Speaker 1: Welcome to zero.
Speaker 2: I'm Akshatrati. This week wind industry struggles and victories. If
Speaker 2: you've heard anything about the wind industry in recent years,
Speaker 2: it's mostly bad news. Building projects is becoming more expensive,
Speaker 2: getting government permission to build wind farms is taking much longer,
Speaker 2: and big companies like Oorstered, Vestas and Semens are struggling.
Speaker 2: But it's not all bad news. There are still big
Speaker 2: players winning at the win game. One of them is
Speaker 2: Copenhagen Infrastructure Partners.
Speaker 1: It's not as.
Speaker 2: Famous as other companies, but it's a big player. Since
Speaker 2: twenty twelve, CIP has raised twenty eight billion dollars and
Speaker 2: it now has one hundred and fifty gigawards of clean
Speaker 2: energy projects in the pipeline. That's roughly the size of
Speaker 2: the UK's electricity generation capacity under one company. CIP is
Speaker 2: so big, in fact, that the company is now even
Speaker 2: talking about building artificial islands out in the sea to
Speaker 2: further speed up the deployment of offshore wind power. To
Speaker 2: understand how CIP is managing to navigate the challenges of
Speaker 2: the wind industry, I spoke to one of its founders,
Speaker 2: Jakub Baruel Poultsen. He got to start building offshore wind
Speaker 2: projects in what used to be Danish oil and natural
Speaker 2: gas and is now Orsted. You can hear more of
Speaker 2: that story in a previous episode of Zero with Ostered
Speaker 2: CEO Mad Snipper. Yakub benefited from the initial wave of
Speaker 2: government subsidies given to offshore wind projects by countries like
Speaker 2: the UK and Denmark, and then he used that success
Speaker 2: to create CIP and bring in big investors such as
Speaker 2: pension funds and insurance companies to build even bigger offshore
Speaker 2: wind project. I spoke to Yakub at the World Economic
Speaker 2: Forum meeting this year in Tavos to understand how the
Speaker 2: wind industry is dealing with the many challenges it faces,
Speaker 2: why CIP has been so profitable, and what will be
Speaker 2: needed to keep deploying off your wind to meet climate goals.
Speaker 1: Yakub, welcome to the show.
Speaker 3: Thank you.
Speaker 4: CIP was founded in twenty twelve, but before that you
Speaker 4: work for Dong Energy for a decade or more. That
Speaker 4: company is now called Orsted and is a giant in
Speaker 4: the offshore wind industry.
Speaker 1: So could you.
Speaker 4: Talk me through that period of working for Dong Energy
Speaker 4: and what made you leave Dong Energy to create CIP.
Speaker 3: Well, I started already in two thousand and one. Actually
Speaker 3: my first job was to consolidate six Danish energy companies
Speaker 3: into what became Dong Energy and what is now astel
Speaker 3: And a few years after we did that six way merger,
Speaker 3: I became head of offshore wind in astel and in
Speaker 3: two thousand and seven and grew the company or the
Speaker 3: offshore wind division from around fifty people to around fifteen
Speaker 3: hundred people. So that was a really really interesting experience
Speaker 3: for me. And when I left in twenty twelve, quite
Speaker 3: a few of those people I had worked with in
Speaker 3: the offshore wind division followed me to the CIP company
Speaker 3: and are still there. So we have been working together
Speaker 3: for almost the twenty years, many of us.
Speaker 4: But let's be honest, you were known as the golden
Speaker 4: birds in Dong Energy. You were building these offshore wind
Speaker 4: projects and making a ton of money for the company,
Speaker 4: but also for yourself and Denmark. You know, the state
Speaker 4: prefers that the executives of its state owned companies did
Speaker 4: not personally profit so much, and so was having CIP
Speaker 4: as an independent company just allow you to grab opportunities
Speaker 4: that you could.
Speaker 1: Not have at Dong Energy, which of course became austered.
Speaker 3: I think the reason why we established CIP was that
Speaker 3: we wanted to give access to many, many more investors
Speaker 3: than just the Danish state into the offshore wind space.
