The European Commission has estimated than an installed capacity of between 240 GW and 450 GW of offshore wind will be needed to make Europe a carbon-neutral entity by 2050, helping to limit global warming to less than 1.5 degrees. This week at its WindEurope Offshore event in Copenhagen, it released a report entitled ‘Our Energy, Our Future’ to give a country-by-country breakdown of where this capacity will be installed across the Atlantic; the North Sea; the Baltic Sea; and Southern Europe. Its report was less a forecast, and more a call to arms.
But the lack of specifics, and attempts to please most stakeholders, has meant that major players will continue to argue that their own way is best, and the collaboration which WindEurope is asking for won’t happen overnight, if at all.
These plans should see a capacity of 80 GW of offshore installed in the UK, 60 GW in the Netherlands and 40 GW in France, as the three leading markets. Germany is now seen as falling back from being the second largest market, to creating a more modest 36 GW of capacity. This is largely due to a boom in floating wind in France, as it becomes competitive with conventional power generation methods towards the end of the 2020s.
According to the report, for 380 GW of the 450 GW to be developed in Northern Europe would only require 2.8% of the available space, although at least 60% of this sits in exclusion zones. These zones often accounted for areas where ‘very low’ LCOE is possible according to WindEurope, which is now encouraging policy makers to challenge the ‘status-quo’ on where future capacity can be built.
This change would be essential for increasing the rate of installations while the cost of offshore wind is still relatively high, compared to onshore wind. Installing this capacity by 2050 would require annual installations to exceed over 20 GW per year beyond 2030 – over six times today’s rate. This would demand a vast expansion of production capacity within the supply chain, with additional offshore vessels required to transport turbines of ever-increasing size.
Additionally, both offshore and onshore grid systems will need significant investment, with €15 billion suggested per year to facilitate the inclusion of offshore hybrids and meshed grids as international collaboration increases, and a further €50 billion annually for the supporting onshore grid system.
The general tone of the session was that a more collaborative approach was needed between countries as well as within industry, with a “partnership approach rather than procurement approach”. As currently seen with projects like Kriegers Flak, multiple countries may benefit from ‘hybrid-style’ projects – Germany and Denmark in this case. But with little regulatory framework, legal issues must be addressed rapidly. One of the more radical suggestions of the morning was to get-rid of national regulators, to have one single transmission system operator (TSO) to oversee the management of electricity distribution across Europe.
This suggestion came from SuperNode Chairman Eddie O’Connor, insisting his idea of a ‘super-grid’ concept, which he first brought up back in 2008. This would require one of the biggest infrastructure projects in history, to connect countries through a meshed grid on a Europewide scale. An idea like this could see the seasonally varying supply of wind and solar across Europe used in a complementary way to provide a more stable and balanced energy system. While O’Connor claims that development of these advanced grid systems is underway in Ireland, the lack of European co-operation makes an idea of this scale somewhat unlikely, causing debate to arise with Raul Gil of the Prysmian Group who offered the more realistic, albeit less ambitious method of tackling the grid issue step-by-step.
With countries like Denmark eyeing exports as they aim to become fully renewable by 2028 and landlocked countries likely to have access to tenders from abroad through an EU push for collaboration, the large expansion in capacity will only be facilitated if transboundary infrastructure is developed. This is already being seen in places like Ireland, where high capacity cables are under development to connect the country to both France and Great Britain and allow two-way power transmission.
Projects are likely to come from those closest to export, or with the largest potential for renewable capacity in the coming decades, with Ireland, Denmark and the Netherlands being places where a surplus of renewable capacity is likely. While tension across the EU through Brexit may cause a little bit of worry on this front, the EIB will likely push for these projects following WindEurope’s key advice to “elaborate a regulatory framework for offshore hybrid projects” as well as “expanding the necessary on- and offshore grid infrastructure.”
These two points were among six key policy recommendations in the report, which WindEurope highlighted to reach ambitious targets. The other four included: setting ambitious maritime special planning policies; ensuring that permitting authorities have the necessary expertise and resources to consent enough sites; accelerating the electrification of transport, heating and industrial processes to provide certainty that the 450 GW will be necessary; and ensuring visibility and confidence in volumes and revenue schemes. Specific recommendations to promote renewables directly remained vague however.
Carbon Floor Pricing was another contentious topic, with several speakers throughout the day singling-out Germany as responsible for these not being adopted by the European Commission, as it remains conservative in phasing out fossil-fuels. All speakers seemed in favor of the idea, as means of facilitating long-term renewable power purchase agreements (PPAs) to provide industry-wide certainty.
This certainty would also be provided by increasing transparency within government, stating routes towards targets, rather than merely a figure of intended capacity. Speakers, as well as many developers indicated a worry that the supply chain will be reluctant to confidently expand its production capacity before investments are seen as low risk.
Another way of doing this would be to spread the use of CfDs (Contract’s for Difference), offering a fixed price to developers for the electricity they produce through a project’s life-time, with the difference in achieved cost funded by government. It was suggested that ‘over-stretching cost reduction’ without the CfDs could in fact be harmful to the industry, promoting a ‘cannibalism-effect’ which many seemed worried about, as developers force each other to lower and lower margins. However, one Orsted spokesman told Rethink that the CfDs are obstructive at a time when competition in the industry is reaching a peak and causing the LCOE of offshore wind to plummet.
While CfDs facilitate certainty, which several panelists thought would provide a platform for offshore wind to flourish in Europe, as it de-risks the investments, often made by the EIB, in its shift to the world’s first ‘climate bank.’ Others seemed wary that unsubsidized technology from Asia may ‘unfairly’ undercut a market supported by CfDs, which will eventually squeeze the margins for European developers, making them less competitive in international projects.
This worry about unfair Asian competition and asking for additional support from policy makers seems remarkably reminiscent of Solar World, which whimpered out of the solar market earlier this year after complaining about the lack of European subsidy only for Europeans.
As highlighted by Dan Jorgensen in the session prior to the report being released, there “is no known solution” to going hitting these ambitious targets – otherwise they wouldn’t be ambitious, but waiting around for international collaboration could see the next few years of offshore wind development make little progress at all.