COMPANY PROFILE
2014
E.ON CLIMATE & RENEWABLES
www.eon.com | +49 2 11-45 79-41 70
Entering tomorrow’s market with new energy Editorial: Christian Jordan
The name E.ON comes from the Greek word aeon meaning ‘eternity’ and fittingly, the company is now building on its experience in renewable energy production to provide more and more green energy to its worldwide customer base. Is this a company that could become an eternal energy supplier? Corporate Communications Manager, Markus Nitschke tells us more… E.ON is a major player in the global energy market. Headquartered in Düsseldorf, Germany, it operates in over 30 countries and serves around 35 million customers. It is one of the 30 members of the DAX stock
provider. With operations spanning the energy sector; everything from nuclear to gas to wind power; the company is a progressive one, always looking for opportunities to expand. Its scale was demonstrated
E.ON planning to move forward in a world that is continually looking towards sustainable ‘green’ energy? One of the areas that the company is focussing on right now is power generation from renewable sources.
index of major German companies and a member of the Global Titans 50 index. The company is one of the major public utility companies in Europe and one of the world’s largest investor-owned energy service
at the end of 2013 when the company announced that its 62,000 employees had generated approximately €122.5 billion in sales in that year in Europe, Russia, and North America. But what of the future? How is
This has seen the formation of E.ON Climate & Renewables. Also headquartered in Düsseldorf, this is a company that plays a leading role in the development of the renewable industry worldwide and has already invested more than €9.5 billion in
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E.ON CLIMATE & RENEWABLES renewable generation projects in the last five years. E.ON currently operates over nine gigawatts of renewable capacity and plans further multi-billion euro investments to grow its installed capacity. As part of its impressive portfolio E.ON is already active in generating energy from onshore and offshore wind, biomass, photovoltaic (PV), and concentrated solar power (CSP). Demonstrating the company’s excellence in the area of sustainable energy generation, E.ON Climate & Renewables won the Platts Global Energy Award in the category ‘Green Energy Generator of the Year’ in 2011.
SUCCESS FROM WIND The company has recognised the importance of wind power and has many successful onshore and offshore wind projects under its belt that show off its commitment to clean energy – one of the most prominent is perhaps the London Array, a 630 MW, 175 turbine development 20 km off the Kent coast in the outer Thames Estuary in the United Kingdom. Then there is one of the world’s largest onshore wind farms in Roscoe, Texas; a 782 MW, 634 turbine wind farm operated by E.ON Climate & Renewables that has proved to be a great success and a benchmark for the industry. So what is the next step with wind power for this global power player? Current projects include the development of Amrumbank West, an 80 turbine, 288 MW wind farm in the German North Sea and the
plans to continue growing in this important sector. “Amrumbank West is part of an excellent project pipeline that E.ON has. The first steps in the development of Amrumbank were made by E.ON in 2002 when the offshore wind areas in the German North Sea were established. In parallel, we started to collect first experiences with building offshore wind farms in shallow waters in the UK. After this, E.ON participated in constructing the first offshore wind farm in deep waters in Germany, called Alpha Ventus. “With further experiences in building offshore wind farms in the UK and in the Nordic region, E.ON took the invest decision for Amrumbank West in 2011. E.ON was well prepared for this challenge to build an offshore wind farm in a water depth up to 30 meters. The construction started in January 2014. E.ON is the single investor and with its project team based in Hamburg fully responsible for the entire project. “E.ON is among the leading global companies in offshore wind and is the number three worldwide. Our experience and capabilities attract many
investors to take shares in our wind farms. Often there are companies from the financial sector as well as other energy companies. “Currently we are running the installation of the foundations. We have already installed 64 out of 80 monopiles and transition pieces. In January we will start the erection of the towers and turbines so that we are able to purchase first power in March. The technical infrastructure for bringing our offshore electricity to households is almost ready. Our substation, collecting the energy of each turbine is installed and the converter platform HelWin Beta, built by grid operator TenneT, is almost accomplished as well,” he says.