Speaker 3: So we saw that offshore wind would not only be
Speaker 3: a Danish or north sea phenomenon, but it would be
Speaker 3: potentially become a global thing, which it tells Subsequently, we
Speaker 3: wanted to give access to many investors. So today we
Speaker 3: have two hundred institutional investors in CIP who are investing
Speaker 3: into our offshore projects across Europe, Asia and the US.
Speaker 4: And since twenty twelve when you created CIP, you've gone
Speaker 4: on to raise twenty eight billion US dollars, which makes
Speaker 4: you one of the largest spenders on clean energy in
Speaker 4: the world.
Speaker 1: But you don't just.
Speaker 4: Raise money and invest in projects. CIP actually goes out
Speaker 4: and builds energy projects. Could you talk me through the
Speaker 4: idea of having CIP as the body that raises money
Speaker 4: and then working with Copenhagen Offshore Partners that's the body
Speaker 4: that goes out and builds these projects.
Speaker 3: We see ourselves as a hybrid between a financial company
Speaker 3: and an energy company, so we try to do the
Speaker 3: take the best from both worlds. We have a very
Speaker 3: very strong financial muzzle because of our fund structure, et cetera,
Speaker 3: so we can always attract money on an ongoing basis,
Speaker 3: on a very flexible basis, in a way that suits
Speaker 3: our investors very well. But on the other hand, we
Speaker 3: have around two thousand people working in our system doing
Speaker 3: practic development all over the world's twenty four to seven
Speaker 3: in the thirty something countrys SO. I think it's a
Speaker 3: very good combination. So it's a hybrid model between a
Speaker 3: fund setup and an energy company set up, and I
Speaker 3: think it's quite unique actually, but it works very very well.
Speaker 4: But on Copenhagen Offshore Partners, the body that build these projects,
Speaker 4: you're not involved in the management of that company. So
Speaker 4: when you say it's a hybrid structure, what exactly is
Speaker 4: the connection between CIP and cop SO.
Speaker 3: Copenhagen Offshore Partner is a service company which is owned
Speaker 3: by some of our former colleagues from Ustor who established
Speaker 3: an engineering company, if you will, who are then servicing
Speaker 3: our projects across the world. And we have a number
Speaker 3: of other similar companies who are servicing us in different
Speaker 3: fields and we work on an exclusive basis with all
Speaker 3: these companies and have a very long term relationship with
Speaker 3: most of these people were working with for fifteen or twenty.
Speaker 4: Years and in building so many projects and raising billions
Speaker 4: of dollars. Could you just talk us through some of
Speaker 4: the biggest projects that you've worked on since twenty twelve.
Speaker 4: What are the challenges that you faced as you tried
Speaker 4: to build this industry because when you started, yes, offshore
Speaker 4: when was something that was starting to scale, but it
Speaker 4: was still very early days. It was, and say, it
Speaker 4: required subsidies and support from government to become commercial. Even
Speaker 4: now there are subsidies around the world for offshore and
Speaker 4: so it's not quite price competitive. Of course, it's become
Speaker 4: much cheaper in recent years. So yeah, talk us through
Speaker 4: the projects and the challenges.
Speaker 3: No, you're absolutely right. So fifteen twenty years ago, offshore
Speaker 3: wind was heavily subsidized sector. Nowadays it's in most countries
Speaker 3: it's actually a sector which can compete with other energy
Speaker 3: sources on a grand scale. So in Europe there are
Speaker 3: not really any subsidies anymore. It's actually the energy sector
Speaker 3: pays monitor governments for the right to build offshore winds.
Speaker 3: In other countries it's a little bit different, but it
Speaker 3: has been a very very interesting development and I think
Speaker 3: something that we will see continue in the future. It's
Speaker 3: offshore wind is unique in the sense that there's actually
Speaker 3: no limit for how big you can do the projects.
Speaker 3: So that's where it differs quite a bit from onshore wind,
Speaker 3: where some natural physical limitations usually for how big you
Speaker 3: can do the.
Speaker 4: Projects, and some projects that you've built and what challenges
Speaker 4: you faced.
