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Dong Energy and Good Energy's tie-up
Overseas businesses are meant to be shying away from deals in the UK ahead of the start of the Brexit process this week. Dong Energy clearly hasn’t got the memo.
Next month, British renewables-only utility Good Energy is set to start using energy from offshore wind farms as part of its energy mix for the first time. This follows the firm's announcement last week that it has signed a power purchase deal with Dong Energy to buy 12% of the output from the 210MW Westermost Rough.
We see this deal as interesting for a number of reasons.
First, because it signals the start of a long-term partnership between the two firms. While this deal is initially set to last only 12 months, the pair said that it is likely to be extended for longer; and is the start of a longer-term ‘partnership’. Good Energy is seeking to find new sources of energy for its growing customer base, and sees offshore wind as a good project.
The company also invests in onshore wind, solar, biofuels, hydro and tidal; and has a larger goal of supporting low-carbon transition in the British energy market.
Second, it shows that Good Energy has faith that the cost of offshore wind will keep falling. Juliet Davenport, CEO at Good Energy, has said that the company was keen to support offshore wind – in her words “huge British success story” – but we can be sure that it would not have backed a source that it expected to drive up the cost of its customers’ electricity bills. It has done this deal because it makes financial sense.
And third, it builds on some of the themes that Davenport discussed at the launch of our Women’s Power List report in London earlier this month. She identified that the growth of electric vehicles would be a great opportunity for those working in the wind sector, and huge offshore wind farms can help support that expansion.
“One trend we’re definitely going to see for the end user is electric vehicles, which is a good thing for this sector because it means that our power will be worth more,” she said. The continued expansion of renewables, particularly offshore wind, also makes it more important for companies like Good Energy to invest in storage systems; and it is currently investing in domestic, on-site, and behind-the-meter systems.
Meanwhile, the fourth reason that this deal is interesting is that it highlights that there are ways that smaller utilities can sell offshore wind energy in the UK, and not simply the larger firms that own the projects. This is the first time a British utility has signed a power purchase deal with a specific offshore wind farm by Dong Energy.
And fifth, this deal represents a move by Dong Energy to become more involved in the UK energy market. Søren Scherfig, head of trading and portfolio at Dong, said he was excited by the opportunities to sell its electricity in the UK.
He said that Dong has “an ambition to support the energy transformation in the UK and become one of the UK’s leading energy suppliers to industrial customers and independent retailers”. That could mean more corporate PPAs in the next year.