Transparent project pipelines, improved auction designs, faster permitting, greater access to finance, a fairer international marketplace – the European Commission’s new strategy ticks all the boxes. But will Brussels’ new plan get the sector on track to meet hugely ambitious targets for wind plant at sea, asks Maria Holm Bohsen?
European offshore wind has, in many ways, been a victim of its own success. Driving down costs over the past decade with ever-larger turbines and evermore streamlined manufacturing and operations, the sector achieved what few once believed possible: transforming the economics of an ‘niche’ technology and making it an engine of the energy transition in the EU, with a levelized cost of energy (LCoE) on par with fossil sources.
But that accomplishment has left the industry in the grips of an existential crisis, as governments pinned their hopes on the EU bloc’s offshore wind capacity to expand from 16GW today to 111GW by 2030, 252GW by 2040 and 317GW by 2050, while counting on LCoEs that have become untenable in the crosswinds of a global supply chain crunch and runaway inflation. Developers have iced projects and suppliers, not least the turbine makers, have been left wading in red ink.
The recently released EU Wind Power Action Plan is the rescue package devised to save the sector from a perfect storm of slow and complex project permitting processes, inflated commodity prices, unfit-for-purpose national auctions, poor access to key raw materials and – to top it off – the growing pressure from foreign competitors.
To reach the target of having at least 42.5% renewables in the EU’s energy mix by 2030 – a target set in the latest update to the Renewable Energy Directive (RED III) published this week (31 October) – Brussels is looking to offshore wind to install 12GW a year going forward – a very big ask given build-out was one-tenth that in 2022, with 1.2GW added to the fleet.
'Most of the wind power action plan initiatives require national-level implementation, so the sector will still live in limbo as it waits for each EU member state to include them'
Maria Holm Bohsen
Head of Research
The EU Wind Power Action Plan hopes to help make this happen with 15 specific initiatives, including these five key ones:
Proactive permitting: though an initiative called Accele-RES, permitting will be digitalized, with the Commission launching an online tool to support member states greenlight offshore wind projects faster to speed up bloc build-out.
Project pipeline predictability: EU states will be urged by the end of 2023 to sharpen visibility on project pipelines through concrete wind ‘pledges’, transparent auction schedules, and long-term planning for the period 2024-2026, plus provide a ten-year renewables deployment plan.
Next-generation auctions: member states should improve auctions with well-designed programs and criteria that reward higher value-added technology – with an eye on sustainability, cybersecurity and data residency – and keep projects on-time and on-budget.
Fast-track finance: the Commission will underpin support for the wind energy supply chain via its Innovation Fund and double the budget for clean technology manufacturing to €1.4bn, and the European Investment Bank will formalize a dedicated guarantee mechanism for commercial banks' credit exposures to key sector suppliers.
Leveling the international playing field: to make sure the European wind sector can operate in a ‘fair and competitive’ international playing field, the Commission promises to be a watch dog for unfair commercial practices, using trade defense and international procurement instruments to safeguard EU manufacturers' access to foreign markets.
The EU Wind Power Action Plan is the latest in a series of initiatives designed to accelerate wind build-out, including RED III and the proposed new Electricity Market Design. The new design aims to steady long-term electricity markets by cultivating demand for power purchase agreements, standardizing two-way Contracts for Difference (long-term contracts which top up the market price when it is low and require the generator to pay back when the market price is higher than an agreed certain limit) as the support mechanism, and improving the liquidity of the electricity forward market.
The Commission’s focus on faster offshore wind permitting, more viable auction designs, and underwriting the European manufacturing sector as it shifts up the gears for the unprecedented build-out to come this decade, sends a powerful signal to the market and has been widely well-received by the wind sector.
But the action plan far from seals the deal. Most of the initiatives require national-level implementation, so the sector will still live in limbo as it waits for each EU member state to include the plan in national legislation and processes.
This article was first published in Aegir Insights' offshore energy intelligence newsletter, Beaufort.
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