Speaker 3: Our daily life is to face challenges, physical challenges, regulatory challenges,
Speaker 3: So we've had hundreds, if not thousands of challenges in
Speaker 3: all our projects. So I think that the two projects
Speaker 3: are mostly proud of. Recently is our wind Yard wind
Speaker 3: project in the US, which will be the first it's
Speaker 3: almost being finished now and it will be the first
Speaker 3: commercial scale offshore wind project in North America. And I'm
Speaker 3: also very proud about our Changfang Seda our project in Taiwan,
Speaker 3: which is the first offshore wind project in Asia outside
Speaker 3: of mainland China. So these two I think are on
Speaker 3: a global scale, actually landmark projects. We have had issues
Speaker 3: in both cases, but the projects has ended up being
Speaker 3: built on time and on budget.
Speaker 4: And what kind of challenges to do face as you
Speaker 4: were trying to build these first of a kind for
Speaker 4: those regions at least projects.
Speaker 3: So there have been a practic specific challenges. For instance,
Speaker 3: in Taiwan, which is very very far away from the
Speaker 3: European supply chain, so a lot of stuff has We've
Speaker 3: had to export that to Taiwan. We've had to build
Speaker 3: an industry in Taiwan to build the foundations and things
Speaker 3: like that. We've had to have many minute discussions with
Speaker 3: government about the regulatory framework for offshore wind in Taiwan,
Speaker 3: et cetera. So it has been a very very long
Speaker 3: journey over the past six or seven years since we
Speaker 3: started back in two thousand and fifteen or sixteen.
Speaker 4: And same thing I assume in the US, which is
Speaker 4: only just really getting into the offshore wind game and
Speaker 4: already many of the developers are either walking back or
Speaker 4: having to take billion dollar write downs exactly.
Speaker 3: So I personally started going to the US twelve years
Speaker 3: ago looking for offshore possibilities and the first practic we
Speaker 3: attempted to do never happened. Actually, that was the Cape
Speaker 3: Wind project that was ultimately abandoned before it was even started.
Speaker 3: So it has been a long journey also in the US.
Speaker 1: And one of the challenges that you face is regulatory certainty.
Speaker 1: I mean, in the US, even if there is incentive
Speaker 1: to build, subsidy to build, regulatory challenges such as permitting
Speaker 1: or governments deciding yes it's okay to build and then
Speaker 1: suddenly deciding no, no, there are challenges there. Whales might
Speaker 1: be affected, as some tried to say, so how do
Speaker 1: you deal with that?
Speaker 3: We tried to have some serious conversations with the relevant
Speaker 3: regulatory bodies before we even consider building, so in the
Speaker 3: early stage, in the development phase, and really try to
Speaker 3: map out any possible issues that could be And I
Speaker 3: think it actually generally works quite well in most cases.
Speaker 3: I think that's a good metrodology now in the industry
Speaker 3: for identifying, for instance, environmental issues such as the whale
Speaker 3: issue in North America and Ada. Now also set there's
Speaker 3: a good toolbox for dealing with the issue so that
Speaker 3: we don't just disturb the whales in critical periods, et cetera.
Speaker 3: So I think all in all, we see that the
Speaker 3: amount of issues are going down because the industry is
Speaker 3: simply becoming more and more experienced. On the other hand,
Speaker 3: of course, a new set of issues have arised in
Speaker 3: the supply chain because of the big volumes and the
Speaker 3: congestions and the supply chain, and so there's always something
Speaker 3: we need to look after, and lately it has been
Speaker 3: a lot supply chain related. What we have been focusing on.
Speaker 4: Well, I mean, let's get specific there, because one thing
Speaker 4: that's happened because of the supply chain issues is that
Speaker 4: prices of offshore.
Speaker 1: Wind have gone up.
