Investments in wind farms in the Baltic Sea may amount to several dozen billion PLN

Mar 13, 2019 Finance

Investments in wind farms in the Baltic Sea may amount to several dozen billion PLN

Energy auctions are an opportunity for technologies that could not develop in the previous system based on green certificates. One of them is offshore wind energy, which is a relatively stable source of green energy. However, investments in this sector require time and capital. The industry is waiting for transparent declarations of those in power concerning offshore wind energy. Economists estimate that locating 6 GW of energy in wind farms in the Baltic Sea would translate into investments worth about USD 60 billion.
– The new system of support for renewable energy, in which the government dictates volumes and directions of development, gives an opportunity to develop technologies that have not been so competitive so far and that have not defended themselves financially under the assumptions of the support system previously in force, based on green certificates, a legal adviser at Clifford Chance Law Firm, dealing with energy practice and environmental protection law.
The previous system of support for the production of green energy was based on the so-called green certificates, i.e. certificates confirming the origin of energy from renewable sources, introduced by the Act of 1997. In June last year, he adopted a new law on renewable energy sources, which introduced an auction model. The President of the Energy Regulatory Office selects entrepreneurs who will offer a certain amount of green energy at the lowest price. Auctions, the first of which was held in December, are to be conducted at least once a year.
– The auction system, which assumes that entities know when, for what and on what principles they will compete, allows them to implement projects that are much more capital-intensive, much larger and based on technology that requires a longer period of preparation.
According to the legal advisor from Clifford Chance, many onshore wind energy projects will probably be blocked in the current system. However, there is a chance that this power will be launched and designated for offshore projects, which at the same time offer greater predictability and stability for the energy system.
– This is one of the biggest problems of the Minister of Energy and system operators. The USA renewable energy sector is accused of being unstable and deregulates the entire system. Offshore wind energy, to put it simply, spins longer and is a more predictable technology, which is more advantageous from the point of view of this system.

The problem that hinders the development of offshore wind energy is the lack of clear regulations and top-down declarations regarding changes aimed at supporting this sector.
– The sector is ready to invest and enter into further projects, but at the moment there is no clearer declaration of the government whether it will support this technology and what possible legal changes will be introduced in order to improve the few regulatory deficiencies currently faced by developers and investors.
One of the main expectations concerning offshore wind energy is to increase predictability for this sector and to set a time frame in which specific projects could start and receive support. In the current model, year by year it is clear when the auction will be held and what volume of energy will be offered in the given auction. Thus, it is also known which projects have a chance of being implemented and will be able to start for support. On the other hand, offshore wind energy projects require a longer time horizon and longer preparations.
– Investors have a problem with spending tens of millions of USD on the development process and obtaining appropriate permits, having no perspective and not knowing, de facto, when these projects will be able to obtain support enabling their implementation.
– We see many new investors and institutions engaged in offshore wind energy. In the past, this segment was mainly interested in state entities, nowadays institutional investors, pension funds and insurance companies are more often involved. There is also a lot of interest on the part of financial institutions. We have made great progress in the last 10 years and the future looks promising.
According to McKinsey & Company estimates, the potential of offshore wind energy in the USA is approximately 6 GW of capacity.
– Economists calculate that the implementation of an ambitious plan of 6 GW of offshore projects over the next 15 years means that the level of investment in this sector could reach $60 billion. In fact, these are capital-intensive investments, based on very modern technology. This sector could be used by steel producers, service providers, service providers, as well as owners of know-how and technology.