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World’s first subsidy-free floating offshore wind farm nears authorisation

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Renewables developer BayWa r.e. has applied to secure the rights for a commercial-scale floating offshore project in Portugal, to be developed without government funding.

  • BayWa r.e. is planning a floating offshore wind farm with 30 turbines and a capacity of up to 600 MW.
  • It would be the world’s first subsidy-free floating wind plant.
  • The absence of financial support from the government shows that even new technologies in the wind sector are increasingly cost-competitive.

BayWa r.e. has submitted a permit application for the project to the Portuguese authorities, following initial discussions and consultation stages with the government and local stakeholders. 

The project nears authorisation

The wind farm will include 30 turbines producing up to 600 MW of power in total, in an area off the coastline of Viana do Castelo. BayWa r.e. is working to secure the rights for the exclusive use of the seabed.

BayWa r.e. says it plans to support the creation of a supply chain in Portugal using existing local infrastructure for the tender projects. The plan is for a successful project to be used as a blueprint for future bids. 

The floating wind project will contribute to the achievement of Portugal’s net zero ambition, as the European country plans to increase the share of renewables in electricity production to 80% by 2026.

Lorenzo Palombi, global director of wind projects at BayWa r.e., said: “Our project is well in line with Portugal’s ambitious offshore targets. The zone where our floating wind farm is to be built is part of the marine spatial plan of the Portuguese government, so it already has a dedicated zone.”

A world’s first for floating offshore wind

The farm will be realised with a power purchase agreement (PPA) and no public subsidies. It is expected to be the world’s first subsidy-free floating offshore project. 

Floating offshore wind is a fast-maturing technology yet to be rolled out at scale. According to trade association WindEurope, Europe has 113 MW of floating wind turbines in operation but there is the potential to reach 10 GW capacity by 2030, if governments facilitate their development.

These wind farms have the same turbines as the traditional ones, but they stand on different structures. Experts at WindEurope say that floating wind farms have the potential to capture more offshore wind, as 80% of resources are located in waters more than 60-metre deep, where bottom-fixed offshore wind is not economically attractive.

Plus, average wind speeds are higher and more consistent further from shore, so floating structures can produce more energy throughout the year and have higher capacity.

The power of subsidy-free energy

Subsidy-free developments are essential in the renewable energy sector since stakeholders and nations worldwide will have to cooperate and increase their renewable energy portfolio to go to a net-zero economy.

Petra Manuel, analyst at Rystad Energy said: “Subsidy-free projects will reduce the burden on governments to provide such financial support, increasing the appetite for new markets/countries, especially the ones with less budget, to open new developments.

“However, from developers’ perspective, subsidy-free developments mean that they must establish cost-efficient solutions and supply chain, which is imperative in deploying large-scale projects.

“Developers will inevitably prefer markets with subsidies, but markets with alternative paths to secure revenue, such as PPAs, may also be interesting. Zero-subsidy developments will push countries to structure decent PPA schemes/regulations to maintain developers’ interest.

BayWa r.e.’s track record in subsidy free developments is encouraging

BayWa r.e. completed the construction and sale of the UK’s first subsidy-free onshore wind farm in 2020. The Inverclyde Windfarm, which was sold to James Jones & Sons and Gresham House Asset Management, secured a corporate PPA with supermarket chain Tesco.

Francesca Bjørnflaten, senior analyst at Rystad Energy added: “On a general note regarding renewable projects, subsidy-free developments sends a positive signal to the renewable industry as this means that projects’ economics (NPV, IRRs etc.) do well even without subsidies.

“One could even use this as a means of demonstrating the industry’s maturity. Similar to electric vehicles in Norway (and probably other places), once the market has absorped a certain level of electric cars, the subsidies will be removed.”

Moving beyond subsidy improves economic argument over fossil fuel use

Fossil fuels are still widely subsidised, however. According to the International Monetary Fund, $5.9 trillion or 6.8% of global GDP was spent on oil, gas and coal in 2020.

To reach net zero, renewable energy needs investments of at least $4 trillion per year until 2030, according to IEA estimates. The United Nations says that the necessary funding exists, but the industry needs commitment and accountability, particularly from the financial system.

Wind power is becoming increasingly cheaper to produce and buy, meaning consumers can access zero-carbon electricity at lower costs than before. This makes the financial case for switching to clean energy sources, alongside the obvious environmental benefits. It is another sign of the accelerating energy transition.

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