In this episode, Ben Perfitt speaks with Equinor’s Michael Corney about what the energy transition looks like in practice. They explore the realities of delivering offshore wind at scale, from evolving grid infrastructure and policy frameworks to the financing structures that underpin major projects. The conversation also highlights the growing potential of floating wind in the Celtic Sea and the role Guernsey can play in supporting long-term energy investment.
Transcript below:
Ben (00:00)
Hello and welcome to the latest episode of the Sustainable Finance Guernsey podcast, rated one of the top 10 most useful sustainable finance podcasts by the Green Finance Guide. Guernsey is recognised internationally for its expertise in green and sustainable finance. And in this series, we speak to global leaders shaping the future of the sector. My name is Ben Perfitt, and I'm a Senior Technical Associate at Guernsey Finance, the island's promotional agency for the financial services sector.
Today, I'm delighted to be joined by Mike Corney of Equinor. Equinor is an international energy company headquartered in Norway, operating across oil and gas, renewables and low-carbon solutions, with an ambition to reach net zero emissions by 2050. Mike has worked across some of the largest offshore and energy infrastructure projects in Europe and Asia, bringing firsthand experience of delivering complex projects at scale.
Today, we'll explore what the energy transition looks like in practice, from large-scale infrastructure delivery to the policy, capital and geopolitical frameworks that enable it. And what that mean for regions like the Celtic Sea and for jurisdictions such as Guernsey that support long-term sustainable investment?
Ben (01:12)
Okay, Mike, welcome to the podcast.
Mike Corney (01:16)
Thanks Ben for the invitation. I'm really excited to be here today.
Ben (01:20)
Great. Why don't we start with the big picture? People often describe the energy transition as a simple swap. Fossil fuels out, renewables in. From your experience, is it really that straightforward?
Mike Corney (01:35)
Yeah, this is a really interesting and good question, but it's also a very complex question and one that I'll try and break down to answer. So first, let's focus on grid grid. A robust electricity grid is key to enable the transition to a more resilient and low-carbon energy system. In the second half of the 20th century, our grid was built to move power from large centralised coal plants which were located closer to where the power was needed. Whereas today we're building renewables at scale, which is located further from these demand centres. For example, for offshore wind, we're building wind 20, 30 miles out into the North Sea. So this really highlights how much grid reinforcement is needed as we transition to low-carbon sources of power generation.
And I suppose the other key challenge as we move to a more decarbonised electricity grid is about how we balance instantaneous supply and demand in real time, but also whilst keeping a high percentage of renewable generation on the system. So at the moment, this is handled by gas and biomass power plants, which are often the last to be switched on. So we really need to keep the focus on developing new technologies to store large volumes and in combination with a change to our behaviours for when and how we use power.
Ben (03:08)
Thanks Mike. So it's clearly not as simple as it sounds. As projects progress then, where do you see things usually getting stuck? Is it in infrastructure, policy or with the capital?
Mike Corney (03:24)
I think first let's take a look at the fundamentals of what does it take to make an offshore wind project viable in the UK. So we need consent and we need land rights. This is for the onshore transmission assets, but also the offshore acreage to where we build the project. We need a viable technical solution which is available in the market.
And when you route to market, which is usually in the form of a contract for difference. We need the national connection to the national grid, which is also ready when we need it. And of course we need to finance the project. So given the scale and complexity of these projects, there can be many different factors which cause projects to slow down or where issues can come up. But the industry is also really good at finding good solutions, technical, commercial, and regulatory, to unlock some of these challenges. And there's a situation playing out in Scotland right now where projects further north are experiencing delays because of a lack of grid infrastructure. So this is severely impacting those projects, which are mature enough, they have a good technical solution, and they're ready to bid for an offtake or a CFD. But they've come in delayed because of the missing grid piece.
So for these projects to progress, they're really reliant on the rapid build-out of the grid. You know, grid build-out is capital-intensive and this makes it more expensive for projects to connect to the grid in more remote locations like off the north coast of Scotland. So compared to areas down south where the grid upgrade costs are lower, this is also incentivising offshore wind developers to build energy projects closer to where the power is needed.
Ben (05:20)
Okay, so that really shows how many moving parts there are. And I guess for investors, it's about understanding how those risks are structured and managed perhaps. Given I assume and what you've just said, offshore wind projects are long-term and capital-intensive. What do investors need to understand about how they work from your perspective?
Mike Corney (05:43)
Yeah, indeed. These projects are capital-intensive and it's been vital for the public and the private sectors to find policy positions where the risks are shared to unlock these huge investments. in the UK, this is where the contract for difference has been such a success.
So the contract for difference is a government-backed revenue mechanism that provides price stability for developers and consumers. It gives the project sponsor a secure revenue stream for a defined period of time. Typically, this is 15 years, but more recently, it's increased to 20 years. So the CFD works whereby a strike price is determined following the outcome of a CFD allocation round. The generator is then paid when the wholesale electricity price is below the strike price to bring up the revenue to the strike price and the generator then pays back when the wholesale electricity price is above the strike price to return revenue to the strike price. So it's really a mechanism that works two-way. So this regulated return has been a key factor for driving down the cost of capital for offshore wind and it has played a significant part in the overall cost reduction for the offshore wind industry.
