Matthias Haag – CEO, Gemini Wind Park, The Netherlands
CEO of Gemini Wind Park, Matthias Haag illustrates the significance of the country’s largest offshore wind development to the nation’s renewable energy mix, as well as the variety of operational and financial hurdles that the company has overcome since beginning this project.
Although an environmentally friendly alternative, offshore wind has been traditionally been viewed as an uneconomical alternative, unable to operate without subsidies. Given this perception, how were you able to convince investors to partake in the Gemini wind farm project?
I don’t think that investors have a problem with subsidies or tax relief: it’s also worth bearing in mind that other forms of power generation, including nuclear and gas, are also highly subsidized in various areas. Energy is a subsidized business; every country in the world is subsidizing energy in various ways and forms, whether through tax relief, lease grounds, or providing support to the megawatt hour.
Having said that, I think investors are very comfortable with the scheme the Dutch government has set up. The Dutch government is one of the few remaining AAA-rated governments, and they are driving the production of energy, which is what they want to achieve – we are subsidized for the production of energy, not just creating a wind park.
What variables have led to this project’s financial stability?
There are two elements: what comes in on the money side, and the cost going out: there we have a two contract strategy. We have only two main contracts – one with Van Oord for supplying cables and plant, and one with Siemens for supplying the turbines and the installation and commissioning of the turbine. That reduces interface risk, the chance of things falling into the cracks. It’s easier to control and give investors confidence that the project will be delivered to cost and on time as planned.
Now after spending the last six years building relationships and obtaining permits, construction has finally begun. What has been the most challenging part of developing the project so far?
I’ll focus on the last year – it was definitely a big challenge to get the project funds in place; I think it has happened very quickly, and been a huge success. Raising EUR 2.8 billion within six months is unheard of.
At the same time it was a big challenge. We had 16 banks and ECAs involved, and all these parties had to come together and agree on what contracts needed to be signed.
On the technical side, the challenges are in the area of electrical infrastructure. Cables have proven to be an issue on other offshore wind farms and we certainly put a lot of focus on it, and so has Van Oord.
From a local beneficiary standpoint, the project has obviously benefitted the country in many different ways. What sort of implications has the project had on the local job market?
It’s always difficult to come up with concrete numbers, but it definitely employs a few hundred people involved in the project. It’s always difficult to define local, as different companies employ different people in different locations.
There are a lot of secondary benefits for the Dutch people, because in the end a lot of that money is spent in the Netherlands as a result of the project, and that means you have people coming here, staying in hotels, using taxis, all these kind of side effects that are very difficult to measure but definitely come along with a project of this size. It’s not just about direct employment, but overall benefit. And we are manufacturing big parts in the Netherlands – for example, 75 monopiles come from CIF in the south.
In your opinion, what factors are important in selecting potential contractors and strategic partners?
This project is a little bit unusual in terms of how the partners have been selected because the partners on one hand Van Oord, Siemens and HVC were selected at a very early stage, and they are also investors in the project. As such, they take an interest in its overall success. This is an interesting strategy that has both benefits and disadvantages, but overall, it has been of net benefit to the project so far.
The other thing that is true for any offshore project has been very good planning. In the end, probably it is less important what exact technical solution you find, but more important how it is planned and executed, and that comes down to your partners, your contractors, what people you have in your team.
What sort of policies, procedures, or support structures must the Netherlands implement to better capitalize on these trends and more effectively compete against its peers in the offshore wind sector including Norway, Denmark, or Germany?
The Netherlands has set up a very good scheme that has showed that it is successful, and they are now designing the process for the third wind park, and as such they are on very good track to push offshore wind and get more renewables (in the wider sense) into the market. There are different philosophies: the UK and the Netherlands prefer a more market-driven tender process, while Germany is more going after the EEG with fixed tariffs. There are different philosophies, and I don’t think only one road leads to success to get offshore wind.
Do you believe that renewable fuel sources can reach the point of materially impacting the market and warrant enough incentives for oil and gas players to consider a move into this segment?
Absolutely. Tidal is definitely a bit behind wind (having worked in tidal myself), but if you look at Gemini alone, we are reducing the carbon footprint of the Netherlands by 2 percent. That’s just one project. If you take more projects into account, you are taking a few 1,000 MW that are planned, then that should be of interest to a lot of players in the energy sector.
I think oil and gas has a lot of synergies, one of which is offshore construction. All the experience these companies have in the offshore design and construction means huge synergies that both sectors would benefit from.
Offshore oil and gas companies have been putting platforms out in the North Sea since the late 1960s, and they have experience of how to design these, including what to specify in terms of painting, cables, installation and corrosion protection. Some lessons are hard learned in offshore wind. It’s progressing very well as an industry, and people from oil and gas are coming in.
Currently operating with at a capacity of 1,000 MW, the Netherlands possesses an ambitious roadmap to expand its offshore wind capacity to 4,500 MW by 2023. What sort of best practices, do you predict, can future Dutch offshore wind projects take away from Gemini?
I mentioned before the contract philosophy, and I think that will be one key takeaway. I also mentioned the project financing, which has proven these things can be constructed that way. It’s a bit early to say this, but I hope future project planners find that this is a way to construct a project safely, to a good level of quality and within the agreed time and budget.
There are also a few lessons on the technical side that can be taken away, because we are in a relatively rare position in that we are far offshore, which means a lot of the maintenance and operation of the park will be done from an offshore vessel in the field, rather than going there daily with a vessel, and I would hope that some of the best practices in terms of O&M will benefit later projects.
And compared to some of the other wind projects in the North Sea, what distinguishes Gemini as a frontrunner in this sector?
One is size, the other is the partners: we have some foreign investors. Van Oord and Siemens are leaders in their field, and on the technical side the AC cable is relatively long – the Germans have gone for a DC connection on their projects, which brings its own challenges. We pushed the boundaries on the foundations for the turbines, which are very large – we have monopiles now with a 7.5m diameter, which in earlier phases were planned to be jackets, which will hopefully bring us some cost reductions.
What are your personal leadership philosophies for chartering success?
It’s very important that you are dependent on people. It’s important to get the right people around you, people with experience and expertise and the right attitude to a project. Personally I value safety very highly – I think a good project is one that is run safely and without any major accidents or incidents, and usually you find that it’s very unusual that a project that has a terrible health and safety performance is a financial success.
This is a very large project, and in timing it can be demanding on people, because you’re not talking about one summer installation phase, but a project running over two years, and for some people six years. You have to take that into account when dealing with people and realizing how busy they are on the project, and how much effort has gone into that. It’s important to recognize that while a project always has peaks and troughs, in this case it’s over a very long period.
How have you gone about recruiting the right people?
Some people have been working on the project for a very long time, continuing on from the development phase over to the execution phase. And then we brought in quite a few people, either through our personal networks or the network of the people involved, and when we couldn’t find anyone, we brought in people via agencies and headhunters.
I believe renewables will play a huge role in the future of energy. Having worked in oil and gas, I am not one of these people that say we have to be green tomorrow because I know that’s unrealistic. But for me it’s a huge motivation that we can make these changes on an industrial scale that makes a difference, and that’s what’s motivating me personally – I have children, and I think this is the right way to look at the future.