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EU states’ energy security fears drive 150-GW offshore wind island pact

20 May 2022 Cristina Brooks

Germany and neighboring North Sea countries have proposed massive energy hubs and islands to accelerate offshore wind as they move away from energy dependency on Russia.

The multinational energy project is at the heart of the Esbjerg Declaration signed by the Belgian, Danish, Dutch, EU, and German heads of state and a related Energy Ministers' Declaration agreed at an offshore wind summit in Denmark on 18 May.

The countries agreed to ramp up their combined North Sea offshore wind capacity tenfold to at least 150 GW, or about four times the global installed offshore wind capacity in 2020, according to the Global Wind Energy Council.

They also set an interim target to reach at least 65 GW by 2030, according to a tweet from the office of Danish EU ambassador Jonas Bering Liisberg.

The planned offshore wind farms would be enabled by infrastructure linking up energy islands, onshore hubs, and interconnectors—cables that allow cross-border trading of electricity.

Hydrogen pipelines, also called interconnectors, would distribute green hydrogen that could be produced from offshore wind power and used as fuel.

To detail a plan to build the infrastructure complex, experts from each of the four countries plan to publish a joint study in a year's time.

The planned hydrogen pipelines will assist the countries in reaching their green hydrogen production targets. On 15 March, Denmark announced a target of 4 to 6 GW of green hydrogen capacity by 2030.

Four days later, the Danish Energy Agency said it would establish a new secretariat for projects that produce hydrogen or other gases from electricity, known as Power-to-X. The country is also targeting 100% renewable power by 2027.

Danish wind developer Ørsted, which has long been planning to bid in Denmark's delayed 2023 tender to build a 3-GW energy island in the North Sea, supported the development.

"Historic day today with official launch of 150 GW (!) offshore wind target by 2050 in Denmark, Germany, Netherlands, and Belgium alone. Add to that [the] ambitions from UK, Norway, and other countries, and the North Sea will end up being THE power plant of Europe. To the benefit of our climate, communities, and our energy independence," Ørsted CEO Mads Nipper tweeted.

Prices for the European benchmark power contract, German Cal 2023, have risen since Russia invaded Ukraine in February. The settlement price hit €241.61/MWh on EEX on 20 May.

Norway, which exports power to Denmark, was not part of the pact, and neither were fellow North Sea states France and the UK. The UK led the world in installed offshore wind capacity in 2020.

The signatory energy ministers called the planned infrastructure a "future proof offshore energy system." Denmark had pledged to phase out its dependency on imported Russian natural gas "as soon as possible" in March.

Energy islands

Alongside the declaration, Denmark now has deals with Belgium and the Netherlands to work together on hybrid offshore energy and network projects, as all four states extend their offshore wind capacity.

To begin with, Denmark and Belgium will each build their own energy islands, although Denmark's would be larger and would be finished first. Later, they will connect the two.

Denmark's energy island will have 3 GW of offshore wind capacity installed and be connected to Belgium by 2033. It could be expanded to 10 GW by 2040.

Denmark will also connect to a Dutch energy hub producing green hydrogen by a date that was not announced.

In parallel with the pair of declarations, Denmark and the Netherlands also signed a separate agreement on connected electricity and hydrogen networks.

The EU has funded offshore networks on islands off Denmark before. The so-called "bright green island" of Bornholm in the Baltic Sea uses a smart grid for high renewable energy penetration.

Apart from Ørsted, another bidder in the tender to build Denmark's proposed energy island is Danish fund manager Copenhagen Infrastructure Partners (CIP).

Its vision for the 10-GW project foresees the potential for hydrogen production and energy storage, and it would be owned by an investor group comprised of two Danish pension funds and a utility company, CIP said in November.

Hybrid networks

The European Commission (EC) in its 2020 strategy on offshore renewables said that interconnectors so far allowed only international electricity trading.

In the future, hybrid networks that combine the function of networks distributing offshore wind power and interconnector trading could "step up offshore renewable energy deployment in a cost-efficient and sustainable way," the EC said.

National transmission grid system operators (TSOs) could build ordinary cross-border interconnectors for electricity trading alongside such hybrid projects that save offshore wind developers money.

Two TSOs, Germany's 50Hertz and Denmark's Energinet, announced plans last year for a hybrid interconnector between the two countries attached to 2 GW of new wind capacity on Bornholm.

The TSOs completed a separate project, which they called the first hybrid interconnector in the world, in 2020. It connects two German windfarms and Germany with the Danish island of Zealand and a Danish windfarm.

EU proposals on metal supply, hydrogen

The EC made several proposals to assist wind projects under development in an action plan detailing its existing REPowerEU proposals to reduce Russian gas dependency. The action plan was released on 18 May.

The plan aims for wind energy to grow from 190 GW today to at least 480 GW in 2030, far exceeding the targets under the EC's 2020 offshore renewables strategy of 60 GW by 2030 and 300 GW by 2050.

Among the REPowerEU's suite of plans are rules that speed wind power permitting and have been welcomed by the renewables industry.

"The message to industry is clear: the moment to step up investment in offshore wind is now," tweeted EC President Ursula von der Leyen.

The EC also aims to assist the offshore wind sector with stronger supply chains. A proposed directive may address a lack of recycling for the rare earth elements used in wind turbine motors.

Trade body WindEurope issued a related warning on wind turbine production. "The new commitments on wind will only be delivered if Europe has a viable wind energy supply chain and if it simplifies the permitting of windfarms. Good things are now happening on the latter. But the former needs major attention: Europe's five turbine manufacturers are all operating at a loss today," Giles Dickson, CEO of WindPower Europe, said in a statement.

The EC also has plans for hydrogen. Among these, more hydrogen subsidies and research, targets on hydrogen consumption for specific sectors, and two delegated acts defining green hydrogen for decarbonization purposes, aiming to reassure potential investors.

Posted 20 May 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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