Initial estimates on the level of engagement of Polish companies in the construction of offshore wind farms in the Baltic have been presented. According to Polenergia and Equinor, when it comes to their projects, the domestic input may reach 9-20 percent at the construction stage, and 60-80 percent in the exploitation phase. The former could be higher. However, for this to happen wind turbine factories need to be built in Poland – writes Bartłomiej Sawicki, editor at BiznesAlert.pl.
Project owners that presented supply chains
The President of the Energy Regulatory Office (URE) published plans for the supply chain of materials and services. So far, the URE President issued five decisions on granting the right to cover a negative balance for electricity produced at offshore wind farms. The owners of those projects have already prepared supply chain plans. The goal behind preparing and publishing those plans is to boost the development of the domestic offshore wind services market and make investment processes transparent.
The following projects published their supply chain plans:
• MFW Bałtyk III llc (Polenergia/Equinor);
• MFW Bałtyk II llc (Polenergia/Equinor);
• Baltica 3 Wind Power Plant llc (Polska Grupa Energetyczna/Orsted);
• Baltica 2 Wind Power Plant llc (Polska Grupa Energetyczna/Orsted);
• Baltic Trade and Invest llc (RWE).
The projects owned by PGE and Denmark’s Orsted are Baltic 2 and 3. The capacity of the Baltica 2 and 3 offshore wind projects is 1498 MW and 1045,50 MW respectively. They are located nea the Słupsk Bank on the Baltic Sea, about 25-31 km from the shore, near the town of Ustka. The Baltica 3 is to start feeding power into the grid in 2026, and a year later the final operational permit is to be granted. The Baltica 2 is to start supplying energy to the grid in 2027, and the operational permit is to be issued a year later.
The MFW Baltic II project, initially implemented by Baltic Trade and Invest (BTI), and owned by Germany’s RWE will be located about 55 km north of Ustka, east of the Danish Island of Bornholm. The decision to locate the maintenance facility was planned before the final investment decision, which is to be made in 2023, while power is to be generated in the first half of 2026.
Polenerga and Equinor’s first project MFW Bałtyk II will have an installed capacity of 720 MW. Their second endeavor – MFW Bałtyk III – is to have the same capacity. According to the schedule for both projects, they will receive the final construction permit in the fourth quarter of 2023. That’s when the final investment decision is to be made. The schedule expects that the power will be first released into the grid in the fourth quarter of 2026.
Developers choose Polish harbors
According to the supply chain documents, all of the involved companies are leaning towards choosing Polish harbors to install the wind farms. When it comes to constructing the farms, a domestic port is preferred, as long as at least one of the harbors is available and ready on time in line with the requirements set out in the document. PGE has stressed that domestic ports are also considered when it comes to building the facilities for the exploitation phase. Between 2019 and 2020 meetings with the authorities of harbors and selected terminals were held. The parties discussed the expected technical parameters, supply chain standards, project schedules, as well as processes related to storage, handling and loading of the components. In a table with examples of orders where there is a large potential for contracting supply, RWE enumerates Polish harbors that could be used to install the farms.
On the basis of survey data, Polenergia stressed that at the moment of application none of the Polish ports were able to meet all of the requirements for a potential installation base. In the company’s opinion, when it comes to an installation port that would provide services for MFW Bałtyk III and MFW II, the ports in Gdynia, Świnoujście and Gdańsk have the biggest potential. In order to change that, the Polish government included in the National Recovery Plan, which has been already delivered to Brussels, the construction of an installation harbor in Gdynia, an investment worth EUR 437 million.
Polish companies may engage in offshore wind development at a few dozen percent
According to some experts and the companies themselves, the development of the offshore wind farm sector from scratch will require PLN 140 or even 160 billion. How much of the money will stay in Poland? PGE believes that a “significant” portion of the money spent on building the Baltica 2 and 3 wind farms will go to companies that have their seat, or branch in Poland’s territory. PGE is planning to announce the date for procurement procedures for 12 main purchasing areas. The most important part of the tender – purchasing turbines – will start his year. The document also includes three turbine providers, which is the most capital-intensive part of the entire wind turbine. Other elements that were enumerated include:
• Monopiles, transition pieces, support structures, concrete work platforms. Number of identified suppliers: 3;
• Export cables. Number of identified suppliers: 8;
• Offshore transformer station. Number of identified suppliers: 2;
• Onshore transformer station. Number of identified suppliers: 30;
RWE did not present a schedule for its main contracts and tenders claiming the data was the company’s secret. However, it did stress that during the exploitation of the Baltic II, Polish contractors will be engaged in those areas where it will be possible, with respect to the rules on healthy competition. The Germans have also stressed that the local content will be an important part of the connected supply chain of the project. To complete the project, BTI cooperates with Polish companies, including Ekozapas, Geofusion, 3Bird, Tringa, Uniwersytet Gdański, Lider Tech, the Institute of Oceanology of the Polish Academy of Sciences, the Polish Geological Institute National Research Institute, Lotos, Sartori & Berger Polska, DHI Polska, PROJMORS, Elecom, and N-SEA.
