Statkraft’s Irish headquarters in Cork Airport Business Park is anything but eye-catching. Aside from a pair of electric car chargers on the parking spaces outside the unassuming building, nothing indicates that the office suite upstairs is home to the fastest-growing developer of renewable energy projects in Ireland.

When it comes to multinationals, Cork Airport Business Park is more readily associated with Amazon’s long-established customer service centre here. Yet with nearly €4 billion in annual revenue and 4,600 employees in 18 countries, Statkraft is an international behemoth in its own right. 

The Norwegian state-owned renewable electricity group first set foot in Ireland three years ago, when it acquired most of Element Power. Statkraft left aside Element’s investment in the proposed Greenlink interconnector between Ireland and Wales, which was sold separately to the Swiss private equity firm Partners Group.

Instead, the Norwegian energy producer focused on Element’s pipeline of proposed wind farms and its team of renewable electricity developers led by co-founders Kevin O’Donovan, Tim Cowhig and Peter Harte. The three west Cork energy entrepreneurs had been working together for years, initially growing the local company SWS Energy in the early 2000s and selling a majority stake to private equity firm Ion in 2006. Bord Gáis later acquired the entire business for €500 million in late 2009. 

Within months, the trio was ready to take a fresh start with Element Power, again growing it and bringing in a majority private equity investor. In September 2018, Statkraft paid €39.4 million to purchase this business from the specialised US renewable energy investment firm Hudson Sustainable Group and repaid another €4.2 million in shareholder loans in a deal worth €43.6 million in total.

Hudson was coming to the end of its eight-year investment cycle and auctioned off the business. “Statkraft came out on top,” said a source familiar with the deal – not only as the highest bidder but also as the buyer offering the best resources to grow what Element had started.

The breakdown between Element Power’s Irish and British businesses was not disclosed, but 1,300MW of the 1,550MW capacity planned by the company at the time was in Ireland. On a per-MW basis, the Irish pipeline accounted for €36.6 million of the acquisition.

Element Power Ireland soon changed its name to Statkraft Ireland. Within weeks, the group’s head office in Oslo’s industrial suburb of Lilleaker began to pour millions into it.

As of its last reported capital contribution in July of this year, company filings show that Statkraft had channelled €313 million in equity investments to Cork – and counting. The funds can then be seen trickling through to Irish subsidiaries among 30 special-purpose vehicles as they advance individual projects around the country. Eight of them have so far broken ground.

The overall investment figure places Statkraft in the middle of the electricity league table – far smaller than established renewables players such as SSE, and of course than those who also engage in fossil fuel-powered generation such as ESB and Energia; but much larger than junior developers specialised in taking a specific type of wind or solar sites to the shovel-ready stage and selling them on as soon as possible.

More significantly, Statkraft has projects at various stages of development across the full spectrum of the zero-carbon electricity business: Onshore and offshore wind, solar, and grid stabilisation services such as utility-scale battery storage. Within the Republic, only ESB displays similar breadth in covering the technologies Ireland relies on to reach its renewable energy targets.

Statkraft also has an energy trading division managing access to the wholesale market or to large direct corporate customers for other owners of renewable generation assets.

Winner of the state support auction

Then there is the pace of investment. Within the industry, a good benchmark is the government’s Renewable Electricity Support Scheme (RESS), which opened last year with its first auction to allocate 15-year subsidised contracts to those bidders able to generate green power at prices closest to market rate.

Outside private purchase agreements (PPAs) between generators and large customers such as data centres, which are still in their infancy, RESS-1 was the first opportunity for developers to make new projects viable since the closure of the previous government scheme in 2015. It was also the first time solar farms were eligible to any state support. RESS-2 is now delayed into next year, so the first auction was really a crucial window to get the next wave of projects off the ground. 

And how did Statkraft fare in that competition? It came on top.

Not only did the Norwegian group secure the largest capacity to enjoy a guaranteed electricity price for the next decade and a half, but it did so across wind and solar farms. Only one other developer achieved that balance – fellow Cork company Craydel, albeit on volumes ten times smaller. 

RESS support meant Statkraft could find long-term buyers for those assets before they were even built. Last December, it forward-sold the two auction-winning wind farms, Cloghan in Co Offaly and Taghart in Co Cavan, to Greencoat Renewables for €123 million and has since launched construction.

Then this year, the specialist UK investment firm Octopus Renewables agreed to buy the RESS-approved Ballymacarney and Muckerstown solar farms in Co Meath for €140 million. Construction is now under way on the 119MW Ballymacarney site, the largest solar farm in Ireland.

