Germany

Germany

Baltic sea projects may not be cheaper

Higher profitability solely due to absence of crowding

The assumption that offshore wind farms in the Baltic Sea will be less expensive to build than in the North Sea has been questioned by German developer, Windreich. Its financial analysis suggests that the costs of Baltic Sea development may have been underestimated by many.

Windreich has compared a German North Sea project incurring typical costs with a hypothetical Baltic Sea project. Both projects featured the same turbine model. "Baltic foundation costs are actually higher, due to soil conditions as well as because of the need for ice cones and greater steel thickness to deal with freezing of the sea surface," explained Windreich investor relations manager, Martina Pesic.

According to Windreich's calculations, capital outlay for offshore substations in the Baltic was also slightly higher due to ice. Pesic was speaking at the recent Windforce Baltic Sea conference in Stockholm.

Factors that reduced the cost of Baltic Sea projects compared to their North Sea counterparts included transportation, installation and operation. "Still, these benefits are not a big slice of the cost-return cake, so they don’t show such a significant effect as one would suppose," said Pesic.

Contrary to expectation, Windreich's hypothetical Baltic Sea project only achieved higher profitability primarily thanks to its greater distance from other wind farms and, therefore, the absence of a 'wind shadow'. In the German North Sea, electricity generation achieved individual wind farms is forecast to drop as more projects are built in close proximity. The German Baltic Sea sites offer developers more unhampered space.

Most of Windreich's offshore wind development rights are for German North Sea sites, but it owns three Baltic concessions: Baltic Sea, Ostseeschatz and Ostseeperle.

Windreich has high hopes for its Baltic projects, despite modelling that suggests they will deliver 2-3% lower electrical generation than if they were subject to North Sea winds.

With crowding an issue in the North Sea, Windreich believes that net yields generated by Baltic Sea projects may outperform North Sea projects by up to 12-16%, explained Pesic. Last year, Windreich announced that electricity generation by its Global Tech 1 wind farm would be notably higher thanks to EnBW's decision to delay construction of Hohe. The latter would have created a "wind shadow" over Global Tech 1.

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