Speaker 4: And as prices have gone up, some of the governments
Speaker 4: have decided not to go ahead with an auction or
Speaker 4: not to build a project. And then when companies have
Speaker 4: had to do write downs, the overall profitability of this
Speaker 4: industry is under question. You're seeing not just companies like
Speaker 4: Osted or Vestas or Semens Energy phace challenges, but also
Speaker 4: oil companies which we're thinking about becoming big players in
Speaker 4: the offshore space are taking a step back and they're
Speaker 4: questioning whether it's an industry we should enter. So, given
Speaker 4: your exposure to off your win and given your history
Speaker 4: of building these projects, how do you think the industry
Speaker 4: can overcome this real big challenge Because it's clear we
Speaker 4: need a lot more wind power in the world.
Speaker 3: I'm actually not so concerned about it. I've been an
Speaker 3: offshore win for more than twenty years now, and we've
Speaker 3: seen this happening a couple of times before. For instance,
Speaker 3: around the financial crisis, we had a similar situation as
Speaker 3: what we see now, so I think it will work out.
Speaker 3: We have seen recently that some of the PPA prices
Speaker 3: have increase.
Speaker 2: Against PPA stands for power Purchasing Agreement and it's a
Speaker 2: contract a company that consumes electricity signs with another company
Speaker 2: producing electricity. The key detail in the contract is what
Speaker 2: fixed price that renewable energy will be sold for and
Speaker 2: for how long.
Speaker 3: So, for instance, the latest US allocation of PPAs were
Speaker 3: at a higher price level than previously. We have seen
Speaker 3: also in Ireland, for instance, that the prices have increased,
Speaker 3: and the UK government also has told me that they
Speaker 3: are considering a new auction instead of the failed one
Speaker 3: et CE. So I think the industry will move on.
Speaker 3: So I don't see this as a fundamental issue in
Speaker 3: the industry. It is a natural reaction to the cost increases.
Speaker 3: We should remember that offshore wind is still a relatively
Speaker 3: cheap energy resource in most areas compared to fust fuel
Speaker 3: based electricity production.
Speaker 4: So do you think the era of falling costs for
Speaker 4: offshore wind is over.
Speaker 3: A period of time, hya there will be an adjustment,
Speaker 3: so the cost level will lead to the revenue label
Speaker 3: will need to adjust so it can cover the costs.
Speaker 3: But I'm confident it will be way cheaper than fossil
Speaker 3: fuel based. And then I'm sure as we see new
Speaker 3: technological progress sort of happen, we will in the long
Speaker 3: run see a continued downwards trend again.
Speaker 4: Right, so you expect that you're going to see price
Speaker 4: declines happening soon, But of course, right now we're in
Speaker 4: that environment of price increases. When do you start seeing
Speaker 4: the trend reverse to what used to be.
Speaker 3: It's very, very hard to say, because it's a combination
Speaker 3: of technological aspects and some macro economic energy market aspects,
Speaker 3: so oil prices, gas prices, and things like that. So
Speaker 3: it's hard for me to come with a firm estimate here.
Speaker 3: But I clearly see that we have a short run
Speaker 3: adjustment so that that revenues and cost align, and then
Speaker 3: we have a longer run fundamental decrease in the cost
Speaker 3: of renewable energy.
Speaker 4: Now, one model that companies building clean energy projects use
Speaker 4: is to build a project, then sell off a portion
Speaker 4: of that project, or to sell off the entire project
Speaker 4: to infrastructure investors bigger holders of capital.
Speaker 1: That way they.
Speaker 4: Don't hold as much debt on their books and can
Speaker 4: use that capital to go and build more projects. Does
Speaker 4: CIP use the same model.
Speaker 3: Our key value creation process is to develop and construct
Speaker 3: renewable energy projects and then we actually seek a good
Speaker 3: long term buyer for the projects. And in some cases
Speaker 3: we sell one hundred percent of the equity and an
Speaker 3: other cases we sell, for instance, forty nine percent, and
Speaker 3: that depends a little bit on the buyer preferences, so
Speaker 3: it's a little bit decided from case to case.
Speaker 4: And when you go out and raise funds, which you
Speaker 4: do and have done so much of what different types
Speaker 4: of funds do you create to be able to attract
Speaker 4: these large investors and just talk us through what type
Speaker 4: of investor is interested in what type of fund?
