14.05.2018 | Christoph Sutter, Head of New Energies, on the development of the Axpo wind portfolio
Axpo's main focus in wind power is currently on development and construction of plants in France. According to the strategy, some of these new wind farms will stay in the Axpo portfolio while others are sold to investors. How is business? We asked Christoph Sutter, Head of New Energies at Axpo.
Wind continues to be a growth area. How is Axpo doing in this sector at the moment?
We are doing very well. We have a clear focus on onshore wind, and on development and construction of wind power plants in France. We have several wind farms under construction in parallel and can complete most of them on schedule.
What do you mean by that?
Our subsidiary Volkswind commissioned a new wind farm in France in March. Four more will follow this year. All total, a capacity of 64 MW will go on grid there. In addition, we will start construction of five more wind farms in 2018.
Are you happy with the pace?
Yes, it's going very well. The regulatory situation in France is also developing positively from my perspective. A change from the feed-in system to auctions is currently taking place. In addition, the details for auctioned tariffs for a period of 20 years have been defined.
The first auction in 2018 already took place.
Exactly. It was very exciting, and we participated with three wind farms. However, we still have a large number of projects in the pipeline in France that fall under the current feed-in regime. We will be building many such plants in the upcoming years. But in the medium term, auctions are interesting for us.
Why do you think the detailed regulations in France are positive?
Because they are very different from those in Germany. The detailed rules for the auctions are very challenging and difficult for wind farm developers in Germany. France is much more friendly toward developers.
But you are active in both markets, right?
True, but our pipeline in Germany is much smaller than the one in France. That's why we are pleased with the new regulatory environment in France. Currently, France is the hottest market in Europe for the development of new wind farms. This also holds true for the prices that can be achieved on the market. Hence, lots of developers want to grow here - but we have the advantage that we are already in the market with Volkswind. We know this market well and have a large pipeline in this country.
But that also means more competition: The first auction in France with 500 MW was massively over-subscribed. How successful were you?
We bid with three projects and got awards for two. Primarily we wanted to get first experiences with auctions. And we are very pleased with the result with two awards and one rejection. If we had won all three, probably would have bid too low. But based on the result that was not the case so I'm happy.
The average award at this auction was 6.54 cents/kWh. Is that economically feasible?
Yes, by all means. Those are very good prices. In Germany the price trend is around 4 cents/kWh. The regime in France is also positive because wind farms with a capacity of maximum 18 MW still profit from the feed-in system - and do not fall under auctions in contrast to large wind farms.
How does price development look overall? Will onshore auction prices go down like we see for offshore?
Price drops are not as strong as in the offshore area. But we do expect that onshore wind prices will decrease. Of course, this is the effect that regulators want to achieve with the new support scheme with auctions and it’s a sign that the whole industry will become more efficient.
Construction is part of our business. But we want to achieve added value by selling wind farms. In 2016, we sold four farms with a capacity of 63 MW to Chorus. What's going on at the moment?
Our strategy is to keep some and sell some of the new wind farms we build. In financial year 17/18 we will sell four wind farms with a capacity of 50.3 MW as a complete package in France. The negotiations are underway.
So investor demand remains high?
Yes, demand is high and market prices are attractive. This is particularly the case when the farms are sold in a bundle because larger investors are involved and participate in the multi-round bidding.
«Investor demand is high and market prices are attractive»Christoph Sutter
What's happening in the area of technical and commercial operational management? Isn’t this also one of our business options in the wind area?
In the current sales process this will be part of the deal. And Volkswind can use its know-how in this area.
What about selling electricity? Will Axpo do this as well?
Up to now we have not had to do that because we could just feed-in and invoice the electricity. But with the system change in France we will have to market the power directly in the future, just as we already do in Germany. Typically we work with brokers in this area. We put out a call for bids.
And who won the race?
Axpo France. The Axpo Trading colleagues submitted a very competitive offer and now we are working together with three wind farms. That's not the case everywhere. In Germany it’s not Axpo that's marketing the Volkswind power, and in Italy it is also not sacrosanct that Axpo will be marketing the electricity from our wind power plants. You have to compete successfully. But I want to acknowledge my colleagues at Trading in this particular case in France. They are very fit and have apparently positioned themselves in this market more quickly than the competition and made the best offer. I hope that will continue in the upcoming years - but competition will continue to play a role.
We still have an interest of nearly 25 per cent in the offshore Global Tech I wind farm. How is Axpo doing here?
The last turbines were accepted in March and the project has been completed from the perspective of the banks. As a result the financing costs for GT I have decreased because the operation phase is less expensive than the project phase. On the other hand we can now implement planned refinancing. That's also positive for Axpo.
We also still hold a 25-per cent interest in Terravent, a joint project involving various Swiss energy companies. A good thing?
The Terravent wind farms are doing very well. Terravent has decided to buy more wind farms. The Axpo M&A team is looking for new wind farms. However, Axpo will not invest any new money. We are investing our money in the Volkswind wind farms. The Board of Directors recently decided to maintain a wind portfolio with about CHF 100 million in investment costs.
Technologically speaking, the motto "even bigger, even higher" appears to apply. Is that true?
Yes, that has been the case for the last 20 years and it will continue. As a result prices will come down like they already have in the photovoltaic area. In the PV area this has to do with the fact that the solar panels are becoming cheaper and have a bit more capacity. In contrast, the costs for wind plants continue to be high. But the facilities have become significantly more efficient.
In conclusion let's take a look at Switzerland. The Energy Strategy 2050 foresees a strong expansion of wind energy. How does Axpo intend to get involved here?
We would like to do a lot more. Switzerland is not really a great wind country, but there are locations where wind energy could be operated successfully, for example in mountain regions. But we have logistical challenges to master here. In addition, there is a great deal of opposition towards wind power plants in Switzerland. That doesn't make construction here easier. But once again, we would like to do more and evaluate projects time and again. It would also make sense to be able to use Volkwind's know-how in the development and construction of wind power plants in Switzerland.
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