Northland Power CEO sets out European offshore wind vision

Interview 25 April

Northland Power CEO sets out European offshore wind vision

Canadian independent power producer Northland Power is looking with interest at Poland and Scotland to expand in the European offshore wind market, where it now generates half of its cash flow, said Northland’s CEO Mike Crawley.

Speaking at the WindEurope conference in Copenhagen on 25 April, Crawley said Northland’s first project in Poland, the 1.2 GW Baltic Power offshore wind farm should reach financial close in the next few months.

He said the joint venture with Polish oil group PKN Orlen, with which it is developing Baltic Power, “has been a really good partnership”, and added the company “would like to do more in Poland”.

“The country understandably has a need for new energy post- Russia/Ukraine,” explained Crawley, “and has a robust CPPA market and CfD scheme.” 

“Poland’s focus on energy security has created a good environment,” he added.

Infralogic reported in January that Northland and Orlen had launched a financing for Baltic Power, seeking to raise more than EUR 2.5bn of debt.

Crawley also said the company supports the inclusion of qualitative criteria in offshore wind tenders, rather than bids only based on price.

“Non-price criteria are important too,” he said. “This is why Northland Power participated in the ScotWind leasing process and not The Crown Estate’s [in England and Wales]”. 

Northland Power secured sites in the Outer Hebrides that represent around 8.4% of the capacity awarded during ScotWind's first round.  

The Canadian developer was one of only three groups awarded a combination of fixed and floating offshore wind by the Crown Estate Scotland, alongside DEME and Iberdrola subsidiary, Scottish Power Renewables.     

Famously Scotland introduced qualitative criteria to its first ScotWind leasing round, unlike in Round 4 which awarded project rights in England and Wales in 2021 on price criteria only. 

Qualitative criteria ensure projects are better suited to the needs of local communities, said Crawley.

“There are two key things – we want to make sure these projects can get build by experienced developers and we also to make sure that the developers are good at working with the community,” he said. 

 “A 2 GW wind project is not just a project of the developer, it’s a project of the community as well.”

Northland’s fixed bottom project capacity in Scotland will be “brought forward first,” Crawley said, followed by the floating projects.

The company is “developing partnerships for those projects right now,” Crawley said.

Infralogic reported in February that the company is in exclusive negotiations to sell a minority stake in the ScotWind projects to Ireland’s ESB.

Despite the importance of non-price criteria, Crawley argued that European countries must keep CfD schemes alive to “really restore investor confidence”. 

“Two-way CfDs are the way to go,” said Crawley. “They will unlock a lot of investment in offshore wind and will facilitate projects moving forward quickly.”

In a two-way CfD, if the market price is below the strike price, the generator receives the difference; if the market price is above the strike price, the generator pays back the difference. 

Many CfDs currently only have a revenue guarantee, according to the European Commission, “but there is clearly scope to pursue more two-way CfDs”, which also benefit the public purse, according to its website.  

Despite increasingly ambitious targets to expand dramatically offshore wind power capacity in the next years, Crawley warned investment risks slowing down rather than speeding up, mostly because of huge supply chain issues.

“In Europe the most important thing is not announcing bigger targets for offshore wind,” he said. “We have to deal with the supply chain, otherwise we’re going to be pushing on a rope.” 

Crawley pointed to the fact that “zero offshore wind projects reached FID [final investment decision] in Europe last year”, saying this should be an alarm bell.

Two major project finance deals for offshore wind reached financial close last year according to Infralogic data, backing minority stakes for the Hornsea Two project in the UK and the Hollandse Kust Zuid scheme in the Netherlands. The two projects’ main developers, Orsted and Vattenfall, had reached FID years earlier, however.

“Governments have to recognise the reality,” added Crawley.

“They shouldn’t be pushing projects to move to FID this year if the supply chain isn’t there. Why force a project to lock in at astronomical prices? Because they may end up in a position where they can’t deliver.”

“Don’t put risk onto developer that they can’t manage,” he said.

Turbine prices have gone up 40%, Crawley said, adding that the market should “put expectation risk on developers, but don’t put the price of steel onto us”.

“In one way [this is] the best environment I’ve ever seen for our sector, but on the other hand I’ve never seen such headwinds,” he concluded.

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