Speaker 3: So we create funds which are regulated by the Danish FSA,
Speaker 3: so it's a regulated financial product we are doing. And
Speaker 3: it's relevant for primarily for big institutional investors, so primarily
Speaker 3: pension funds, and it can also be family officers and
Speaker 3: insurance companies and other financial investors. Even the nuclear industry
Speaker 3: has actually invested money in our funds, which I'm very
Speaker 3: proud of. So it's really relevant for people who want
Speaker 3: to invest capital for ten fifteen years and who has
Speaker 3: a positive view on the renewal energy transition and who
Speaker 3: we leave in our ability to develop and construct projects.
Speaker 2: We'll be back with more from the conversation after the break.
Speaker 4: And are there some of your backers that you can
Speaker 4: talk about, because I think you started with one investor
Speaker 4: and now you said you have two hundred who have
Speaker 4: been the consistent ones we have.
Speaker 3: Our biggest investor is still Pension Denmark, who sort of
Speaker 3: invested in our first fund, is still our biggest investor.
Speaker 3: We have I would say most of the Danish pension funds,
Speaker 3: and in Denmark we are very blessed to have a
Speaker 3: very very strong pension sector where all Danes are forced
Speaker 3: to invest into the pension funds basically, and we have
Speaker 3: many German clients, many Scandinavian clients, quite a few Asian
Speaker 3: investors also including several sovereign Welsh funds. Also, we are
Speaker 3: still quite the small in terms of US investors, but
Speaker 3: that's growing and the US is the biggest capital market
Speaker 3: in the world, so it's a big priority for us
Speaker 3: to get more exposure to US clients.
Speaker 4: Now, the oil industry is famous for its boom and
Speaker 4: bus cycle. Oil prices rise, more people invest in trying
Speaker 4: to supply oil, that causes too much supply, and then
Speaker 4: oil prices fall, then demand starts to rise, oil prices
Speaker 4: rise again.
Speaker 1: And the cycle just repeats.
Speaker 4: Is clean energy also becoming a victim of the boom
Speaker 4: and bus cycle?
Speaker 3: I think we see an element of that also. I
Speaker 3: think what is quite clear in the renewable energy sector
Speaker 3: is that quite a few of the investors who want
Speaker 3: to invest into renewable energy are only allowed formally or
Speaker 3: implicitly to invest into brown field assets, so essentially assets
Speaker 3: that has been brought into operation. It's basically investors who
Speaker 3: can not take development and construction risks. So when we
Speaker 3: see these boom and bust cycle sits primarily because a
Speaker 3: lot of money are chasing a scars number of brownfield assets,
Speaker 3: and the prices are then increased a lot and then
Speaker 3: returns fall for those investors.
Speaker 1: And brownfield being already existing.
Speaker 3: Already existing assets exactly. So the point I'm making here
Speaker 3: is that the investment starting returns for brownfield investments can
Speaker 3: be a little bit volatile, but for greenfield assets. It's
Speaker 3: actually remarkably stable in the twenty five years I've been
Speaker 3: in this business.
Speaker 4: And greenfield investments is where you actually go and build
Speaker 4: these things. And what's the rough stable return that you've
Speaker 4: seen in that then.
Speaker 3: I would say it has been around ten percent. That
Speaker 3: has been the return level we have seen for greenfield
Speaker 3: returns over in many years. Of course it's going up
Speaker 3: and down a little bit, but it has much less
Speaker 3: to do with financial markets and speculation. It has much
Speaker 3: more to do with technological progress, power prices sometimes also,
Speaker 3: but it has been remarkably stable. And the way we
Speaker 3: work in CIP is that we have a very very
Speaker 3: big portfolio of investment opportunities. So we're developing around one
Speaker 3: hundred and fifty gig award of renewable energy products, so
Speaker 3: that's comparable to all of Germany's renewable eddy So a
Speaker 3: massive portfolio, and it means that we always have some
Speaker 3: products which are mature where we can take the decision
Speaker 3: to invest, and we also have the opportunity to say, okay,
Speaker 3: this project does not attractive right now, let's defer a
Speaker 3: little bit and then focus on other products. And that
Speaker 3: gives us quite a bit of stability because we can
Speaker 3: always just focus on the best projects and let the
Speaker 3: other products develop until they become as good as we
Speaker 3: want them to be.
