Canada’s largest pension plans ramp up investing in offshore wind projects

This article was written by James Bradshaw and originally published in The Globe and Mail on December 30th, 2023.

One of the next frontiers for clean energy that is attracting investment dollars from Canada’s largest pension plans is just out of sight to the naked eye onshore, in an expanse of ocean water 32 kilometres off California’s central coast.

In early December, Canada Pension Plan Investment Board and Ocean Winds, a Madrid-based company specializing in offshore wind, jointly put up US$150.3-million to secure a lease covering 32,544 hectares of deep ocean waters. The lease site and four others auctioned off by the U.S. Bureau of Ocean Energy Management are earmarked as the future home to floating offshore wind farms.

The floating variant of offshore wind technology that CPPIB is investing in is both promising and complex: It aims to build wind turbines as tall as 120 metres fixed to floating platforms, which in turn are anchored by cables to the sea bed hundreds of metres below. The technology to create such floating farms to generate clean power is advancing and getting cheaper. But it is still novel, and years away from widespread deployment.

“There’s a growing level of experience that’s being applied to offshore wind. It’s moved from onshore to offshore to floating offshore,” said Bruce Hogg, CPPIB’s head of sustainable energy, in an interview. “We’ve seen the scale and the size of the projects increasing over time. And the cost curve has actually come down significantly.”

Some of Canada’s largest pension plans, already established investors in wind power generated on land, are ramping up their bets on offshore wind. CPPIB announced its California joint venture two weeks after the official opening of the Saint-Nazaire wind farm off France’s west coast, which was also backed by the Canadian pension investing giant.

Also this month, Ottawa’s Public Sector Pension Investment Board put up US$250-million to back Norwegian wind farm equipment owner Havfram in building a fleet of vessels to install massive offshore wind turbines embedded more conventionally in the sea floor.

Last May, Ontario Teachers’ Pension Plan Board pledged to invest US$1-billion in a joint venture with Corio Generation to develop 14 offshore wind projects stretching from South Korea to Ireland, some fixed-bottom and some floating.

CPPIB’s 50-50 joint venture with Ocean Winds – which is itself jointly owned by Spanish-based EDP Renewables and France’s Engie SA – is years away from completion, but could eventually generate up to two gigawatts of energy. That would power the equivalent of 900,000 homes, adding to CPPIB’s offshore wind portfolio of about 16.9 gigawatts. The pension investor’s pipeline of further projects to be developed would total 35 gigawatts.

The Ocean Winds project is part of the first floating offshore lease sale in the United States, and one of the first offshore wind leases of any kind awarded off the West Coast. It is on step in California’s plan to generate 140 gigawatts of renewable energy by 2045, including 10 gigawatts from offshore wind. The rest is expected to come from a constellation of clean energy sources, including solar power complemented by long-duration energy storage, as well as conventional wind energy, some of it transferred from New Mexico.

Offshore wind is most advanced in Europe, but “you’ve seen a rapid catch-up in the U.S.,” Mr. Hogg said. “You kind of need the whole package of [clean energy sources] to achieve those targets.”

CPPIB chose Ocean Winds as a partner for its expertise over a decade in offshore wind, which included a role in the pioneering Windfloat Atlantic project near Portugal.

CPPIB also has significant investments in Calpine Energy Solutions, a producer of gas and geothermal energy, and in Pattern Energy Group LP, which specializes in wind and solar energy.

Interest in floating wind farms has been growing in countries such as Britain, France and Japan. While conventional offshore wind is limited to shallow waters with sea beds suitable to installing turbines, floating platforms open the door to moving the turbines much farther offshore, where winds are higher and more consistent, and the environmental effect could be lower.

Because they’re largely out of sight from shore, they also help dodge potential opposition from coastal communities that consider them an eyesore.

There are still significant technical challenges to floating offshore wind, “but they’re getting tackled systematically,” Mr. Hogg said. The different floating platforms to support turbines, distributing their weight in the water, are typically based on existing technologies that are often drawn from the offshore oil and gas industry.

There are also hurdles in California in the form of regulatory approvals and permits to win approval to transfer the power onshore and connect it to the state’s energy grid. There are contracts to be negotiated, such as power purchase agreements with local utilities, to ensure a return on the upfront investment. And environmental groups have raised concerns about the effect the cables and turbines could have on sea life and birds.

But the most complex engineering problem for floating offshore wind is not keeping the turbines stable and upright in windy conditions. It is building floating substations at sea to gather power from turbines at a single point so it can be transported to shore.

“That’s the last technological piece they’re working through,” Mr. Hogg said. “It’s actually not the very large, skyscraper-sized buildings that are floating in the ocean that’s the complex bit.”

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