EEHH: Which off-shore projects is Sumitomo currently working on? What is your role in these?
Christoph Mertens: “Sumitomo Corporation has been active in the off-shore wind energy sector since 2014. Our first investment was a package deal that involved three Belgian off-shore wind projects: Belwind, Northwind and Nobelwind. At that time, we were heavily reliant upon the competence and local network of our partner, Parkwind, and therefore assumed the role of an interested investor. Since then, we’ve undergone significant development. We subsequently invested in the Galloper and Race Bank projects in the UK, Le Tréport and Iles d’Yeu et de Noirmoutier in France, Northwester 2, again in Belgium, Five Estuaries in the UK and finally the first project in which Sumitomo took a leading development and construction role in Akita, Japan.
I’d now describe us as a highly committed partner with our own development, procurement, construction and operation competence, in addition to our core project finance skills. Our role varies in each of these joint ventures: e.g. in France we appoint our own staff to several of the key director roles in the project development company, while in Japan project management is almost entirely in-house.
I myself have the wonderful job of managing a small Sumitomo subsidiary that supports the off-shore wind investments of our parent company with a team of hand-picked experts.”
EEHH: What are your most interesting and promising markets?
Christoph Mertens: “In our view, there’s no such thing as a perfect off-shore wind market. Instead, certain regulatory tools have proven to be extremely useful in sustainably promoting the expansion of off-shore wind with a market-based approach. Good examples of this are the site development plan and orderly approval process in Germany, as well as the CfD regime in the UK that is still considered to be the best incentive programme in the world for renewable energies.
In many new markets, infrastructure and supply chains are currently being created that will enable the long-term development and operation of off-shore wind farms. The fact that each of these markets offers new opportunities is worthy of closer attention. Thanks to the global nature of our group, we’re a highly international business.
However, we mustn’t forget that we work in an extremely demanding sector with many risks. I occasionally get the impression that this is sometimes overlooked against the backdrop of negative interest rates. For example, projects in Taiwan are now achieving returns that are comparable with those in some European countries. European developers in particular need to evaluate the risks in a very different way from in their home countries.”
EEHH: How do you rate the potential of hydrogen production in off-shore projects? Which projects are you working on in this area?
Christoph Mertens: “We have to regard green hydrogen both in the context of a market that has yet to be developed and within a global context. We definitely believe there is huge potential, provided we succeed in generating appropriate demand, e.g. in the freight transport, mobility, petrochemical and steel production sectors. Off-shore wind will play an important role during the initial phase, in particular due to its huge production capacity. But as soon as hydrogen can be transported economically and cost-effectively (and I think this will soon be the case by ship and pipeline), the world’s cheapest renewable energy producing regions will, for the first time, be in direct competition with one another. The benchmarks against which domestic green hydrogen must also be measured are the Al Dhafra PV project from Abu Dhabi Power Generation, with USD 1.35 cents/kWh, and on-shore wind in Patagonia, where Porsche is currently investigating the production of future e-Fuels.”
EEHH: Let’s gaze into the famous crystal ball: Hamburg Offshore Wind Conference 2022 – what issues do you think we should be highlighting this year?
Christoph Mertens: “The lack of continuity in the German market is and remains a perennial issue. Now, the entire industry is set to benefit from something really good, with new, increased development targets, although the sins of the past are catching up with us again, with zero new network connections in 2021 and 2022. We then expect a peak of more than 2GW in 2024 and 2025, followed by a further drop to around 900 MW p.a. in subsequent years, with another increase towards the end of the decade. How a supplier industry can develop sustainably in this country is one of the key issues for our sector, I think.
Secondly, technical innovations for the growing European off-shore market are just as important. Digitisation throughout the entire life cycle, weather and climate-adaptive turbine performance, floating platforms and extended service life are just a few of the buzzwords. Medium-sized European suppliers can participate in the global off-shore boom, because every resulting economy of scale also reduces costs in the domestic market.”
Thanks for a fascinating and informative interview!