Dong's Samuel Leupold – leading the offshore wind charge

In an exclusive interview, Dong offshore wind CEO Samuel Leupold talks to Darius Snieckus about the company's pacesetting build-out, IPOs and how low costs can go

Samuel Leupold smooths out a map of the North Sea. “In 2013, there wasn’t much to show, it was all in the pipeline, an aspiration,” he says.

The chief executive of Danish developer Dong Energy’s offshore wind division is pointing to now-landmark projects including Burbo Bank Extension, Westermost Rough and Borkum Riffgrund 1.

“But today most everything is under construction or in operation. It’s a dramatic change.”

Dong, born in 1972 as the Danish Oil & Natural Gas company, has grown away from its fossil-fuel origins over the past decade to become the global pacesetter for the offshore wind sector.

Led by an ambition of building 6.5GW by 2020, it has established front-running positions in the British, German, Dutch, Danish and US markets — and is scouting prospects in Asia from a new office in Taiwan.

“Back then [in 2013] when we were planning this strategy, the biggest concern was that the industry would not make it out of its infancy fast enough to keep pace with what was eroding patience on the political side — where the view was ‘offshore wind looks similar to onshore wind but why does it cost so much more?’” says Leupold.

“We’ve made huge strides since: everything that was on our map [of planned development off Europe] in 2013 is becoming a reality. And we have brought the supply chain along such a distance too — [there has been] tremendous progress. It gives us courage when we are looking at the wider potential of offshore wind around the world.”

Dong is not alone in its faith in offshore wind’s future. The developer — after two previous aborted attempts at initial public offerings (IPOs) — hit the financial newspaper headlines in June as the world’s biggest stock market flotation this year, fluttering a price tag for the entire business of just under DKr100bn ($14.7bn).

Claus Hjort Frederiksen, finance minister of Denmark — which owns 50.1% of Dong, alongside 17.9% shareholder Goldman Sachs — said the IPO was indicative of the company’s “growth from primarily being a Danish utility business to a growing international company with a leading position in the offshore wind sector”.

"When we were planning this strategy, the biggest concern was that the industry would not make it out of its infancy fast enough to keep pace with eroding political patience"
Samuel Leupold

Cost — for Dong, as for the wider developer fraternity — has been king in winning over financiers and governments to the idea that offshore wind can become a mainstream, bankable power source.

That it bull’s-eyed a target set in 2013 of cutting 30% out of the cost of offshore wind three years early was material evidence in its favour that it has played to full advantage.

“In those days I was definitely not as bullish as I am now about offshore wind’s LCoE [levelised cost of energy] potential, particularly as [the industry] finds scale advantages in the economics of many of the [plant-size] wind farms we are moving ahead with now,” he states. “There is still a way to go but a key driver in the further maturation of the industry is the potential for further reductions to LCoE.”

Dong drove the cost-reduction argument home this summer with a world record-low winning bid for the 700MW Borssele 1 and 2 projects off the Netherlands of €72.70 ($80.60) per MWh. It was the first time an offshore wind farm was tendered to be built for under €100/MWh — long a magic number in the European wind industry’s campaign to reach grid parity with conventional power sources.

“Winning this tender in a highly competitive field of bidders is another proof of our business model which builds on continued innovation, industrialisation and scale,” says Leupold, who was among the signatories of a joint declaration inked by 11 developers to get offshore wind’s LCoE to under €80/MWh by 2025, a goal he feels is meaningful but “far from the lowest it will go”.

Technologies ranging from radar-assisted Lidar wind measurement, through ultra-large turbines and high-voltage cabling, to next-generation service vessels, have powered the revolution in cost reduction, says Leupold.

But it is the scale of the coming projects that is the driving force.“With Borssele 1 & 2 there were good reasons why our bid price could be so aggressive,” he notes. “By combining the two you got scale — [there were] significant synergies there in structuring the two as one project — and in fact there could be more still if we can combine them with [just-tendered] Borssele 3 & 4, which would make almost 1.5GW.

“Now with the next group of projects [in the UK] — our Hornsea projects but also [Iberdrola’s] East Anglia zone projects and others — this gives scale to the UK as a market and keeps the industry thinking about how it could bring costs down further.”

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The Hornsea zone — where Dong has cemented the FID [final investment decision] for the 1.8GW Hornsea 1 mega-development and is pressing ahead with paperwork and planning for the 1.8GW and 2.4GW Hornsea 2 and 3 projects — will be a litmus test for Britain’s model of cost reduction through scale.

“This is a very interesting zone from a cost point of view and one where the projects that make it up — starting with Hornsea 1, which is a game-changer [as the first 1GW-plus wind farm in the world] — is on a completely different trajectory from the sub-300MW sites, which were the norm until recently,” says Leupold. Much as European waters have made for a happy hunting ground for Dong this decade, they are only the start of the company’s offshore adventure.

Last year, the developer launched two sorties into the nascent US offshore market, coming back with 2.5GW of acreage in waters off the northeast coast. And this past May, it set up a satellite office in Taipei for a look-in at the first tranche of 15GW of acreage that could be auctioned at Taiwan’s upcoming 36-site inaugural tendering round — while also scoping out market opportunities in “Asia-Pacific more widely”.

Leupold characterises the US offshore market as “having the potential to become a significant area for future development” but cautions it will be “similar but different”.

"There is, we feel, a compelling long-term case that US offshore wind will be successful"
Samuel Leuplod

“Off the northeast coast of the US, metocean and seabed conditions and wave loads are generally similar, so the technologies we have developed in the North Sea will be a good fit, but there is a wider environment that needs to be considered, one that goes beyond this,” he says.

“The socioeconomic environment, political environment, business culture, the power network and pricing of wholesale electricity and so on, all of which are very different — to say nothing of the difference when it comes to the [offshore wind] supply chain, which is underdeveloped but has great potential.

“Still, the fundamentals are right — and we believe in business cases based on fundamentals. There is, we feel, a compelling long-term case that [US offshore wind] will be successful.”

Bringing the first 800MW into the grid “in a way that is convincing to the public and the authorities” will mean Dong has “much more ahead of [itself] here — same as we have done in Europe”.

“And the same holds true for Taiwan and Southeast Asia more generally, just on a longer time-line,” adds Leupold.

“Taiwan looks to be a good starting point, given the government’s ambitions to create the right boundary conditions for offshore wind — and [the country’s] great need for domestically driven power generation while moving away from nuclear and imported fuels.”

Looking at offshore wind power in the global scope, Leupold is keenly aware of the pace of progress being witnessed in its historic European heartland and “the many changes that will be coming with the next phase of development, post-2020”, which will lead to stiffer competition.

“There will be many more players than we have seen in the past in the business, not least IPPs [independent power producers] and oil majors coming into offshore wind from more traditional forms of power production, so it will become much more competitive — and at the same time, outside Europe many interesting opportunities are opening up.

“This is central to the transition we are having to embark on: how to dedicate the right levels of resource to Europe and to new markets like the US and Taiwan. We will have to more selective in which markets we participate in. There will be trade-offs.”

Ultimately, with the industry “on a cost trajectory that is steeply downward pointing”, Leupold reckons there is reason to bet offshore wind will take up a central place in global decarbonisation.

“Renewables — once ‘a will we or won’t we?’ — is now a given,” he states. “Now the question is ‘which renewables?’ With costs reaching the level they are and with still further LCoE reductions ahead, we are challenging the tendency to dismiss offshore wind when you compare cost-efficiencies among the various green energies available to us in meeting our Paris Accord targets.”

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