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Engie commits to offshore wind

The French firm is moving decisively away from its gas roots

The sheer awfulness of the pun that saw France’s incumbent gas firm GdF Suez become Engie (because natural gas has the initials NG, geddit?!)—made even worse by the Elengy and Storengy subsidiaries that went in the same direction but had the -gie/-gy spelling variation—has lessened somewhat with five years of familiarity.

This is, perhaps, useful as Engie diversifies even further away from gas. Offshore wind is a focus for the firm going forward. The shift makes sense in terms of changing priorities both in its home market and abroad. “There has to be a move away from gas” if France is serious about meeting its 2050 target of carbon neutrality, says Alun Davies, senior director at consultancy IHS Markit in London.

The company in January signed an offshore wind joint venture with Portugal’s EDP Renewables, aiming to have 5-7GW of projects in operation or under construction by 2025. In France, Engie is developing projects off the coasts of Le Tréport, Yeu and Noirmoutier islands and Dunkirk.

“There has to be a move away from gas” Davies, IHS Markit

Further afield, the French firm signed more wind power supply agreements in 2019 with US corporates than any another developer. In May, it confirmed it remains interested in clean energy acquisitions, including in offshore wind, in the US. Engie aims to increase the share of renewable energy in its power production capacity to 58pc in 2030, from 28pc in 2019.

Short-term travails

But it is not all about expansion, Like EdF—which was born out of the monopoly French state power firm just as Engie was in gas—it has withdrawn its 2020 financial targets as it recalculates the impact of the Covid-19 pandemic on its business. And it will become more geographically focused by pulling out of more than 20 of the 70 countries in which it is currently active over the next three years. Engie will focus on its major western European and North American markets, as well as Southeast Asia and Africa.

Covid-19 is also threatening to interrupt, at least in the short term, the downward trajectory in offshore wind costs that make it an increasingly attractive proposition. According to the International Renewable Energy Agency (Irena), the total installed costs of global offshore wind farms fell from c.$5.40/MW in 2011–14 to $4.35/MW by 2018, and will keep falling to $3.20/MW by 2030 and $1.40-2.80/MW by 2050.

But the turbine is the crucial cost component in offshore wind—accounting for up to 45pc of total installed costs, according to Irena. And an IEA report on world energy investment in late May warned France was among countries to have suffered disruption to wind turbine manufacturing in April and May owing to the pandemic.

Covid-19’s impact on the French public purse could also pose difficulties for Engie’s domestic offshore strategy. The country’s energy transition is an expensive aspiration when government revenues are falling, says Sylvain Cognet-Dauphin, a Paris-based IHS Markit analyst.

And any payback will take time—as renewables capacity cannot be added quickly—making investment a tough sell in the short term, he warns. “Putting more money into renewables will be hard.”

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