Polenergia and Equinor have provided calculations that are a lot more specific. They want to make about 20 large orders managed by a group of companies. The first invitations to participate in the tender were made last year. This pertains to choosing the turbine provider. The procedure is to end this year. It will take two years to select the other providers of components and services. The companies analyzed the abilities and potential of Polish local providers, and estimated that the participation of contractors and subcontractors in both projects – MFW Bałtyk II and III could reach between 23 and 38 percent. During the construction phase, the domestic input may reach between 9 and 20 percent, and during the exploitation phase (maintenance and operation) between 60 and 80 percent.
Without a turbine factory Poles won’t keep PLN 140 billion
The capacity of wind turbines is an interesting aspect of the supply chain. They constitute up to 50 percent of all expenses, which is reflected in the chart prepared by PGE and presented below. RWE’s current business model for MFW Baltic II provides for the the usage of wind turbines of a capacity of about 14 MW. PGE is considering turbines with a capacity upwards of 10 MW for both projects. Polenergia and Equinor are planning to install turbines with a capacity of about 13.6 MW for each of the projects.
There are no wind turbine factories in Poland, so if their cost is estimated at 50 percent, it is easy to conclude that just this one element out of the dozens of tenders constitutes half of the cake. This means this portion of the money spent on developing offshore wind will not go to Polish companies, and that figure may reach PLN 140 bn. In result, the companies involved are trying to put a damper on any big hopes. Despite the huge ambitions about the participation of domestic supply and services, considering the results of the dialogue, and the latest professional analyses, the readiness of Polish companies to participate in the initial offshore projects is not substantial enough to ensure a large-scale involvement. One of the factors that contributes heavily to this state of affairs is the plan to install turbines with a capacity of 12 MW or higher. Currently Poland does not have enough production potential to manufacture and operate such turbines, and it takes time and significant investments to generate such capabilities. The company estimates the current participation of domestic contractors and subcontractors in the turbine contract package at about 10 percent, which includes the existing ability to deliver casings for nacelles, covers for spinners and prefabricated steel elements. If the Polish supply chain develops according to plan, the participation of national providers and sub-providers in the wind turbine sector may reach about 25 percent.
The participation of Polish contractors and subcontractors in the contract package for foundations is estimated at 2 percent at the most. The companies have stressed that despite the potential capabilities when it comes to jacket foundations, the key market participant in Poland is currently undergoing a liquidation, which halts the development of this product and the certainty of its availability.
According to estimates, the current participation of domestic contractors and subcontractors on the cable market is at about 10 percent with the possibility of supplying cable assemblies. Companies understand that the potential of internal cables could be improved. “According to the analyses conducted by the companies, a global entity on the market has a Polish majority shareholder, so the group has the potential to increase its local supply,” the document says.
The cost model estimates that the current participation of domestic contractors and subcontractors in the power substations package is at about 10 percent with regard to offshore power substations and 45 for onshore stations. “Considering the capabilities of Polish companies that build onshore wind farms, when it comes to onshore power substations, there is a big potential for implementing such endeavors in case of offshore wind farms connections as well,” Polenergia and Equinor stated. The participation in onshore power substation construction may reach 70 percent, because local construction services and components are already available. At this point the estimated participation of domestic contractors and subcontractors with regard to installation and assembly contracts is estimated at about 10 percent. If the plans to develop the local supply chain are successful, the participation of domestic contractors and subcontractors in the area of operation, services and maintenance will reach between 60 and 80 percent in case of operation and 25-40 percent in case of service and maintenance. This is caused by the fact that the spare parts will be mostly purchased from the turbine manufacturers, where the participation of domestic contractors and subcontractors is lower.
So, will a wind turbine factory be built in Poland? The three biggest suppliers – Siemens Gamesa, GE and MHI Vestas are already present in Poland.