EXPERIENCED PLAYERS Of course, E.ON has a raft of experience when it comes to constructing offshore wind farms and the experiences from previous projects are always very helpful. However, with Amrumbank West there were some challenges that were new to the company which bought
Humber Gateway, a 73 turbine, 219 MW wind farm off the coast of East Yorkshire in the UK. Markus Nitschke, E.ON Corporate Communications Manager tells Total World Energy more about the development of these two projects and also about the company’s PAGE 3
about innovation. “We learnt that it is a real challenge to build in deep waters and 130 kilometres away from the coast. There have been intensive challenges regarding weather, water depths, logistics and HSSE issues during this project. In many cases we had to do pioneering work but we did it successfully,” says Nitschke. And you might think for a construction project of this size there would be some opposition or objection but Nitschke says that the only issue that came up was with the local porpoise population and this is something which has been easily navigated. “Due to an intensive licensing process with the responsible authority, there are no significant objections. A sensitive issue in Germany is noise reduction regarding porpoises. We are able to manage this environmental issues. Latest studies show that seals like offshore wind farms as preferred
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“With our next investment in an offshore wind farm we hope to bring down costs by 40 percent compared to Amrumbank West”
hunting areas once as they are in operation,” he explains. And experience navigating all of these issues, coupled with E.ON’s ability to finish projects on time and within budget means that the company is managing to attract investors from across the spectrum to partner with on these complex wind projects. “We are convinced we will finish the Amrumbank West project safely, on time, to top quality standards and within budget. €1 billion is a significant amount of money for any utility today. Everybody is looking more carefully at the investments they are making, mainly because the outlook for the utilities sector is so difficult. “There have been some specific problems where low wholesale prices and nuclear shutdowns have significantly impacted German utilities. We are also seeing the impact of low wholesale power prices across Europe. This has resulted in weaker balance sheets.
E.ON CLIMATE & RENEWABLES As around 90% of developmentstage offshore wind assets are held by utilities, the sector is suffering. So utilities are looking at all of their assets, not just renewables, and trying to work out where value really is. We are already looking at partners for projects at various stages. Thus far, we have taken the approach of selling shares in existing operating projects. For example, last year we sold an 80% share in our Rödsand project in Denmark in order to recycle that capital. We have also done the same with three onshore projects in the US. We are also looking to bring partners in at an earlier stage as we did with London Array. We would look to do this again for future projects because projects are increasing in size and balance sheets are not getting stronger. We need to marry the capabilities we have at E.ON with
financial investors that are willing to invest in offshore wind. Preconstruction partnerships are very much on our agenda for our future offshore wind projects,” he says. “The largest field of investors are those that want to invest in operating wind farms as the revenues are pretty clear and there is only operating risk. Pension funds, sovereign funds and other financial investors are willing to invest at this stage. But at the pre-construction stage you are looking at a narrower universe of investors, probably focusing on those that have some experience of construction risk. This will include strategic investors such as other utilities or major corporations interested in getting into the offshore wind space, but also some financial investors,” he adds. But is the risk of investing in
offshore wind as big as the market perceives? Definitely not according to Nitschke who says that a few projects where issues have arisen has created an illusion that offshore is somehow risky when in fact, the majority of projects are delivered without any disruption. “We are looking at the market right now to see who is capable of taking this risk. I honestly think the risks of constructing offshore wind farms are not as big as people perceive them to be. One or two high profile issues have created the perception it is much riskier than onshore wind. Our experience is that this is not the case. The major projects we have built like Rödsand and London Array were delivered on time and ahead of budget and have had outstanding operating experiences. We think construction and operating risks are overplayed,
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E.ON CLIMATE & RENEWABLES but nevertheless we have to get this message across to the financial community,” he says.
