The offshore wind sector in Europe has been witnessing increased activity in recent months. The sector is gaining centre stage as the region gears up to deliver its climate and clean energy commitments over the medium to long term. Several key policy decisions are being made at the highest political levels to spur investments in the sector to revive economic development, which has taken a severe hit due to the COVID-19 pandemic.

Several opportunities for investments in offshore wind farms are expected over the next year or so. Recently, the Irish government has accelerated over 3 GW of offshore wind capacity through a new marine permitting regime. The governments of Estonia and Latvia have signed a memorandum of understanding to jointly develop a 1 GW offshore wind farm in the Gulf of Riga, the Baltic Sea. The Danish Parliament approved the world’s first offshore wind energy islands in the North Sea with 5 GW of capacity, further expandable to at least 12 GW. Germany has expanded its 2030 offshore wind capacity target to 20 GW from 15 GW and proposed a target of 40 GW by 2040. Norway has opened two offshore wind areas with 4.5 GW of available capacity, while Lithuania is pitching proposals for 700 MW of offshore wind. Poland is expected to finalise an offshore wind act over the coming months, which will open the gates for investment to flow into the sector.

Further, the region is witnessing bold investment decisions in offshore wind projects despite the global crisis. Ongoing projects are also making continued progress. A recent virtual conference on Offshore Wind Transmission, Europe, organised by Global Transmission Report featured presentations by senior government representatives from countries including Poland, Ireland and Estonia covering the latest developments, plans and procurement programs for offshore wind in these countries.

Poland

Considering German and Danish experience as well as estimates of wind resources in the Baltic Sea, it may be assumed that the potential of the Polish Exclusive Economic Zone (EEZ) reaches at least 10–12 GW, with output potential of 50 TWh per year. According to the The National Energy and Climate Plan for the years 2021-2030, in 2040 it is forecasted that installed capacity of offshore wind farms in Polish EEZ will achieve 10 GW.

“Currently, 12 location permits have been issued for offshore wind farm projects and seven of them have grid connection conditions issued,” said Roksana Szymalska Chief Expert Renewable Energy Department Ministry of Climate, Poland.

Investors in Poland’s offshore wind have been eagerly awaiting the passage of the Offshore Wind Act, the draft of which was published in mid-January 2020. In a positive development, in early July 2020, representatives of Polish ministries and the wind industry signed the ‘letter of intent on cooperation in the development of offshore wind energy in Poland’. The signatories included representatives from the Ministry of Climate, Ministry of National Defense, Ministry of Maritime Economy and Inland Waterways, Ministry of State Assets as well as those from the Polish Wind Energy Association (PWEA) and the Polish Offshore Wind Energy Society (PTMEW).

Earlier this year, the Ministry of State Assets published the draft legislation for public consultation. However, there was no progress on the bill for several months as there was a change in the administrative jurisdiction of the sector. On March 21, 2020, the Ministry of Climate took over the supervision of the renewable energy area from the Ministry of State Assets. During the event, Szymalska stated that, “The Offshore Wind Act should be adopted and enter into force by the end of 2020.”

The government is very keen to promote the sector as it presents an opportunity for Poland’s economic development in the current troubled times and is also a guarantor of its energy security. The sector is also an important part of the National Plan for Energy and Climate 2021-30 and the Polish Energy Policy until 2040. The plan is to build 8 to 10 GW to begin with. The country has the potential to reach up to 28 GW by 2050.

The draft bill provides for a 25-year contracts for difference (CfD) support mechanism. The CfD for about 10 GW by 2028 is proposed to be awarded in two phases—up to end-2022 [4.6 GW through administrative decisions by the energy regulator, Energy Regulatory Office (ERO)], and 2023-2028 (at least 5.5 GW through competitive auctions). According to PWEA, the Baltic wind farm construction programme is worth over PLN130 billion.

Ireland

The Irish government has recently increased its offshore wind energy targets from 3.5 GW to 5 GW. However, the country needs to install 1 GW of offshore wind energy capacity by 2025 if it is to meet the new Irish government’s target of 5 GW of installed offshore wind by 2030. It will also contribute two per cent of the Programme for Government’s annual seven per cent reduction in Ireland’s overall greenhouse gas emissions between now and 2030.

Timeline for RESS Auctions in Ireland

The 5 GW target, the energy equivalent of power for about 5 million homes, is to be phased in by 2030, with the first auction of quota to potential developers by next year.

Estonia

Estonia has an offshore wind potential of over 7 GW (equivalent to power generation of over 24 TWh per annum). “Offshore wind will play a major role in transitioning towards climate neutrality in Estonia,” said Jaanus Uiga, Director of Energy Department, Ministry of Economic Affairs and Communications, Estonia. “Offshore wind farms have the advantage of lower national defence constraints than onshore, better offshore wind conditions, and the fact that offshore wind farms do not interfere with people’s daily lives as much as existing solutions, is less important.”

Subsidies transitioning towards reverse auctions

While a dedicated auction for offshore wind could be some time away, Estonia is already planning joint offshore windfarms with Latvia and welcomes the idea of projects with other countries in the Baltic. “Cooperation between states will make offshore wind more affordable,” he said.

The way forward

Europe is serious about achieving its climate objectives. This is evident from the recently proposed EU recovery package (including an economic stimulus plan worth EUR750 billion) to tackle the deep economic recession caused by COVID-19, which prioritises climate investments. The intent was strong even prior to the crisis caused by the pandemic as delineated by the European Green Deal launched in December 2019. It outlined a comprehensive framework of regulations and legislations to achieve EU’s targets of net-zero carbon emissions by 2050 and a 50-55 per cent cut in emissions by 2030 (relative to 1990 levels). Offshore wind initiatives being undertaken by the aforementioned countries are also a positive indicator of Europe’s clean energy transition.

Given that offshore wind holds the promise of delivering the region’s long-term climate goals, the sector has gained greater significance. The recent developments augur well for the future development of the sector. In fact, the offshore wind sector’s growth will be a silver lining in the current tough economic times.

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