How did Statkraft pull off the largest solar transaction in Ireland to date within three years of entering the country? To understand, I went to Cork Airport Business Park and sat down with Kevin O’Donovan, who stayed on from Element Power. He is now Statkraft’s managing director in Ireland, as well as the group’s head of wind and solar across northern Europe.

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Thomas Hubert (TH): You're working across wind, solar, battery and other services for the grid. Maybe if we take the those types of projects step by step, where do you start? How do you identify where you're going to go? And at what stage?

Kevin O’Donovan (KOD): The first thing, I would say, is you really do need to have experience and people with good knowledge of the market you're in. For example, Statkraft is in quite a few different markets, not just in Europe, but around the world, and we would always have that local team who would have that understanding of the specific market. 

When it comes to Ireland, one of the key hurdles to renewable development or development of any infrastructure in Ireland is the planning process and whether the projects can get permitted. So a lot of focus is on identifying suitable areas from an environmental perspective, as well as from a planning system perspective. That's how we identify projects first.

I guess we bring a lot of experience both within the Irish team and the overall Statkraft business in understanding the cost of energy that can be achieved for those particular technologies in the market. That's really important because you have to understand, ultimately, that your project has to be able to find this route to market and it has to be a competitive project versus what other projects are in the market. 

So that's pretty much where we start: That identification of the right areas to consider development, as well as understanding the competitiveness of the technology, and then what type of project can be developed in an area.

Some really key decisions have to be made at that early stage. Frankly, if you don't get them right, then the product may never reach the stage of actual investment decision, then construction and operation. So that's a large part of our business and our key activities are to identify those sites and then take them through the development process.

TH: Staying on this early stage for the moment, you're only here three years as Statkraft and you were working for Element Power before that, which was taken over by Statkraft. But in general, is that more of an acquisition-based approach? Or is it from scratch: Let's find a bare site and start from there? Do you have a preference? 

KOD: I think if you want to grow in a market like Statkraft did when they came into Ireland in 2018, it was very clear we needed both. So Element Power would have had a very strong development team but also a strong development portfolio, mainly in the onshore wind side of things with some initial battery and grid services projects planned. 

But as we did our analysis of where the market was evolving, and what Ireland needed in terms of technologies to achieve its 2030 targets and beyond, it was very clear that actually, Ireland needs a diversification of renewable technologies. So we then set out to grow a solar portfolio. That's been a combination of acquisitions, as well as some greenfield development.

“Our plan is to grow further and that probably will still be a mixture of both greenfield and acquisitions.”

Kevin O’Donovan

And then as well, on the offshore side of things – offshore, obviously, is going to be a very important part of the mix in Ireland and we had an offshore project that we had acquired in Element Power, but we're still at that early stage. Offshore was really only coming to be a reality again over the last couple of years.

So we grew through that mixture of greenfield development and acquisitions. Going forward, our plan is to grow further and that probably will still be a mixture of both greenfield and acquisitions.

TH: Now, before you do anything with the site, you need, as you said, a route to market. You were successful in the first RESS auction for a number of projects, but there's also the option of selling direct to some large customers. What do you see happening in that space at the moment?

KOD: I think corporate PPAs, as well as the RESS auctions, are going to be necessary if we want to achieve the numbers we want to achieve. Today, there has been some activity on the corporate PPA front, but it will need to grow and I do see it growing over the next few years. But I still see the bulk of the heavy lifting being done through the RESS auctions. The government has clearly set out the plan of 15 per cent of the 2030 targets coming from corporate PPAs and I believe Ireland can achieve that.

There are a lot of corporates out there that want to source their power through renewables and someone like Statkraft is very well placed because our market trading capability means that we can deliver quite a good package to a corporate. We can give a retail solution, not just produce the power and have someone else manage that for them – we can actually bring that full package.

So we see ourselves as being very well placed to work with corporates, and Statkraft does a huge amount of corporate PPA activity across Europe because our market trading team has quite a lot of that activity in Scandinavia, through our hydro and wind there, as well as other markets in Germany, the UK and southern Europe. So I see both as being necessary.

One thing I would say is that we need to try and get more certainty built into how renewables are developed and rolled out in Ireland. And one of those is that we have a regular timeframe of RESS auctions. Obviously, there's a delay in RESS-2 now, which is unfortunate because there's quite a lot of challenges with trying to develop technologies, but also, if a route to market is delayed, technology keeps evolving. Then projects either have to go back and re-design and, actually, are delayed being delivered; or the cost of energy that they need to deliver the project at an economically viable level won't occur.