HUMBER GATEWAY As for the Humber Gateway project, Nitschke says that location was an important consideration and the connections that bring the valuable green energy onshore are vitally important. “Located eight km off the East Yorkshire coast, just north of the mouth of the river Humber, the wind farm will comprise of 73 turbines and will have an installed capacity of up to 219 MW. Upon completion, the wind farm will be capable of generating enough electricity to power up to 170,000 UK homes, which is more than one and a half times the number of homes in Hull. “After considering a number of alternative sites we believe Humber
Gateway is an ideal location for the generation of offshore wind energy, with its high winds and good connection into the National Grid. A key part to the project is the connection of the offshore wind farm into the National Grid onshore. Connected through onshore and offshore cables linked to a substation, these are essential components to the project, as the cables are needed to feed the electricity generated by the wind farm into the National Grid for distribution around the UK. “The offshore cables will bring ashore the electricity where it will adjoin the onshore cables that will run underground for approximately 30 km from Easington to Salt End. Two substations, one onshore and one offshore, will be needed to step up the voltage of the electricity that is generated by the turbines to
connect into the National Grid. The total area of the site is approximately 24.8 km2 and its northern boundary runs parallel to existing pipelines that run into Easington,” he says. And both Humber Gateway and Amrumbank West form part of an ongoing focus that will see E.ON use its experience to develop more and more wind power generation projects while also looking for a broader range of investors. “We are very clear that we want to build on the experience we have already developed in offshore wind,” says Nitschke. “We have built our experience over five completed projects since 2004, and the two further projects that are still under construction. We have a good idea about how these projects should be structured in terms of the contractual framework we put in place – how many contracts
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there are, and the interfaces we put in place and so on – all of these things we have developed over time based on our experience. We would aim to explain to investors why we do projects in a certain way and that it is the best way to structure projects.” The company is using all of the experience of working in the UK on the London Array for the Humber Gateway project and this is helping to structure the project in a way that is proven to be successful. Nitschke explains that knowledge of legislation and the national
and Nordic. Today it is a huge benefit to have the capability to act successfully in these different regimes.” And being headquartered in Germany and operating across many different geographies is no easy feat and has been the downfall of many organisations in the past. This is why a sound understanding of local conditions and legislations is essential and E.ON is in the strong position where it can adjust easily and quickly to align itself with regional policies. “It is always more difficult to
regimes we are able to adjust our processes at short notice.”
framework for a project of this type is of particular importance. “This experience is an essential point because for E.ON, as a global operator, we are facing three mainly different licensing processes in the main markets UK, Germany
operate abroad,” Nitschke explains. “E.ON as a global investor and operator has strong bases in many regions worldwide. This is crucial to start new businesses. As already mentioned this is a question of experience. If a country changes the
28 increased overall by 81.3 % between 2002 and 2012, equivalent to an average increase of 6.1 % per year.” And this trend continues with more and more renewable projects being commissioned each year. So, could it be that one day E.ON will
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A GROWING CONCERN A report from Eurostat and the European Commission paints a clear picture of the way renew energy is growing across the EU. The report found that “The primary production of renewable energy within the EU-28 in 2012 was 177.3 million tonnes of oil equivalent (toe) — a 22.3 % share of total primary energy production from all sources. The quantity of renewable energy produced within the EU-
E.ON CLIMATE & RENEWABLES be a company solely focussed on renewables? “Indeed, renewable energy is getting more and more important to E.ON,” explains Nitschke. “Our company is getting greener day by day. However, the speed towards renewables differs from country to country. The moment the world can rely only on renewables is located in a very far future. We have a broad portfolio in providing energy solutions for our customers. We will provide these solutions in addition to our renewable activities as long as there is a demand.” But even with the inevitable
growth of the renewable energy industry there are always concerns from groups who say that investing in power of this kind costs too much and yields poor results. However, Nitschke says that the cost of renewable energy, especially wind energy, is always coming down and in the future, costs should be reduced significantly, even compared to Amrumbank West. “E.ON has the clear commitment to decrease the costs of renewable energy so that no subsidies are necessary. For sure, the development of new technologies needs support. This is the same
with offshore. But E.ON wants to position itself as the cost leader in building and operating largescale offshore projects. Offshore wind is on the road to becoming a reliable and cost-effective source of electricity. Amrumbank West will help take us significantly closer to this goal. With our next investment in an offshore wind farm we hope to bring down costs by 40% compared to Amrumbank West,” proving that once again the company will use its experience and expertise to improve products and services for investors and consumers
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