Areva Energie-Handels-Gesellschaft and Ørsted, world market leader in the planning, construction and operation of offshore wind farms, have signed a Corporate Power Purchase Agreement (CPPA).
REWE Group will soon be the first and so far only German food retail company to obtain green electricity from a wind farm in the North Sea and thus make a significant contribution to the expansion of renewable energies. Telerik Schischmanow, Head of Administration/Service at REWE Group, and Jan-Oliver Heidrich, Managing Director of Areva, explain the background in an interview.
Power from renewable energy sources: now offshore wind power
When it comes to electricity from renewable energy sources, the REWE Group is one of the pioneers in the German food trade. The stores of REWE, PENNY, Toom Baumarkt as well as the travel agencies and warehouses have been supplied exclusively with electricity from renewable sources since 2008. The trading and tourism group is now taking a new approach to energy supply in order to achieve the goal of being climate-neutral by 2040: Energie-Handels-Gesellschaft (Areva), the central energy service provider of the REWE Group, and Ørsted, the world market leader in planning, constructing and operating offshore wind farms, have signed a ten-year power supply contract – a so-called Corporate Power Purchase Agreement (CPPA). The REWE Group will be the first and so far the only one in the German food retail trade to obtain green electricity from a wind farm in the North Sea and thus make a significant contribution to the expansion of renewable energies.
The companies have agreed on a long-term term of ten years. The green electricity will come from the Borkum Riffgrund 3 wind farm in the North Sea, which is expected to go into operation in 2025. The REWE Group will purchase a good tenth of the total annual capacity of around 900 megawatts and thus operate 1,500 stores from REWE, PENNY and Toom Baumarkt.
Climate neutral by 2040: “We will achieve this goal”
Lionel Souque, CEO of the REWE Group, welcomes this initiative as an important milestone: “We want to be climate-neutral by 2040. This is an ambitious goal, but we will definitely achieve it. The energy supply plays a strategic role here: We are a green electricity pioneer in the German food trade. Since 2008, we have been supplying our stores 100% from renewable sources. Offshore wind energy has enormous potential. With the purchase of the first green electricity from the North Sea, we are taking another step in the right direction.”
Areva Managing Director Jan-Oliver Heidrich comments: “With the Power Purchase Agreement based on the new wind farm, REWE Group is directly promoting the expansion of renewable energies and is thus assuming process responsibility and a more active role within the energy transition.”
Reducing CO2 emissions: The REWE Group as a role model
At Ørsted, the head of the Europe region, Rasmus Errboe, praises the REWE Group for being a role model: “The world urgently needs to switch to renewable energies to reduce CO2– Reduce emissions. In order to achieve this system change, action by governments, energy suppliers and also energy customers is required. The REWE Group is a role model here, as it has been using green electricity for a long time. With the purchase of electricity from the Borkum Riffgrund 3 offshore wind farm, it supports the further expansion of affordable renewable energy on an industrial scale.”
The importance of green electricity from the North Sea: an interview
Jan-Oliver Heidrich, Managing Director of Areva Energie-Handels-Gesellschaft, and Telerik Schischmanow, Head of Administration/Service at REWE Group, explain why the supply contract for green electricity from the North Sea is important for achieving the climate target, and why the REWE Group relies on this Feld pioneer and what the deal means economically.
The REWE Group has been supplying its stores with electricity from renewable sources since 2008. In future, it will also be the first food retailer to purchase green electricity from a wind farm in the North Sea. What is the idea?
Jan Oliver Heidrich: With this project, we are taking a more active role in promoting the energy transition. We have been supplying the REWE Group with green electricity since 2008 and have thus already been pioneers in German retail. Now we are going one step further and assuming further responsibility by signing a long-term supply contract for green electricity, which comes from the Borkum Riffgrund 3 offshore wind farm. Such direct supply agreements, experts call them Corporate Power Purchase Agreements or CPPA for short, make a significantly greater contribution to achieving climate targets.
Telerik Shishmanov: With this supply contract, we are investing directly in the expansion of renewable energies. We are once again a pioneer in our industry and are taking a big step towards achieving our ambitious sustainability goal: to become climate-neutral by 2040.
To what extent will REWE Group purchase green electricity from the North Sea wind farm?