Ben (07:05)
Okay, so it sounds like contracts for difference have been fundamental then in reducing risk and unlocking investment in the UK. I guess if we look at this more broadly now, how important do you see policy stability in terms of attracting long-term investment?
Mike Corney (07:24)
Policy stability can't be underestimated when it comes to investment in renewables. And this is another area where the UK has really succeeded. So the strong policy support that has stemmed from good public acceptance of offshore wind over the last 14 years, conservative-led governments have strong, stable policy support for offshore wind. When labor
formed a government, we saw a continued and accelerated rollout of the technologies needed for the energy transition and especially for offshore wind.
And I should point out that in January this year, it was announced in the contract for difference allocation round seven. We had a record of 8.4 gigawatts capacity across 12 different offshore wind projects being awarded. So we really turned up the volume with the number of projects coming forwards in these rounds. And there are now so many coastal regions in the UK which are benefiting from the offshore wind industry. Communities along the East Coast supporting projects in the North Sea and communities on the West Coast supporting projects in the Irish Sea and all of the projects already located off Scotland.
Ben (08:49)
Great, so consistency and stability then are clearly a big part of the UK success story. But I guess looking even broader, we're now operating in a much more uncertain global environment, particularly around energy security. How much do you think that's changing the way governments and investors are approaching major energy projects?
Mike Corney (09:16)
So let's talk about this in terms of the energy trilemma. So that's energy security, energy affordability, together with transition to net zero. And right now we're seeing competing priorities are influencing policymakers' approach, climate and energy policies, and the current geopolitical tensions, wars are drawing focus away from energy transition goals.
I think it's really important to underline here that offshore wind will continue to be one of the cheapest forms of electricity generation. The UK has a strategic advantage compared to other European countries when it comes to offshore wind. We have a shallow seabed which makes it suitable for fixing offshore wind structures to the seabed and we have a really good wind resource and you don't need to have been here long to realise that.
Ben (10:11)
Absolutely, certainly in Guernsey. Well, thank you. Thank you, Mike.
So bringing this closer to home, Mike, in terms of what you're working on at the moment, you're currently Project Director for a new offshore wind lease that Equinor has won in the Celtic Sea. I guess what makes that region particularly interesting right now, especially with the development of floating wind?
Mike Corney (10:35)
You're right. So in June last year, the Crown Estate brought three large acreages to the market, which were located in the Celtic Sea. So three 1.5 gigawatt sites located between the coast of South Wales and North Devon. And prior to this, there were four 100 megawatt test and demo sites also leased in a similar area. So that pipeline, together with an earmarked up to 12 additional gigawatts in this region, there is already a very credible pipeline starting to grow now in the Celtic Sea.
So why Celtic and foremost, it benefits from a high wind resource, but together with the more favourable grid connection charges, because it is closer to the demand centres and the consumers, these two factors combined give us a really good starting point for developing offshore wind in this area.
But this area is also challenging from another angle, and that's the water depth. The offshore wind industry in the UK is typically being built out in water depths of 20, 30, 40 meters. And previous floating offshore wind farm projects have been in water depths of 90, 100 meters plus. So these new areas that have come up with water depths of 60, 70 meters, means that we may require floating structures where it's too deep for bottom fixed like we've built elsewhere. So Equinor is a pioneer in floating wind. We installed the world's first floating offshore wind turbine off the coast of Norway in 2007.
And then we installed the world's first floating offshore wind farm, High Wind Scotland, off the coast of Aberdeen, which was commissioned in 2017. So since then, we've built Hywind Tampen, where we've scaled projects up even further. And we've connected 11 8-megawatt turbines to two gas platforms in Norway. And this offshore wind farm supplies approximately 40% of the electricity demand of those two platforms. So, with our sort of history in oil and gas, pioneers in floating wind, the Celtic Sea is a really interesting area for Equinor as we look to industrialise these technologies to deploy in deeper waters.
But by developing technologies which allow offshore wind to be deployed in these areas, it also really unlocks enormous areas globally for offshore wind and where there's fewer overlaps with existing stakeholders. So for example, fisheries, aggregate extraction, other military zones, the deeper we can go, the further that we move from the coastal waters.
And not to mention the role that floating offshore wind can play as we strive to decarbonise our electricity system as we work towards net zero in 2050.
Ben (13:58)
Mike. It's a really fascinating project and generally just a fascinating place to be working in right now in terms of the whole sector. I guess so far we've talked a lot about infrastructure, policy, capital investment. You did touch on it earlier slightly but these projects obviously sit alongside real communities, real people. From your experience I wondered how positive can offshore wind and renewable projects in general be for local communities?
