Europe's renewable future

Aug. 4, 2014
With European offshore hydrocarbon production on the decline, a host of developments promise to breathe new life into several regions.

Tayvis Dunnahoe
Exploration Editor

With European offshore hydrocarbon production on the decline, a host of developments promise to breathe new life into several regions. While hydrocarbon resources will remain the primary source for electric power generation, renewable energy has grown considerably in Europe within recent years.

Recent changes may soon reconfigure the market in many regions leading to fewer subsidies with more competition among a variety of industries.

Offshore, onshore wind

In 2013, more than three fourths of the 719 offshore wind turbines installed worldwide were in the North Sea, according to Douglas-Westwood. For the next decade, analysts expect the North Sea region to continue as a stronghold for global offshore wind activity. The region will see more than 60% of installations worldwide.

This trend has benefitted from a combination of attractive financial incentives in several key markets and the supply chains of Germany and Denmark. With more than 40 years of development in the North Sea, an ample supply of offshore engineering experience also plays into the growth of offshore wind.

Despite the growth, other renewables have become costly and several regions have redefined their commitments by limiting subsidies to renewables across the board.

In 2013, the UK accounted for 39% of turbine installations, which made the region the world's largest market for offshore wind, with major projects installed in both the North and the Irish seas.

Offshore, wind installations continue to spread while onshore installations has met with some political resistance. As reported June 4 by the Financial Times, Sec. of State for Communities and Local Government Eric Pickles has turned down applications to build 10 onshore wind farms in the past year. As of July 24, the UK government capped its subsidies for renewable energy.

Starting in October, renewable energy projects across the board will compete for a budget of more than $340 million/year. Under the new plan, contracts will be divided among three technology groups: onshore wind and solar, offshore wind, and biomass conversions.

The UK's Department of Energy and Climate Change (DECC) considers onshore wind and solar to be more established; therefore, offshore wind projects may continue to benefit under the new limited subsidies.

According to DECC, the reformed subsidies will reduce emissions from the power at a lower cost than through existing policies-6% ($69) lower on the average domestic electricity bill up to 2030.

New ventures

Statoil's and Statkraft's Dudgeon Offshore Wind Farm offshore Norfolk, UK, has been approved. Statoil will operate the wind farm, which will be in full production by late 2017.

It will lie 20 miles offshore Cromer in North Norfolk, UK, and the installation is expected to have a capacity of 402 Mw. Once completed, the project will provide energy for as many as 410,000 households. The first phase includes construction of onshore cables and an onshore substation in Necton, UK. Offshore construction is slated for 2016. An estimated investment of $2.54 billion will bring the wind farm online.

The project is near the 317-Mw Sherington Shoal Offshore Wind Farm that was completed in 2012, also as a Statoil and Statkraft joint venture through the partnership's Scira Offshore Energy Ltd.

British waters provide access to 40% of the EU's entire wind capacity. Despite uncertainties in some of Europe's offshore wind markets, Douglas-Westwood forecasts more than $110 billion will be invested on offshore wind projects in Western Europe within the next decade.

Other regions

Germany has had difficulty implementing planned projects due to spiraling costs associated with extending offshore and onshore transmission systems.

In April, Germany scaled back its renewable subsidies with onshore wind and solar photovoltaic installations capped 2.5 Gw/year and offshore wind at 6.5 Gw/year to 2020. By 2017, renewable energy generation will compete with conventional sources as of 2017 due to Germany's Renewable Energy Act Reform.

Germany plans to generate 40-45% of electricity from renewable sources by 2025 (55-60% by 2035).

Renewable forms of energy will see continued development in most European regions although the fiscal regimes supporting these technologies may be supplanted with market driven initiatives in years to come.