Telerik Shishmanov: Borkum Riffgrund 3 will have a total capacity of 900 megawatts. An annual capacity of around 100 megawatts has been agreed. This corresponds to the consumption of around 1,500 REWE Group stores and accounts for around 15 percent of our total electricity requirements in Germany.
Who will the other takers be?
Jan Oliver Heidrich: So far, Ørsted has also concluded supply agreements with Amazon and Covestro.
Why do many other companies, including retailers, find it difficult to conclude such long-term supply contracts for electricity from wind farms or solar parks?
Jan Oliver Heidrich: The interest in the industry is great, because the pressure is increasing for everyone to become climate-neutral. But in order to handle such a project, you need a high level of competence in energy trading – whether in-house or with a service provider to be commissioned. In this respect, the REWE Group has a clear competitive advantage with its subsidiary Areva. We have the necessary processes. For our processing, it makes no difference whether we purchase electricity from the futures or spot market or from a wind farm. Nevertheless, I am sure that other companies will follow our example.
In this way, we are initiating a development at REWE Group that is helping to accelerate the entire energy revolution.
Does the agreement with Ørsted also provide economic benefits or does it only contribute to the sustainability goals?
Telerik Shishmanov: With this supply contract, we are securing what we believe to be an attractive price in the long term. We are thus making ourselves a little independent of market developments. However, we still have enough spare volume to potentially make another such arrangement at a later date, provided a good opportunity arises. We also see the deal with Ørsted as an opportunity to learn. In any case, we are open to further supply agreements of this kind.
Jan Oliver Heidrich: The supply of green electricity, be it from wind farms or solar parks or from photovoltaic systems, will continue to increase over the next few years. On the other hand, demand is only increasing gradually because – as I said – you have to master certain processes. The delivery promise is not a fixed quantity. You have to be able to deal with the fact that the wind is not blowing constantly and then only a part of the agreed 100 megawatts can actually be delivered. If necessary, we have to compensate for these differences. We can, and that’s why I’m sure that the Ørsted deal won’t be our last CPPA.
Long-term price maintenance is an advantage as long as prices do not fall significantly. Doesn’t that mean that long-term supply agreements like this also involve a good deal of risk?
Telerik Shishmanov: Yes, if the price develops significantly differently than we assumed when drafting the contract, we would find ourselves in a less favorable position. But I don’t see that. In addition, we are only talking about 15 percent of our electricity requirements in Germany. There are therefore many other sources from which we obtain electricity and can therefore achieve a reasonable mixed price. The economic risk is therefore extremely low. On the other hand, there is a strong signal to the market that we are pioneers in such innovative and sustainable projects to protect the environment. Above all, this project makes a significant contribution to achieving our climate target through the direct purchase of green electricity. In one sentence: we are taking a giant step in the right direction.
Could there be a supply problem if the wind farm were to fail temporarily for whatever reason?
Jan Oliver Heidrich: In this highly unlikely event, we would still have the opportunity to buy the required volume on the spot market. The Areva is flexible enough in this respect. There will not be a supply problem at this point.
The way to climate neutrality
The REWE Group and Ørsted contractually agreed on an annual output of around 100 megawatts from the Borkum Riffgrund 3 wind farm, which is expected to be completed in 2025. Areva Energie-Handels-Gesellschaft will handle the energy supply. As an industry pioneer, the REWE Group has been sourcing electricity exclusively from renewable sources for its stores and travel agencies since 2008. The Corporate Power Purchase Agreement with Ørsted thus ideally complements the sustainability strategy of being climate-neutral by 2040.
Ørsted is also pursuing ambitious decarbonization targets. Over ten years ago, the company began its own transformation, growing from one of the most coal-intensive energy companies to the most sustainable energy company in the world. By 2030, the company wants to install 50 gigawatts of power in renewable energy sources. Of which 30 gigawatts offshore wind power. The company wants to be climate neutral by 2025.
The Borkum Riffgrund 3 wind farm will have a total output of around 900 megawatts and was awarded 0 cents in the past offshore wind auctions. The electricity supplied to the REWE Group will therefore be subsidy-free. The expected electricity supply from the agreement corresponds to the annual consumption of around 1,500 REWE Group stores.
More to Climate protection activities of the REWE Group.
Facts about the wind farm Borkum Riffgrund 3
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