So I think we need to be very careful ensuring that we do have a regular route to market in Ireland. That actually, in my opinion, will lead to quite a good roll-out of renewables at actually a very competitive overall cost, because with that certainty, developers can ensure they're using the best available technology each time and they can roll that up quite quickly then afterwards.

TH: You're talking about costs and it brings me to another aspect that is crucial in every development of renewables, which is the cost of finance. But you have a very different position with Statkraft in that as far as I can see, you've no debt in Ireland – or maybe elsewhere, I don't know. How does that work?

KOD: It's certainly a change for me from my previous smaller development-type companies. Statkraft is fully funded to fund the construction of our projects. That's basically an internal controls process where we have a very strong core project delivery team and a very strong team of support functions that can support us being able to make financial investment decisions on projects. Ultimately, the investment decisions are made by our corporate management and our board of directors.

That's a straightforward process once the project has been designed the right way and can be economically viable. But it is one of the very interesting benefits of working with Statkraft that we can fund the construction or projects and we can make the right decisions at the right time, based on the projects and our strategy, rather than maybe something I was more used to in the past where your plans were very much driven by raising equity, raising project finance and very much being at the risk of what the particular market appetite was at the time.

If the cost of finance was expensive, then that made it very challenging, or if raising equity took a long period of time, projects got held up. I think that is a very strong position for someone like Statkraft to be in that we can support the roll-out of what we plan to build in all our markets.

TH: And how can Statkraft afford this at group level? Is it the famously wealthy Norwegian sovereign fund or something else?

KOD: Well, Statkraft has a large amount of generating assets and a large amount of other businesses – its market trading business, its other interests. And if you look at our first-half results for this year, there was a substantial revenue for the company. Obviously, the company has a dividend policy because we're owned by the state. So the state takes some of that but the rest is used for investment. 

Each country in each market and each business in Statkraft has to forward-plan and say what it aims to build out over the next few years. That gets factored into the available revenues and funds that are available after running costs and the dividend. That's a very different process to, as I say, what we would have been used to in the past, but again, it's a very strict process where the analysis is done, the projections are done. Really, it's up to us then in the individual markets to deliver the projects along the timelines we've earmarked.

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On the technical side, bringing a renewable energy project to life starts with getting a grid connection. “It's fine to develop a project in a really windy location or a really sunny location, but if you don't have a point where you can plug that power into the grid relatively nearby and take it from there into the wider system, then your projects won't go ahead. It's obviously one of the main challenges in Ireland,” says O’Donovan. He adds that Statkraft Ireland’s growing staff of around 80 includes several experts dedicated to obtaining grid connections.

Then when it comes to building out each project, the company assumes the role of construction manager. O’Donovan says he can draw from the wider group’s teams, who have delivered projects such as Europe’s largest wind farm – the 1,000MW Fosen complex completed last year in Norway.

They source the turbines directly from the manufacturers, with the bargaining power attached to Statkraft’s size, and hire the so-called balance-of-plants contractors who carry out other works, from civils to electrical connections. “On the solar side of things, we would take more of a full EPC [engineering, procurement and construction] contract role where we take that overall contractual responsibility of delivering the project as well, so I would say it’s very hands-on,” O’Donovan says.

“In the last few years, we've developed and built the first two battery projects in Ireland. And again, that was our Irish construction team along with our group project delivery team that fully construction-managed those projects,” he adds.

TH: Now we come to the last step in the progress of a project when it's ready to function. When do you decide to sell a project? How much involvement do you retain?

KOD: There's no set requirement or plan on that across all of our group. It's more that in certain markets or certain technologies at certain times, we make decisions on which way we go.

In quite a lot of projects, we would fund the construction, build it out and hold those projects for the long term. On some projects and some markets, we actually would look at the opposite and do, quite early, a forward sale of the project. When you make your financial investment decision, you obviously are deciding whether you're constructing and holding long term or whether you're doing a forward sale, or maybe planning to do a sale at commercial operation or a few years into operation. Across our portfolio, we've taken all those different approaches. We have projects where we might do a part sell-down and have a financial or a joint-venture partner in with us as well.

And then in a lot of markets, Statkraft actually does not just the management of the operation of those projects, but also the actual operation and maintenance activities. In markets like the Scandinavian countries or the UK, our team of technicians actually manage the day-to-day operation and maintenance of the turbines, as well as doing the energy trading over the lifetime of the project.

So it's very much a case of being flexible, and being able to make the decisions that work best for us based on what the overall company strategy is at any one time.

“We've tripled our portfolio from when Statkraft came into Ireland first.”

Kevin O’Donovan

TH: Is it your intention to have sufficient capacity to act as an actual independent power producer in Ireland as well as selling down projects as you finish them?

