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SCA has the wind at its back

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SCA has the wind at its back

April 15, 2013 - 16:00
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BRUSSELS, April 16, 2013 (RISI) -In January 2013, SCA passed a milestone when the first wind-generated electricity from its joint venture with Statkraft, the Norwegian-based, state-owned power utility, was fed into Sweden's national grid.

Statkraft SCA Wind (SSVAB) now has its first five turbines producing, but plans call for hundreds more to be installed, up to almost 400. Another 63 turbines are now under construction in the first two wind farms. A total of seven wind farms are in the plans. Speaking of the 400, Lars Gustavsson, project manager, SSVAB, says these are conditional based on financing being available and the project being approved by the companies. He adds that they have "their hands full" with what has already been started.

The project proceeds with stepwise investment decisions. Presently investment decisions have been taken and work is in progress for 186 turbines with an expected capacity of 1.6 TWh of electricity. Start-up decisions have not yet been taken for the further step to produce another 1.2 TWh from another 194 turbines in the last three wind farms that will be owned by SSVAB. The project has been approved by the various government regulators.

Since an article about SCA's wind power project was first published inPPIin November 2008, bigger wind turbines have been developed so SCA has looked at different configurations. In some farms turbines were added, in others, they were taken away.

Ultimately, the target is to produce 5 TWh from turbines built on SCA land by 2020. This will from come joint ventures such as SSVAB as well as a newly signed one between SCA Energy and Fred. Olsen Renewables called FORSCA, but also from SCA-owned turbines and leases. In all, it is expected more than 1,200 turbines will be in place by this time. In December 2012, SCA signed an agreement with E.ON to take over the devlopment of a number of wind parks that will produce 2 TWh from 270 turbines. SCA had driven these projects up to the point where application for permissions was submitted. These projects should be in operation by 2016 or 2017. The deal with E.ON is not a joint venture as the ones mentioned. E.ON takes over the projects and will pay land lease as production starts.

A long way in less than 20 years

SCA has come quite a long way since the first lease contract was signed in 1997 and the development has increased rapidly since 2007 when SCA dedicated just one person to work with wind power at that time.

As noted, SCA uses three business models for wind power:

  • Land lease: Companies that produce power from wind lease SCA lands, build turbines and pay SCA a fee, about Euro 11,000-17,000/yr.
  • SCA-areas where SCA handles the approvement process. When the area has received a permit to build wind turbines it will be decided if the permit will be sold, included in an existing or new joint venture or explored by SCA.
  • Joint ventures such as SSVAB and FORSCA.

All power produced is sold to the national grid and SCA buys the power it needs to run its mills. One benefit is that the more power SCA feeds into the grid, the lower the price it has to pay for it.

The new farms that SCA is planning are in the same area as the first ones so Gustavsson thinks the company will be able to take advantage of the knowledge received from the grid connection process for the first turbines. As he says, one of the biggest challenges is making the connection to the grid.

As a country with no fossil fuel reserves of its own, Sweden has always had the reputation of being an innovator in the field of alternative energy. The development of wind-based power production has taken off in recent years thanks to some key factors: a push from government; an increase in the price of electricity; and, technological advances.

Sweden consumes 145 TWh. About 66 TWh comes from hydro power, 60 TWh from nuclear power plants, 13 TWh from bionenergy and the rest from wind. SCA's total electrical consumption is 3.6 TWh. The Ortviken mill alone consumes about 2 TWh (1.4% of Sweden's total). The company produces 0.8 TWh from "green" sources (wind and biofuel). It must buy the rest so its interest in wind is quite understandable and the projects are part of the company's sustainability targets.

As a group, SCA has established a number of sustainability targets. The company sees these as not only a cost but as business opportunities. In practice, the business plans of SCA Energy mesh well with those of the corporate parent.

In the same time scale, SCA also plans to treble its biofuel operations so it is looking at various types of alternative power/fuel sources. The proviso is that the business logic must exist for any projects to advance.

It goes beyond Swedish borders. The EU's 20/20/20 plan to reduce greenhouse gases (GHG) by 20% by 2020 and to increase the energy produced by renewable resources in the EU by 20% in the same time are measures that SCA believes will remain in place and is one of the key reasons the company is investing.

The bigger, the better

Gustavsson says that in 2007, Sweden had an installed base of about 1,000 windmills, producing just over 1,400 GWh. By 2011, the number of windmills had doubled but production was about 6,000 GWh. By 2015, with an estimated 4,000 windmills installed, production will be 18,000 GWh.

"Turbines are becoming more efficient and bigger, so output is increasing," Gustavsson says. Towers have grown from 80 m high in 2005 to 160 m high today, enabling them to be built on forestlands. Wind speed increases with height. Higher towers also allow longer wings that collect more wind. Gustavsson says building higher towers is possible. The longest wing today is 75 m and the area swept is 2 ha.

There are some strong figures backing up the investment in wind power. Gustavsson says one windmill can produce 5,000-8,100 MWh/yr, enough to heat 200-300 homes electrically.

The turnkey cost per station is Euro 4,000,000-5,000,000. That includes roads and connection to the grid. Payback is nine to 12 years. For each windmill, the company receives electrical (or "Green" certificates) for 15 years. The technical lifetime of each wind station is estimated at 25 years. As for employment, Gustavsson says a wind farm of 200 turbines will need 30-35 employees.

Each wind tower requires 200 tonnes of concrete if it can be anchored to rock. If not, it requires 600 to 1,000 tonnes to firmly set the tower. SSVAB has chosen Siemens to build and deliver the turbines, including the towers and the wings. The towers are transported by truck in sections and assembled on site. The wings are 56 m and are transported in one piece. As there is no windmill manufacturing in Sweden, the parts are shipped by sea to Örnsköldsvik and transported south to the wind farms

When the subject of green certificates was discussed in thePPI2008 article, the certificates were worth SEK 300. Now, the certificates are worth SEK 150-200. The price has come down because in the short-term the production by sources that are granted the green certificates, including wind turbines, have increased, while the total electrical consumption has decreased due to the economic downturn. The latter also affects the electricity prices that have not risen as rapidly as they had prior to 2008. Weather has been another mitigating factor. There has been a lot of rain so the hydroelectricity plants have been running full. Still, the long-term trend is for prices to continue rising so SCA believes it has made the right investment to invest in wind power, both economically and environmentally.

A lengthy process

Establishing a wind farm is not simply a matter of finding the land and erecting the windmills. There is a lengthy government approval process. Gustavsson admits the company would have preferred for the approval to have been granted more rapidly with SSVAB proposals. "One condition was that we were the first big wind power project so we had to break the ice. We'll see if the permission process is faster for the new proposals."

As noted in 2008, the Sami native people claimed that the wind farms would interfere with reindeer grazing. This was the most time consuming appeal.

The environmental protection agency appealed because it felt some of the towers were too close to protected lands. Finally, ornithologists appealed because they said the distance between the towers and eagles' nest in the area had to be greater.

The wind power projects are all part of SCA's BioLoop approach that encompasses all it does throughout its value chain, from woodlands to sawmills to pellet plants to pulp and paper mills and back again (PPI, January 2013, p. 21).

The efforts are being recognized. In October 2012, it was announced that SCA has qualified for the Carbon Disclosure Leadership (CDP) index for its approach to climate change disclosure. The CDP represents 655 institutional investors with $78 trillion in assets. The CDP index highlights the constituent companies within the Nordic stock exchanges that have displayed the most professional approach to corporate governance with respect to climate change disclosure.