Interview: Iberdrola’s Jonathan Cole on offshore cost cuts


September 12, 2016

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“In this industry you should never be surprised when you see something happening much quicker than people expected.”

It is fair to say that Jonathan Cole, managing director of Spanish utility Iberdrola’s offshore wind arm, is positive about the prospects for offshore wind. Cole was the guest speaker at our third Quarterly Drinks networking evening of 2016, which we hosted with Swiss Re Corporation Solutions in London on Thursday.

The cost of generating power from offshore wind farms has fallen steeply in the last five years, from £150/MWh in 2010 to £119/MWh at Iberdrola’s East Anglia 1, which was confirmed in April.

Now the UK Government is looking to give subsidy support to projects with a strike price of under £105/MWh in the next round of its Contracts for Difference regime, which has been delayed until 2017, with further cuts to come.

The UK Government has said that continued support for offshore wind under its Contracts for Difference regime depends on the industry reducing costs. Given the results of recent offshore wind tenders, we are confident that these reductions will be made.

Chief among these are Borssele 1 and 2, which are planned in the Dutch North Sea and which Dong Energy is set to deliver for a price below €100/MWh. This means the offshore wind industry has already hit a milestone that it was targeting by 2020.

Cole is bullish about the prospect of more reductions as technology improves and companies across the supply chain get more experienced in building and operating wind farms offshore. These cost reductions will be vital if the industry is to become competitive with all other large-scale forms of low-carbon electricity generation.

He says: “It is right to be optimistic about the future because offshore wind will be cheaper than nuclear and can be cheaper than gas if we carry on with this cost-reduction journey. The goal between now and the middle of the next decade is to get to a point where offshore wind is competing with every other low-carbon generation technology, and that is where I think we’ll get to.”

In the UK, this would put offshore wind in a prime position as the country seeks to replace around half of its electricity generation capacity over the next decade.

Cole says that the need for the UK to replace this capacity means Brexit should not be a big hindrance to those working in offshore wind. The UK’s decision to leave the European Union might lead to some short-term economic shocks, and additional cost for UK-based projects that need to import turbines and technology from other countries, but new generation capacity is needed regardless.

It is this confidence that has encouraged Iberdrola to go big on offshore wind. Cole set up the company’s offshore wind arm in 2010 when it only had €6m invested in offshore wind.

Now it has committed €6bn of equity to offshore projects including the 714MW East Anglia 1, 389MW West of Duddon Sands and 350MW Wikinger. Its strong balance sheet means it can develop without debt or other equity players. This has also established the utility as one of the sector’s largest equity investors.

Iberdrola’s plan for the 2020s is to develop two clusters of offshore wind farms, in the southern North Sea and the German section of the Baltic Sea. It currently has a 3.5GW pipeline for the 2020s, including a 1.2GW follow-up to East Anglia 1.

Cole says that clustering schemes like this would make it easier to build and operate is projects, and help the offshore sector to optimise both its technology and business practices.

Not only is he confident that the sector can keep driving down costs. He is also playing a key role in making it happen.

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