European and US lawmakers differ in their policies on offshore wind farms, yet this reporter suspects Europe's offshore wind industry could provide some lessons to US lawmakers, the energy industry, and its investors.
Ten European countries host more than 1,660 turbines on 55 wind farms while the US currently has no turbines offshore. The UK and Germany have favored construction of large offshore wind projects in stages covering decades. The US has no such long-term approach on offshore wind policy.
Regulatory stability is a key issue for the energy industry regardless of whether one is discussing fossil fuels or wind energy. Offshore wind projects are capital intensive so regulatory stability is key to attracting investors.
The European Wind Energy Association (EWEA) issued a report saying equity and debt providers are concerned about the possibility of changing regulatory frameworks although investors indicated they remain willing to invest in wind.
Future investment needs
EWEA's report estimates the European offshore wind industry needs €90-120 billion worth of investment between now and 2020 to meet a deployment target of 40 Gw.
"By undermining investment stability, governments are putting green growth, jobs, and a world-leading European industry at risk," said Thomas Becker, EWEA chief executive. "Stable national frameworks and a binding EU renewable energy target for 2030 will be a green light to investors and ensure the industry continues to flourish."
The report, entitled "Where's the money coming from? Financing offshore wind farms," can be found on the EWEA web site. Ernst & Young researchers helped compile the report, which EWEA released during the EWEA offshore conference in Frankfurt.
"The major challenge increasingly facing the offshore wind industry is regulatory risk, which can refer to unclear or conflicting political support for offshore wind, uncertainty with grid connection regimes, or lack of a long-term stable market and regulatory framework," the report said. "It is critical that national governments address this risk, not least by working with the European Commission to agree [to] a binding 2030 renewable energy target at the earliest opportunity."
If regulatory instability prevents the offshore industry from reaching its 40 Gw target by 2020, even a conservative assumption of 25 Gw would still require €50-69 billion over the next 7 years, the report said.
Industry comments
Henrik Poulsen, DONG Energy chief executive officer, told offshore wind conference participants that industry should strive to slash costs 35% by 2030. Poulsen believes the 35% goal is achievable provided that regulatory framework beyond 2020 is in place.
"I think the time has come for us to focus on efficiency," Poulsen said, noting that previously industry has focused on construction and infrastructure.
"What's fascinating is we are truly talking about a transformation of the entire European energy system from predominantly fossil–fuel types of energy to gradually transitioning to renewable technologies. It's a huge undertaking: capital intensive and technology demanding."
Poulsen said he intends to redirect DONG's investments with 50% of future investments to go towards offshore wind and 40% to oil and gas exploration and production around Denmark.
Last month, DONG announced plans to build two offshore wind power projects in Germany's North Sea. DONG's German projects, Gode Wind 1 and 2, will generate at full capacity a combined 582 Mw of electricity from a total of 97 turbines.
Separately, German utility RWE announced it plans to scrap a proposed wind farm, the Atlantic Array, in the Bristol Channel off southwestern England. Plans had called for the project to generate up to 1.2 Gw of electricity, almost twice as much as the largest farm already operating in UK waters.