KOD: Yes, I would think that's the longer-term plan – that we will be developing a large amount of projects, and it's probably a mixture of different business models over that time. We've got the capabilities to sell them down and manage those projects with financial investors and deliver a very good solution for them, or we've got capability to operate and manage and hold the projects ourselves for the long term. So I would see that as being a mixture over time.

Overall, Statkraft has made a decision that Ireland is one of its core markets and it's here for the long term, which is great for all of our team here in terms of delivering certainty with our roles. It's really good for Ireland as well, because what it's saying is Statkraft is committed to what Ireland is trying to achieve in its Climate Action Plan and its Programme for Government targets.

That's really not a big commitment for Statkraft to make in a way – once it was happy the Irish market was a market it wanted to be in – because that is our strategy in all our core markets where we're active.

TH: To finish on the decision to sell or hold on to an asset, is it dictated first by the asset itself? It's actually a good time in its life to make an interesting sale from it. Or is it that Statkraft has an opportunity to invest elsewhere now – that's when we need the cash, and we're going to sell something now?

KOD: I think it's a combination. Sorry I'm not able to say it's definitely this or that. I mean, at the moment, in Ireland, we're in a period of really substantial growth. We've tripled our portfolio from when Statkraft came into Ireland first. That's a lot of activity. It makes sense to be able to recycle some of the value we've created already to support that further growth.

But I would say that those decisions aren't necessarily just driven by our Irish activities, we're part of a very large group in Statkraft and the wind and solar business is only one part of it. I don't want to say a small part of it, because it's quite a big business, but if you look at our first-half results, it's a company that has a lot of operating assets already. It's a company that looks at that big picture when it's making those decisions.

But obviously, in Ireland, we're growing quite fast at the moment, and it's made sense to take in some of that value to keep supporting the growth.

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It’s too early to say how profitable Irish projects are to Statkraft as none of them have gone through the full life cycle from planning to post-completion sale as described by O’Donovan. Yet the firm’s portfolio illustrates how it has been progressing.

Statkraft’s only operating sites in Ireland at this stage are the Kilathmoy and Kelwin-2 developments in Co Kerry. Element Power had a shovel-ready 23MW wind farm there and Statkraft began construction immediately after acquiring the Irish company. The full cost from land acquisition by Element to completion by Statkraft was €31.5 million. This is a project the group has held on to, not only to sell electricity but also as a testing ground for new technologies. 

In April last year, Statkraft switched on the first grid-scale battery in Ireland at Kilathmoy. The 11MW storage system was commissioned to inject emergency power into the national grid for brief periods when other sources fall short.

Statkraft replicated the project on a larger size at Kilpaddoge on the nearby Kerry coast and opened a larger, 26.6MW battery park for the same purpose. The project was called Kelwin-2 after a separate company (not acquired by Statkraft) had developed the neighbouring Kelwin wind farm, already incorporating its own small-scale battery storage capacity. 

Statkraft reported that both Kilathmoy and Kelwin-2 batteries stepped in for 14 minutes when grid operator Eirgrid needed a sudden boost of power on May 4 this year. 

The rest of Statkraft’s projects portfolio in Ireland is at various stages of development, with those successful in the RESS-1 auction and forward-sold to Greencoat and Octopus now under construction.

Along with the wind and battery sites already live at Kilathmoy and Kelwin-2, these represent just the tip of the iceberg. The Currency has identified 26 other projects across wind and solar in the Republic, spread across all provinces except Connacht.

Most of these projects have come from acquisitions, starting with that of Element Power in 2018 and its pipeline of sizeable wind farms. Although Kilathmoy is the only one of those built to date, five sites forming the bulk of the former Element portfolio are now among a group of six Statkraft is lining up for the next RESS auction in 2022.

A surviving subsidiary continues to own the North Meath Wind Farm, Element’s mammoth 200MW onshore project that went dormant just before the deal with Statkraft in the face of local opposition and steep planning hurdles. Element’s plan was to export much of the energy to the UK via the proposed Greenlink interconnector. The overall strategy was code-named Greenwire.

“While there are no immediate plans to return to development opportunities in North Meath, Statkraft is keen to look at all proposals that will help us meet our country’s ambitious decarbonisation targets,” a company spokesperson told The Currency. Fossy Wind Farm, a subsidiary of Element Power named after a prime hilly location in Co Laois, has similarly not reported any planning activity in recent years.

Statkraft then built up its solar business through the 2019 acquisition of eight projects from JBM Solar, a developer that decided to exit Ireland at the time to focus on the UK. Many of these are small, leasing a field from a farmer and staying under the 5MW size to benefit from simpler grid connection procedures. But the JBM deal also included some of the largest solar farms planned in the country, such as the 130MW Clonfad project and a proposed complex of several sites just north of the Meath-Dublin border, since assembled into the Ballymacarney site.