Speaker 4: And if you didn't want to do just one number,
Speaker 4: what other numbers would you talk about?
Speaker 3: We are usually investing at around the ten percent. Then
Speaker 3: we very often sell in the brownfield space at a
Speaker 3: return level of maybe six percent or something like that.
Speaker 3: So there's a quite good value pick up from the
Speaker 3: activity we do. And that's that's the key attraction for
Speaker 3: the investors in GOP, that that we can we can
Speaker 3: underwrite products usually at around ten percent, and we can
Speaker 3: usually sell them when they have been constructed, and we
Speaker 3: have taken the risks, usually at around six percent.
Speaker 4: And so if we talk about it in sort of
Speaker 4: a billion dollar valuation, say you build a project that's
Speaker 4: worth one billion dollars, when you sell it to a
Speaker 4: large investor, how much are you charging them?
Speaker 3: Then it can sometimes happen that weich asked them two billion.
Speaker 1: Well that sounds like a pretty good rate of return.
Speaker 3: Yeah, but we take some risks and some you know,
Speaker 3: there's some costs also, and it's so it's not just
Speaker 3: a free lunch, right, it's we actually do quite a
Speaker 3: bit of work for that or several years. Sometimes it's
Speaker 3: also less than two billion, right, it can also be
Speaker 3: one and a half or something, but it's it has
Speaker 3: never happened. It's less than one.
Speaker 4: Let me say like this, And if we are in
Speaker 4: a bus cycle right now, given the state of the
Speaker 4: wind industry, how do you take advantage as an investor
Speaker 4: with plenty of cash to spend?
Speaker 3: No, but we have had a period now where we
Speaker 3: have bought, acquired, developed quite a number of development projects.
Speaker 3: So we have expanded our development portfolio. So I think
Speaker 3: over the past two or three years we have probably
Speaker 3: expanded the development portfolio from around ninety two hundred gigawatts
Speaker 3: to around one hundred and fifty gigawats. So you could
Speaker 3: say that our inventory, or our wine sellar so to speak,
Speaker 3: has grown. I think there could be a good possibility
Speaker 3: that we see into now a boom cycle and then
Speaker 3: we will sell out a little bit and the wine
Speaker 3: cellar will diminish a little bit. Again, that would be
Speaker 3: my expectation.
Speaker 4: And you've built a lot of offshore wind projects. What
Speaker 4: are some of the exciting innovations that you've seen over
Speaker 4: the years beyond just the fact that the more you deploy,
Speaker 4: the cheaper it is to build these turbines out in
Speaker 4: the sea.
Speaker 3: No, but I think the exciting things are actually all
Speaker 3: the on exciting things. So it's a number of quite
Speaker 3: cycnical and quite boring things. So there's not one big, fancy,
Speaker 3: moonshot thing that has changed the whole world here. It
Speaker 3: has been a number of smaller things.
Speaker 4: But recently you've created a new company that's going to
Speaker 4: build energy islands off Sure, now that sounds like a
Speaker 4: James Bond movie set.
Speaker 1: What is it really?
Speaker 3: Yeah, that was not the plan to do to do
Speaker 3: James Bond movies. We actually see this idea about building
Speaker 3: artificial eyelanes in the North Sea and certain places in Asia. Also,
Speaker 3: there's a natural prolongation of the development of offshore wind
Speaker 3: in the last thirty years. So thirty five years ago
Speaker 3: the first project was built in Denmark that was five megawat.
Speaker 3: Then a few years after one hundred megabater project was built,
Speaker 3: and now most of the products we're doing one thousand
Speaker 3: megawat projects. We hope that seven to ten years from
Speaker 3: now it will be ten thousand megabot projects. And there
Speaker 3: we need eyelanes for the electrical infrastructure for power to
Speaker 3: x for the service facilities, et cetera. Eight CE. So
Speaker 3: we see it actually as prolonging the exponential growth we
Speaker 3: have seen over the last thirty five years. Whether James
Speaker 3: Bond movies will be done on the islandes also I
Speaker 3: cannot say. But so most of the stuff that will
Speaker 3: take place there will be pretty boring, right. That will
Speaker 3: be you know, electrical engineers who will run around and
Speaker 3: make sure that the wind turbines are connected properly.
