October 30, 2017 / 10:52 AM / in a year

Dutch offshore wind farm builders in talks to sell green energy to corporates

AMSTERDAM, Oct 30 (Reuters) - Energy companies building wind farms off the Dutch coast are negotiating to sell some of their green electricity directly to large corporates instead of offering it to the wholesale market, they told Reuters.

Developers of offshore wind farms have traditionally relied on government subsidy payments to guarantee income, but substantial cuts in support mean operators now have to find new routes to securing future revenue.

One of these is locking large electricity customers, for example technology companies that need electricity for energy-intensive data centres or industrial corporates that run heavy machinery, into multi-year supply contracts, also known as Power Purchase Agreements (PPAs).

“We are indeed talking to our clients about PPAs from planned projects like Borssele 3 and 4,” said Kirsten Barnhoorn, manager of strategic partner management at Eneco.

Last year, Eneco, together with project partners Royal Dutch Shell, Van Oord and Mitsubishi/DGE, won a tender to build 700 megawatts (MW) of offshore wind capacity across two sites, called Borssele 3 and 4.

The Dutch power producer already counts the Dutch Railways, Google, FujiFilm and Amsterdam’s airport, Royal Schiphol Group, among its renewable energy buyers.

“Their long-term commitment through corporate PPAs is helping us to invest in new renewable energy projects,” Barnhoorn said.

Eneco will sell half of the electricity to be generated by Borssele 3 and 4, while Shell will market the other 50 percent. Shell declined to comment on who it will sell the electricity to.

For rival offshore wind builder DONG Energy, which has a Dutch government contract to build offshore wind farms at Borssele 1 and 2, securing a large corporate buyer is also on the table.

“In the Dutch market, this is something we are considering. It’s a new route to look at your revenue line,” said Daniel Nathan, head of wind asset portfolio development at DONG Energy.

PPAs with corporates are common practice in the U.S. renewable energy field, where securing a credible electricity customer has helped make projects bankable.

But renewable energy PPAs are only just starting to take off in Europe, with most deals so far focusing on smaller solar and onshore wind farms.

One of Eneco and DONG Energy’s potential customers could be tech giant Microsoft which has located one of its large European data centres in the Netherlands.

“The Netherlands is definitely a priority ... We’re very interested in offshore wind development,” said Vanessa Miler-Fels, renewable energy strategist at Microsoft, declining to give further details.

For corporate buyers, securing green energy contracts helps improve sustainability credentials and gives clarity on future energy prices and supply.

Developers like Eneco and DONG Energy will be able to reduce some of the future price risks of projects when locked into multi-year supply agreements, which in turn lowers costs. (Reporting by Karolin Schaps; Editing by Mark Potter)

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