Floating wind, planning and transmission all ought to be important features of the European Commission’s upcoming strategy for offshore wind, but CmY Consultants* founder Charles Yates believes strengthening and enhancing the European transmission network is the key to continuing rapid reduction in the cost of electricity from the sector
“An adequate, joined up and cost-effective transmission grid will strengthen the internal energy market, facilitate the energy transition to green power, and ensure secure system operation,” Mr Yates told OWJ.
“Reliable, uncongested transmission connecting all of the European Union (EU) to offshore wind generation from a growing number of countries is necessary to hit the EU’s legally binding target of net zero greenhouse gas emissions by 2050.
“However, achieving this will require sustained investment at scale from both the public and private sectors. The consultancy report Investment needs in Trans-European Energy Infrastructure up to 2030 and beyond to the European Commission by Ecofys, Cowie and Vito in 2017 estimated the required capital expenditure on transmission infrastructure in the EU28 as €152Bn (US$172Bn) between 2021 and 2030.
“In addition, the EC says Europe needs between 230 and 450 GW of offshore wind by 2050, more than 20% of all electricity generation, to decarbonise the energy system and deliver on the objectives of the Green Deal.
“Allowing offshore wind uncongested access to the large and geographically diverse EU market will help to stabilise power prices and reduce the cannibalisation of the price of offshore wind power which is a significant and increasing barrier to growth in offshore wind.
“As a whole, the EU market is big enough to absorb peak offshore wind generation with a limited impact on power prices and so significantly reduce the risk of negative prices. This important risk reduction will encourage private investment in offshore wind and cut the price of electricity by reducing the cost of debt and equity which are key cost drivers for offshore wind,” said Mr Yates.
Mr Yates anticipates that finance for the expansion of the transmission network would take the form of long-term debt from the EU-owned European Investment Bank. This, he says, would further reduce the cost of transmission by crowding in private capital and being a significant, reliable source of cheap debt at scale.
As he noted, adequate transmission is also required for the large-scale production of green hydrogen using low cost offshore wind power. “Hydrogen is central to the European Green Deal as a key energy vector to reduce emissions from hard to decarbonise non-power sectors such as industrial heating, domestic heating and transportation of heavy goods,” he told OWJ.
“As hydrogen produced in summer can be economically stored until winter it will also improve energy security and reduce the seasonality of electricity prices. The European hydrogen sector is due to grow exponentially this decade from €2Bn annual turnover today to €140Bn by 2030, creating 140,000 jobs in the process and boosting the post-Covid-19 recovery.
“Offshore wind also needs new transmission links so it can provide green power to offshore oil and gas platforms to reduce their greenhouse gas emissions. Typically, offshore oil and gas platforms are powered by burning petroleum products and contribute 15% to 40% of the total greenhouse gas emissions from transport fuels such as gasoline and diesel,” he concluded.
“A well thought-out, co-ordinated plan to reinforce the transmission grid throughout the EU – on land and at sea – is key to delivering growth of offshore wind, driving down power prices, increasing energy security and hitting the EU’s 2050 net zero target.”
*Charles Yates is founder of CmY Consultants Limited, which specialises in regulatory and financial advice relating to renewable energy. The company recently co-ordinated the financial close of the £500M transmission link for the Race Bank offshore windfarm and is currently providing strategic advice and auction support to government and major renewable developers.