making floating offshore wind projects commercially viable. We are already taking advantage of that though by bringing in the expertise of Aker Solutions as our partner, for example.

From the fixed side, the big reference is the importance of driving costs down, and the big lesson that to do that we need to drive down the cost of every single component of the supply chain, including turbines, foundations, installation work. 

However, floating wind has an advantage compared with fixed-foundation offshore wind. The sector has, in fact, major limitations in certain markets in terms of infrastructure and vessels, while floating doesn’t require the same amount of work offshore. This creates a major benefit in terms of new markets, and not having to rely on a few decades of development of the vessel industry, as it has happened in the fixed offshore wind industry. 

What are then the opportunities for wind investors in floating wind compared with fixed?

One is the opportunity to differentiate, to diversify their portfolios, as well as in terms of entering new geographies where they aren’t going to have as much competition as they would have in more established markets for fixed- bottom offshore wind. Second, there is an opportunity to dramatically expand markets in areas where today people aren’t developing yet. This is set to create an opportunity for higher profitability.

Which trends will affect the sector the most in the next few years? 

The continuation of the evolution of the wind turbine technology is going to be a big driver, with turbines getting larger and with higher capacity. This is going to affect floating because it works very well with very large turbines. The economies of scale that happen in floating systems are actually quite large. 

Also, another big trend is going to be globalisation. A globalised market in offshore wind will help address challenges in different markets. This would include new markets in regions such as the US and Asia. Globalisation is set also to have huge implications on the way we manage our business, and how we allocate our resources. 

You have just mentioned new markets in the US and Asia. Which are the biggest markets for new offshore wind developments now? 

China is by far the market with the highest trend of growth. However, entering China require a complex evaluation and you need to do it with the right foot. Another market we firmly believe in is Japan, especially since recent regulation has facilitated the permitting for offshore wind farms. Japan has now the fundamentals to develop an interesting market for offshore wind. And then there are several countries in South East Asia that are developing plans for offshore wind. In these countries, the sector is set to become an important component to reach renewable energy targets. 

What about emerging markets in Europe? Are they set to take advantage of their proximity with more established markets? 

Yes, I think they will. In markets like Portugal and Spain for example we believe that there will be opportunities. We don’t see a large, extended market there yet but yes, there will be opportunities there in the future. In Spain, in particular, the existing supply chain is set to be very important for the development of offshore wind. Poland is a very important market as well, but for floating we see limited interest since most of the waters there are quite shallow. 

What are the next steps for Principle Power? 

Three ongoing projects are happening in parallel. We are working on wind farms totalling 100MW, which are currently under construction or late stage of development in Portugal, France and the UK. The aim is to show the world that this is an industry that can deliver on target and effectively.

Also, we are building a large pipeline of floating offshore wind projects around the world, including in the US, which is set to drive the growth of the sector. Our main objective is to grow a pipeline of revenues over the coming years. Of course, to make all this feasible, reducing the levelised cost of energy remains key. 

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