Statkraft then added to its solar portfolio when it acquired more developments in progress in July last year from Lightsource BP, a joint venture between the oil giant and a team of British developers. The Lightsource pipeline was made up of medium-sized projects from Cork to Meath.

Around the same time, Statkraft was also going back to the market to purchase more proposed wind farms. In a previously unreported deal, the firm acquired three projects from Galetech, a Cavan-based joint venture between General Electric and Belgian renewable energy company Storm. Two of them were the RESS-1 winners sold to Greencoat, and the third one was the 50MW Pinewoods in Co Laois, which Statkraft is now lining up for RESS-2.

Greenfield developments and planning appeals

Aside from acquisitions, the group has also started to develop its own projects from scratch. They range from onshore wind at Dernacart and Ummeras in the midlands to solar at Gorman, Co Meath – all of which are currently under delayed planning appeals. O’Donovan says a “hobby horse” of his is to advocate for An Bord Pleánala to be forced to return decisions within a set timeframe, just like it already does within the statutory deadline of 16 weeks for strategic housing developments.

Statkraft continued to incorporate new subsidiaries this year, with names like Kilcush Solar Farm or Killeena Stability suggesting upcoming developments across a broad range of technologies and locations. This is confirmed in planning documents, such as 2019 pre-planning records for the site of the Kelwin-2 battery indicating that up to four rotating stabilisers could also be built there. O’Donovan adds that Statkraft is now moving into electric vehicle charging infrastructure here.

Then just last month, the firm registered the cryptically named Bore Array Ltd, which suggests a new offshore wind project might be in the offing.

This wouldn’t be the group’s first foray into the huge potential of installing turbines at sea. As mentioned above by O’Donovan, Statkraft acquired one offshore wind development with Element Power – the North Irish Sea Array (Nisa), which was initiated by Gaelectric in 2009. The company applied for a foreshore licence to land its connection cable two months ago and conducted an initial public consultation. The 500MW, 30-plus-turbine complex off the coasts of counties Dublin, Meath and Louth is expected to go to planning next year. Statkraft hopes to start producing electricity there in 2026 after a €1 billion investment. “It’s a long game,” O’Donovan says euphemistically.

Legislation is going through the Oireachtas at the moment to establish a new consenting process for such projects, but it will include a transition regime through An Bord Pleanála for a handful of offshore wind projects, like Nisa, which were in the pipeline before the reform. 

“Each of the developers involved in those projects are investing very heavily to have those projects ready to be able to be built over the next few years,” says O’Donovan. “The legislation and the policy to support that has taken its time to come into place and that's probably leading to a little bit of uncertainty over timing of delivery of these offshore projects. But I think from an offshore industry perspective, and from our perspective, we're ready to deliver those projects when that legislation and policy is there.”

While a major constraint lies in the national grid’s capacity to transport renewable electricity from the typically isolated areas where it can be generated onshore to the main consumption centres, he adds that this doesn’t apply to projects in the Irish sea: “What's really interesting with Nisa is that it's there next to Dublin, able to supply that power where it's needed, particularly in the north Dublin area where we're connecting into.”

When it comes to the future, O’Donovan likes to mention the past. “When I started, 300 to 500MW of onshore wind was the max that the system operator said could be put on the system – back in the 2000s. When the 2020 target of 40 per cent of our electricity demand coming from renewables was set over a decade ago, that was also thought to be potentially not achievable. And we did it,” he says. “There's been so much progress made already that I think when you look at the challenges to do what we have to do next, it feels like it's achievable, but it does seem quite challenging still.”

Those who know Statkraft believe it is up to the challenge. “They have transformed the business,” says a source who has done business with the group since it first came to Ireland and wished to remain anonymous. “I do think that Statkraft will be one of the, if not the largest producer of renewable electricity in Ireland.”

O’Donovan’s concern for the coming years is whether the Irish government will match its ambitious renewable energy targets with commensurate resources – not in terms of funding for developments, but for the state bodies tasked with overseeing the transition. “I think we still haven't made a step change in terms of resourcing our Department of Climate Change, – they have a huge mandate – and our system operator and our regulator, and An Bord Pleanála,” he says.

“It's the nitty-gritty, it's the more boring stuff. I'm sure you'd probably like me to talk about floating energy and exporting hydrogen and our power in the future and how great that sounds,” he adds. But for the present, he insists: “We do need to put serious investment into the state organs to help that be delivered.”

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