Mike Corney (14:36)
Yeah, so the offshore wind industry has already brought enormous benefits to some of the more deprived coastal regions in the UK. And I think that the offshore wind industry is particularly good at maintaining a strong focus on the benefits that it will deliver from the start as we design these projects. So some areas where project benefits are felt, local supply chains, these projects typically have a 25 to 30-year design life. So when it comes to operating and maintaining these facilities, they will bring jobs for the decades to come. So what kind of jobs are created? I suppose we have the jobs in the development and the construction of these sites, and then the jobs that come with the operation and maintenance involved in running the sites. So during the operations phase, there will be many wind turbine technicians that are needed, but also the large vessels needed to access the wind turbines and support all of the logistics related to spare parts, port logistics on the quayside, as well as the operation of the power plant itself.
And the offshore wind industry also has a really good track record of developing programs to upskill local workforce where they can benefit from these new jobs. And at Equinor, we've developed schemes with local colleges, universities and skills providers on the east coast of the UK where our projects are located where we've had to upskill. And it also provides jobs for those transitioning from the oil and gas sector into the jobs that come with the energy transition.
Ben (16:19)
Well, that's it's really encouraging to hear how much long-term value these projects can bring from what you've seen. And I think what's interesting for us in the Channel Islands is Guernsey's now in phase three of its offshore wind journey. So it's moved beyond the feasibility stage and into really how this is going to work commercially for the island. I guess the question for you, given
and Guernsey's position in this part of the world, do you think we could play a more direct role in offshore energy?
Mike Corney (16:59)
Yeah, so let's zoom out a bit from offshore wind. You know, the Channel Islands has a rather unique geographical position, which means that they could have the potential to play an important role in power flows across geographies. So last year, 15% or approximately 15% of the UK's electricity arrived through interconnectors from neighbouring countries, Europe, and Scandinavia.
And going forwards, we see an increasing importance of interconnectors for electricity flows in both directions between the UK and between other European markets. So Guernsey's position between the UK and Europe could position itself as an interesting player when it comes to interconnectors.
And as a market, I would expect that Guernsey has a lower power demand. So large-scale renewables projects would need to sell power to other markets like the UK or France.
Ben (17:59)
That's really interesting then. So essentially what you're saying, if I've got that correct, it's less about generating for local use because of the market in Guernsey and it's more about how Guernsey fits into that wider regional energy system.
Following on from that, guess, if generation doesn't end up happening locally, how important do you see financial centres like Guernsey in supporting long-term energy investment?
Mike Corney (18:32)
So most or many offshore wind farm projects are funded through a structured project finance arrangement whereby lenders rely on projects projected cash flows to recover their debt rather than relying on project sponsors' balance sheets. I would say that there's a lot of opportunity here for lenders on Guernsey to participate in project financing for offshore wind.
And when it comes to ensuring all of the different risks for these large-scale infrastructure projects, think Guernsey will continue to play an important part.
Ben (19:07)
Great, that makes sense. And I guess really that's where Guernsey's role of financial centre comes through, especially through the fund structures here and on the insurance side, managing the risks around those projects, often through captive structures that are set up here, who then access the reinsurance markets globally.
Finally, shifting gear, Mike, just to finish on a slightly different note. What advice would you give to someone starting out in the energy sector today? If you could take yourself back to when you started and what you do now.
Mike Corney (19:45)
Yeah, I think this is a really nice point for us to finish on Ben. It's so important that we can help the future workforce needed for the energy transition enter this exciting industry. So if you're interested in renewables, but not sure where to start, I'd firstly recommend trying to secure some sort of work experience. It could be by replacement, work experience through university or college, summer job, or even some sort of volunteering work.
I think would be helpful. And when you find that job, to try and secure a mentor, because it will help you.
The second thing I focus on is the Renewable UK website has some good resources. So Renewable UK are the trade association for the offshore wind industry and they have some really, really good resources on their website to help direct people on how to find their entry point into this industry.
And thirdly, I would focus on being present. I think it's quite different being a young professional since the COVID pandemic with so many people now working from home, trying to focus on building relationships in person when you get opportunity to do so, because these relationships will last you your career. So find out about what industry events and conferences are on.
Students or people in education are often given, you know, there's often discounts on tickets to some events. And personally, I always learned so much when talking to others and hearing different perspectives at these types of events. Companies like Equinor run world-class graduate programs, so it's always worth looking into those firms who are developing these projects.
Ben (21:42)
Thank very much, Mike. That's very informative and useful, and I think our listeners will love that. And we really appreciate your insights today and joining us on our podcast.
Mike Corney (21:53)
Great to talk and thanks for having me.
Ben (21:56)
No problem. And thank you to everyone for listening. If you enjoyed this discussion, we have an extensive back catalog of interviews exploring sustainable finance and global energy developments. To learn more about Guernsey and its specialist financial services sector, visit guernseyfinance.com Until next time, it's goodbye from Guernsey. Thank you.