Speaker 4: Well, that could be an extra source of revenue if
Speaker 4: you can sell it to a James Bond movie. But
Speaker 4: just to understand the concept right now, you have these
Speaker 4: offshore wind turbines that are typically anchored to the seafloor.
Speaker 1: There's a big base.
Speaker 4: That is built on top of which there's a big pole,
Speaker 4: and then you have these turbines which can be sometimes
Speaker 4: as big as the Eiffel Tower just out in the sea.
Speaker 4: Of course, then you have to take a big long cable,
Speaker 4: and perhaps you bring many of those turbines into one
Speaker 4: cable at a substation, and then you have to take
Speaker 4: another long cable back out to the land where this
Speaker 4: electricity is consumed. So all you're saying now, is as
Speaker 4: this industry grows and you have many, many more wind
Speaker 4: turbines than there are out there, instead of having so
Speaker 4: many cables going out directly to land, you create a
Speaker 4: hub where those cables come in, and then from that
Speaker 4: hub you still have to take a cable back to Yeah.
Speaker 3: But the whole point here is that wind power is
Speaker 3: an intermittent resource. So around half of the time the
Speaker 3: window is blowing an the other half it's blowing lists.
Speaker 3: So it means that if we do an energy island,
Speaker 3: as we call it, and we connect all the wind
Speaker 3: turbines to the island, and they sent the power to
Speaker 3: the island, then we only need a smaller cable from
Speaker 3: the island to show than we would otherwise have needed.
Speaker 3: But that cable will then be full all of the
Speaker 3: time instead of only being full half of the time.
Speaker 3: So that's the purpose of the island is to facilitate
Speaker 3: energy storage power to X facilities so that when we
Speaker 3: have surplus power, it will be exported in a pipeline
Speaker 3: as hydrogen to show and exporting energy in a pipeline
Speaker 3: is only caused a fraction, a small fraction of what
Speaker 3: it costs to export it in a power cable. So
Speaker 3: the big driver for the island thinking is that it's
Speaker 3: very very expensive to build all these electricity cables, so
Speaker 3: we try to save a lot of billions and billions
Speaker 3: of euros on that. And we also by doing that,
Speaker 3: we create a more stable, almost a flat production profile power.
Speaker 3: So the power cable that we do build is then
Speaker 3: almost one hundred percent utilized.
Speaker 4: But if the power cable is one hundred percent utilized,
Speaker 4: that's good because then you're going to get a higher
Speaker 4: rate of return on that power cable. Except the hydrogen
Speaker 4: electrolyzers that you will install will not be running at
Speaker 4: one hundred percent power, and so they will be half utilized,
Speaker 4: and so they won't have the kind of return. And
Speaker 4: so how do you balance Because of course, yes, cables
Speaker 4: are expensive, but they're also kind of simple, right, they're
Speaker 4: made of copper and electricizers. Much more complicated. You need
Speaker 4: more precious metals, and of course the price of green
Speaker 4: hydrogen hasn't quite come down. So you want to use
Speaker 4: those electrolyzers one hundred percent of the time.
Speaker 3: Yeah, but our calculation shows that there's a very clear
Speaker 3: economic benefit from having more electoralizers and less cable and
Speaker 3: there will also be an element most likely of better
Speaker 3: restoration on the island, also to some extent in order
Speaker 3: to fully stabilize the sport of power.
Speaker 4: And just so we have numbers on how much money
Speaker 4: this saves, I would make a case for how big
Speaker 4: a project and how much money would be, say.
