Nordex recently landed a 475MW order for 104 of its N149/4.0-4.5MW machines and ten N131/3900 turbines for E.ON’s Nysäter project in northern Sweden, which is the manufacturer's largest order to date for its Delta 4000 series.

Tim Carpenter, head of sales at Nordex for the Nordic region says more data centres and a phasing down of nuclear power in Sweden will boost power demand in the Nordics further.

Why are there so many large orders in the Nordic region now?

What we have is a region that has always been, from a political point of view, quite stable and quite attractive for investments. The power market is well understood. Power prices are fluctuating. Certificates markets have also fluctuated and been highly volatile. But despite that, there is a solid basis upon which power price forecasting can be made. There is a strong acceptance of wind power across the Nordics.

Some of the challenges are [also] increasing. New projects will always find new challenges in terms of getting the necessary consent to build. But generally, there is quite a large backdrop of already permitted or well-advanced projects in the development cycle. So there has been plenty of investments in that respect in terms of developments, and a wide acceptance of wind energy on the market.

If you take the Swedish market, if you go back five to seven years, that was also quite a high volume market – around 800-1,000MW a year. But then power prices reduced. There became a surplus of certificates in the market, so the certificate price went down considerably. Then you just had an issue with there not being a possibility to actually bring investment cases forward, because you had big project, but the technology wasn’t able to achieve the right levels of cost of energy.

So what has changed?

What has changed is that the cost of energy level has come down considerably, in terms of the percentage year-on-year. From our side, we have been reducing cost of energy by maybe 10% per year or more over the last few years. And doing that by having bigger turbines, and turbines developed more specifically for certain project landscapes, market landscapes. So now we have cost of energy levels with the new technology that enable lower power prices to be somehow accommodated, which enables the investors to work with very low green certificate prices.

How low are these green certificate prices now?

They have been floating around at a €5 to €15/MWh level. They are fluctuating all the time. The combined power price against which we were able to get long-term power purchase agreements has been somewhere around the €30/MWh level. The combined power plus certificates price has been around €30 to 32/MWh. [At that level] you are able to get a long-term hedge. So it is a very low level.

But power prices now are above €50/MWh in the Nordic region…

But if you then want to secure a long-term PPA, which has been a necessity to get investment with project finance, then the levels are much lower than that. If you would just sell your power on the open market, then, yes, you get the power price as it currently is. This is then fluctuating significantly. So maybe you would need a separate assessment of price levels in the market. But, overall, the challenge has been – and the reason why there was a dip in new project installations – was because the power prices were too low for the technology.

If you go back two years, we were selling turbines with 131-metre rotors, and now we are selling turbines with 149-metre rotors, with bigger generators, where the overall cost of energy has been reduced significantly, and where we have really changed our whole philosophy and approach towards big projects. In the past you would have had maybe a turbine technology with a certain IEC class, you would take that off the shelf, and you would evaluate it for a given project. Then you would say: “Yes, this turbine is suitable for this project, and this is what you install, and then it will run on the site for 20 years.”

"We have really changed our whole philosophy and approach towards big projects."

What has happened with that kind of set-up is that in many cases turbines were over-engineered for the site. Thereby, you have wastage, because you have too many buffers in terms of matching the technology exactly to the site. So, one of the areas where we really have driven the cost of energy down, is with technology. [In the case of] the N149 technology, the ability to have variable outputs, variable operational life times, and varying operational modes in order to match the technology specifically for the conditions at each individual turbine location on a site.

How important is the Nordic region for Nordex?

It is increasingly important. What has happened is that cost of energy levels to make a project fly are now are now achievable, with the right turbine and the right size.

At the same time, we believe that there will be more and more investments made without these long term PPAs, but on a more merchant basis in the future. Sometimes you are having high power prices, and these fluctuate during the year. But if you have a certain flexibility with your turbines, then you can manage that, and you can even generate some certainty on a business case even without a long-term PPA.

All of this together opens up the market a little bit more. There are big projects around with consent, and now if they all of a sudden are investable, then there is a big potential market there. In Finland, for example, we had been waiting two years for the new auctions to be announced and formalised. Now we are in that process, where the auctions are about to happen. For the auction volume, I believe it is somewhere around 400MW over two years.

If we would add up all of the projects [in Finland], where we are currently tendering and have firm enquires, then this would be well over 1GW, maybe even 2GW. This is because the auctions are seen as being one option for getting projects financed, by actually getting the subsidy.

But in general, with more and more corporate PPAs available in the market, developers are seeing their projects as being not necessarily dependent upon these auctions in the future. All of a sudden Finland becomes a big potential market. We have closed 200MW in Finland this year outside of the auction, ahead of the auction. One of those was with a Google PPA, and the other one was pure merchant, with IKEA, to support their drive for 100% renewable energy by 2020.

As Nysäter [in Sweden] was developed, when we first started talking about that deal, the N149 was just an idea on paper. Over two years, we have developed that product together with the development of this big project opportunity. We have optimised the N149 for the Swedish market, for the Nordic market, which means now at the end of that process, we have a turbine that is very well suited to the conditions here.

You mentioned data centres, PPAs with heavy industries. Will this trend in the Nordics will continue? Is there enough appetite?

It seems to be the case. More and more of these data centres are coming. There is an increasing demand. At the same time, there have been announced plans to decommission the nuclear power stations over the course of the next 10 to 15 years [in Sweden]. So there will be the need for more generation. Whether it all comes from wind or not, is difficult to say.

But considering that there is unlikely to be significant additional installation of hydro power, and for wind you have a huge land mass, when we speak to our customers, we don’t really get the sense that there will necessarily be a slow-down in projects. Power price projections are relatively conservative. And the challenge will come in terms of transporting the power you generate to elsewhere in country, in the region and also south within Europe. There will, of course, be bottlenecks in the transmission system that will need to be addressed. But all in all, it is an area where wind conditions are really perfect for wind energy.

Where do you think power prices are heading now?

It depends who you speak to. If you are able to get a long-term 15- or 20-year PPA at a level of €30 to €32/MWh, then that suggest a fairly conservative long-term outlook.

Do you think Nordic power prices could go back to levels seen in recent years of around €20/MWh?

No, the general view is that it is more likely that prices won’t go down further, but stay at the level of long-term projections. But also within Nordex, there are different views.

Are green certificates helping much?

They are just a little bit on top. It is just a small amount.

Wind

'More data centres are coming: the Nordics are a key market for Nordex'