In any market where product prices are just expected to keep falling and falling, the idea of consolidation is attractive, usually followed by combining central services like sales, marketing and finance to cut costs. We have seen a fair few of these in Renewables over the past few months and even weeks and now Portugal’s EDP and French specialist renewable player Engie are putting their wind units together to push into being one of the global top offshore wind specialists.
The deal is not laid out in detail and at present just a Memorandum of Understanding has been created, and legal paperwork will follow. The joint venture will be co-controlled, and held 50% each with EDP’s shares held through its subsidiary EDP Renewables, and it will operate in offshore wind, both fixed and floating. All of their wind operations will be placed into the JV and it will go after new opportunities on a global basis.
The joint pipeline begins with a total of 1.5 GW already operational or under construction and a further 4 GW under development. The two expect to have between 5 GW and 7 GW in operation or construction by 2025, with a further 5 GW to 10 GW under advanced development.
Floating wind has become a bit of a passion at Rethink Energy and in June we hope to produce a forecast for its development – EDP has been a pioneer in this, and has used the US designed Principle Power semi-submersible design in trials, many of which have been maturing nicely for 5 or 7 years and are ready to go into production mode. EDP is an investor in Principle Power. A rival architecture which is equally mature is the Hywind design from Equinor, which has a cost disadvantage in that it has too deep a draught to be tugged into port for maintenance. Both are set to go mainstream over the next few years with a variety of contracting partners and the new EDP Engine venture has a chance to lead this market, which will be considerable by 2030.
Fixed bottom offshore wind is far more advanced and its generational costs are now being attacked aggressively to bring it into parity with onshore wind in a variety of markets.
The companies believe that creating an entity with greater scale and a fully dedicated team, with global business development reach and strong power purchase agreement origination capabilities, will allow them to grow their asset base more rapidly. But this move is perhaps likely to stimulate further consolidations in offshore wind, so expect more such announcements over the coming 12 months.
The JV will primarily target markets in Europe, the US and selected geographies in Asia (Japan, Taiwan and Korea mostly), where most of the growth is expected to come from. It will be self-financed and projects developed in line with the existing investment criteria of each parent.
EDP Renewables and Engie have worked together for six-years on two massive fixed offshore 496 MW wind deals in Dieppe Le Tréport and Yeu Noirmoutier in France as well as the Moray East and Moray West wind farms in Scotland, which are even larger and which are expected to get sign off shortly. They also work together in two floating offshore wind trials in France and Portugal and in the Dunkerque offshore wind tender currently under way in France. Japan and South Korea are also getting close to giving the go ahead on floating foundations offshore wind.
Isabelle Kocher, Engie CEO, said, “We are delighted to announce this strategic alliance in offshore wind with EDP that we have been partnering with since 2013. The creation of this JV will enable us to seize market opportunities while increasing our competitiveness.”
The US will be split largely east and west, with west coast deals likely to be floating and east coast likely to be fixed bottomed. These have been very slow to take off but a number of key developments are poised for signature, while New York has inked in 2035 for a massive 9 GW of offshore power.