A trustful dialogue between government and industry is extremely important. I am pleased with the good discussions we have had within industry and with the Polish administration so far. A predictable and stable framework is beneficial for all industry players. Increased transparency in the decision-making process leads to increased confidence – says Michał Kołodziejczyk, CEO of Equinor Polska in an interview for BiznesAlert.pl.
BiznesAlert.pl: Does the coronovirus epidemic affect the construction of offshore wind farm projects in Europe? If yes, how?
Michał Kołodziejczyk: In my response I would like to focus on the effect of the coronavirus on Equinor’s operating offshore wind farms. Equinor is taking necessary measures to protect the health, safety and wellbeing of our people and minimize the spread of the coronavirus. All but business critical personnel needed at our UK offshore wind sites are currently working from home. For those working at the sites, we have split the teams in two, and cross-shifts are conducted via video. Equinor adheres to the UK Government’s and national health care instructions and all personnel reporting to duty are subject to check-ups.
We are focusing on safeguarding our operations, therefore as a precautionary measure, all installation and maintenance work is reduced to a minimum for the time being.
As to wind farms in the development phase, there obviously is a risk of delays, as in most industrial sectors these days. We are advancing our projects and engaging with our stakeholders and suppliers as best as we can.
We have seen that authorities in various European countries have recognised the risk of delays and we appreciate that they demonstrate flexibility when it comes to deadlines for grid connection and start of operation.
Equinor has acquired a 50-percent stake in three projects [in Poland], two of which have environmental decisions and connection agreements. When can they be connected to the network and what power can they have?
As you rightly say, Equinor has a 50% stake in three offshore wind projects in the Polish part of the Baltic Sea, namely Baltyk I, Baltyk II and Baltyk III. We are developing these projects together with our partner Polenergia. Equinor manages the development, construction and operation phases of the projects. We took this leading position as we believe in the attractiveness of the Polish offshore wind market.
According to our current planning, we hope to make a final investment decision for Baltyk II and Baltyk III in early 2023. This means that first power from the farms could be fed into the grid in 2025. The combined maximum capacity of both projects is 1440 MW. Our timeline is based on the assumption that the Polish Offshore Wind Law is adopted and enters into force towards mid-2020 and the contract for difference is allocated to the projects in the second half of 2020.
Baltyk I is at an earlier stage of development and will follow a different timeline. The project is further out in the Baltic Sea and will have a capacity of up to 1560 MW.
Earlier this year, a draft act on the construction of offshore wind farms was created. Equinor’s comments are related to the certification process. What needs to be improved in this respect?
We very much welcomed the publication of the draft law this January. This was an important milestone for the development of offshore wind in Poland. The dialogue process between industry and government leading to this draft has been very good and we appreciate the opportunity to share views in the public consultation.
The solutions suggested in the draft law generally provide a reasonable and realistic framework which should allow for the development and construction of offshore wind farms in Poland. Equinor, has endorsed the comments submitted by the Polish Wind Energy Association (PSEW), to which we have actively contributed.
As for certification, this is an important topic. Safety and security are Equinor’s top priority in all project phases, from development to construction and operation. We have developed solid procedures for our offshore wind activities, based on our company’s nearly five decades of offshore experience. When establishing a regime for certification for offshore wind, we believe Poland should take into account international best practices and benefit from experiences made in other countries like the United Kingdom, where the development of offshore wind started some 20 years ago. Internationally approved norms and guidelines should be used to achieve solid and efficient solutions. We further believe it is important to have a level playing field for companies involved in this sphere.
During consultation, companies suggest that the first phase of the auction may be extended by one year and includes projects with a capacity of 6.5 GW. Currently it is 4.9 GW. Is it good idea?
The deadline for applications for a contract for difference (CfD) during the first phase is to a large extent dependent on European legislation and in particular the state aid guidelines applying to the energy sector. We understand that the current guidelines, which for now are valid until end of 2020, will likely be extended until the end of 2022. The end of phase 1 is linked to this deadline. This means that prolonging phase 1 might be difficult from that perspective.
The capacity to be allocated in phase 1 should be linked to the total capacity of projects advanced enough to participate in that phase. It is for the Polish government and Parliament to take a position in this matter.
Equinor has experience in the UK and Germany. What good practices can be learned from both markets?
Many things come to my mind! Poland is in the fortunate situation that we can learn from projects and regulatory solutions developed in more advanced offshore wind markets.
A trustful dialogue between government and industry is extremely important. As I mentioned earlier, I am pleased with the good discussions we have had within industry and with the Polish administration so far. A predictable and stable framework is beneficial for all industry players. Increased transparency in the decision-making process leads to increased confidence. Visibility regarding the timline of allocation of CfDs is important. It is very positive that such is included in the draft law.
Defining ambitious targets for offshore wind development is another key element. Larger volumes mean lower costs and a market with ambitious targets becomes more attractive for both developers and suppliers. For instance, the ambitious offshore wind targets set by the British government helped to convince turbine manufacturers to take investment decisions for factories based in the UK.
When it comes to local content, we also have good experience from the British model which focuses on capacity building and the development of a competitive supply chain. This brings better results than for instance mandatory levels of local content, which are also difficult to defend in the context of the EU internal market. The initial French rules regarding local content have resulted in year-long delays in the development of offshore wind. The offshore wind market is truly European and all projects realised so far have used supplies from various countries, including Poland.
A key learning from Germany is the importance of the grid dimension. It is crucial to adapt onshore grid planning early to accommodate for offshore wind: due to the lack of such integrated planning, there have been significant delays in Germany. I am happy that we have an intensive dialogue with PSE on this topic and hopeful that the Polish power grid will be ready to accommodate power generated offshore.
Finally, well equipped and fit for purpose ports are critical for safe and efficient construction, operation and maintenance of offshore wind farms. In the United Kingdom, many regions on the East Coast have experienced a revitalisation from the investment that offshore wind developers have brought to the area. Investment in critical infrastructure, port capabilities and local recruitment have brought much needed growth to the region. Offshore wind represents a significant opportunity for coastal towns, cities and areas in Poland. I hope that the necessary decisions will be made as soon as possible to prepare Polish ports for offshore wind.
Interview by Bartłomiej Sawicki