Speaker 3: One island, So one island would probably anger around tin
Speaker 3: gigawats of wind power, so the total capex of that
Speaker 3: would be around thirty billions or more. Only maybe one
Speaker 3: or two billions will be the island itself, so that's
Speaker 3: actually a quite small investment. Many people think the artificial
Speaker 3: island is expensive, but it's actually relatively cheap. That transmission
Speaker 3: investments will probably be five or seven billion euros lower
Speaker 3: than they would otherwise have been.
Speaker 4: You're right, I mean it doesn't have to be that
Speaker 4: expensive to build artificial islands. Of course, to buy has
Speaker 4: built entire maps and different designs with artificial islands just
Speaker 4: off the coast of Dubai, so it's not that expensive.
Speaker 4: But you know, just looking at it from a technology perspective,
Speaker 4: from a risk perspective, there are two big things that
Speaker 4: this creates. One the benefit of renewables is that they're
Speaker 4: decentralized and if you attack a nuclear power plant, that
Speaker 4: could be a big danger. But if you attack a
Speaker 4: wind farm, you know, the damage isn't that much. Now
Speaker 4: you create a central hub where all this power comes in,
Speaker 4: just becomes a very easy target. From a geopolitics perspective,
Speaker 4: how are you going to tackle the challenges that brings
Speaker 4: As a.
Speaker 3: Starting point, Renewable energy is improving Europe's security of supply situation.
Speaker 3: If you think about offshore projects, it's a little bit
Speaker 3: similar to the existing oil and gas projects we have
Speaker 3: in the North. See. I don't think the energy island
Speaker 3: will be more vulnerable for an attack compared to a
Speaker 3: guess installation, for instance, So we have that vulnerability already.
Speaker 3: I think we will, of course, when we suggest islands,
Speaker 3: we will of course have a debate with the various
Speaker 3: governments about how can we improve the security for the
Speaker 3: those installations from the start, So I'm sure there will
Speaker 3: be various technologies available for that for surveillance and protection.
Speaker 4: You will also have to manage sea level rise. Building
Speaker 4: an artificial island in a world that's warming.
Speaker 3: We have for many years taken that into account when
Speaker 3: we build it. The offshore wind projects that there wasn't
Speaker 3: expectations for sea level rise.
Speaker 4: And then you'll have to of course contend with the
Speaker 4: difficult guessing game that everybody is in right now, which
Speaker 4: is whether the hydrogen demand will appear or not. Because
Speaker 4: the way you make your economics of this energy island
Speaker 4: work is that you have this hydrogen production and that.
Speaker 1: Is piped back to the ground.
Speaker 4: And for all the interest in hydrogen, and yes, there
Speaker 4: are applications for it in many places, and there's also
Speaker 4: lots of subsidies that governments want to give, it hasn't
Speaker 4: actually ended up being used at scale in many many places.
Speaker 3: I think what is important in relation to hydrogen in
Speaker 3: a European context is that I don't think many people
Speaker 3: in Europe would doubt that we need electricity ten, twenty,
Speaker 3: thirty or fifty years from now. I think most people
Speaker 3: would agree with that. And we see very very high
Speaker 3: electricity prices right now, and the main product from the
Speaker 3: islands and from all offshore wind paths that will be
Speaker 3: the electricity produced, so the hydrogen will be a by product.
Speaker 3: And it means also that most of the revenues for
Speaker 3: these projects will come from the electricity side, and it
Speaker 3: actually means that the necessary price we need for the
Speaker 3: hydrogen will be relatively low, so it will be relatively
Speaker 3: competitive also with other sources of hydrogen because it's a
Speaker 3: by product, so we don't need that much money. We
Speaker 3: will earn most of the money, or the projects will
Speaker 3: earn most of their money on the electricity side.
Speaker 4: So the company is called Copenhagen Energy Islands and your
Speaker 4: plan is to spend something like one hundred and fifty
Speaker 4: billion euros over the next decades to be.
Speaker 1: Able to build multiple of these islands. I do hope there.
Speaker 4: Is a James One movie set on one of these
Speaker 4: islands if it does get built.
Speaker 1: Thank you, Yakob.
Speaker 3: Yeah, you're welcome.
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Speaker 4: Bindrim and Will Mathis. I'm Akshatrati until next time.