“The 800 B€ Offshore Wind bet” or “Is there a Plan B?”
Photo: SSE Renewables
Background:
The European Union and its Green Deal are putting high hopes on Offshore wind power. But there are signs around that might make you reconsider. Signs as the UK looking at an alternative subsidy models, the Netherlands exploring nuclear alternatives and ongoing legal processes in Spain on earlier subsidy schemes.
But to start where it all begins: Executive Vice-President for the European Green Deal,
Frans Timmermans said:
“Today’s strategy shows the urgency and opportunity of ramping up our investment in offshore renewables. With our vast sea basins and industrial leadership, the European Union has all that it needs to rise up to the challenge. Already, offshore renewable energy is a true European success story. We aim to turn it into an even greater opportunity for clean energy, high quality jobs, sustainable growth, and international competitiveness.”
https://www.esgtoday.com/european-commission-presents-massive-e800-billion-offshore-wind-strategy/
This paper will elaborate on this Wind bet via the Natural Laws of Energy Transition, the German death declaration of Markets & Base load, European Power System research and the Meshification (explanation to follow below) idea. At the end, an alternative Plan B will be scrutinized.
Natural Laws of Energy Transitions:
As has been mentioned before, there are still some Natural Laws in Energy transition to consider. One being Intermittency, another Cannibalization. With ever increasing amounts of intermittent power production, the value of the produced MWh will decrease over time. This can be seen with increasing hours of negative prices, but also as increasing tender prices for wind developers. Germany shows examples of both, with 2020 numbers of negative prices up 42% over 2019 and with Onshore wind lastly tendered at around €60/MWh.
AFRY has done a study for the Netherlands on how to support further Offshore wind growth, when among other things, Cannibalization increases. https://afry.com/en/newsroom/news/afry-evaluates-offshore-wind-business-case-dutch-ministry-economic-affairs-and
AFRY are assuming a decrease from 90% to 70% in capture rates over 30 years. With many countries also betting on Offshore wind in the North Sea. If this is a correct assumption or if Cannibalization will be even higher is to be seen.
AFRY’s report also elaborate what Policy supporting measures investors would need, to continue investing. But if ever accelerating Cannibalization would continue, you might get stuck in a negative spiral. Germany can partly already see that in Onshore wind where new measures need to be added regularly, to keep the investments going.
Further balanced and technology neutral research is needed to capture the real effects on Cannibalization in Renewable Energy transitions.
The German (RWE) death declaration of Power Market & Base load
The current RWE CEO Rolf Martin Schmidt said a few months ago that the “The Market as we used to know it, does not exist anymore.” https://www.linkedin.com/posts/anders-%C3%B6sterlund-21153629_%C3%B6kostrom-rwe-chef-rolf-martin-schmitz-zur-activity-6746732758028095488-n82i
His successor to be, present CFO Markus Krebber stated the following on Montel two years ago:
Conclusions from RWE are:
a) Renewable Energy, if even cheap (?), need a framework to make investments profitable
b) The rest of the conventional fleet need a capacity market.
c) Flexible resources, like gas peaking, need additional renumerations.
The market function is then dead in Germany, this must be the closest one could come a
re-nationalization of a Power market. The question is how this will develop going forward with no market forces in place.
European high level Power System Transition research:
Lilliestam et al have been referred to before. Here they describe the EU Renewable Energy Transition pathways for the EU as such and five of its countries. https://mustec.eu/sites/default/files/reports/Lilliestam_et%20al_2019_Policy_pathways_for_the_energy_transition_in_Europe_and_selected_European_countries.pdf
The conclusions are discussed in chapter 5 of the report above, with following headlines:
“Flexibility is weakly described; Policy instruments could be conflicting, and Optimality has little to do with policy strategies” are maybe the most “eyebrows raising” headlines here.
Lilliestam then sum up with the following words:
“Flexibility, Storage and Sector coupling remains largely unspecified.”
“Finally, it is very unlikely that the pathways that national governments view as the most beneficial for their respective countries will add up to something that is even close to “optimal” when aggregated into a full European electricity pathway trajectory; quite likely, the power systems as specified by the pathways may not even be stable, both as the flexibility options are underspecified but also as the basic functioning and balancing of each national system may be in conflict with the neighbor systems.”
Quite intimidating headlines and statements if ONE common, integrated and “meshified” Power market is the final Goal.
Meshification:
A suggested measure in the European Energy Transition ambition is to mesh the Offshore power grids together from not only a physical perspective, but market model and regulator wise. https://www.linkedin.com/posts/anders-%C3%B6sterlund-21153629_eu-sets-out-vision-for-offshore-power-activity-6740137429669355520-6RS_
With most countries having quite different views on where they are going in their transitions.
This kind of integration/meshification would be quite complicated, if even doable, full stop.
Plan B:
Again, many European leaders think and hope that a full scale 800 B€ North Sea Offshore Wind power expansion is the solution. But what if those hurdles elaborated on above turns out to be real, what is the fallback? We still need a secure supply of power in our modern societies.
One resolution could be that with 800 B€ to spend on intermittent Offshore generation and transmission capacity, you would get at least 80 1600 MW nuclear reactors or many more SMR’s.
Such a pan European investment would safeguard a full transformation to a totally fossil free society. There are obviously a few hurdles here. But compared with the full-scale Offshore wind expansion, which has never been done, where France and Sweden have built 58 and 12 reactors in their earlier decarbonizations. If Cannibalization turns out to be an unbreakable Natural Law, all options should be kept on the table.
It is off-course not realistic to think that all countries in Europe, and their citizens, should become pro-nuclear overnight. But a nuanced discussion about the options for Climate change solutions and how to achieve balanced Power Systems, might benefit those counties who are already have Low carbon power. Some new countries are also considering nuclear, such as Poland, where a balanced and not ideological discussion, would benefit everyone.
The realistic long-term solutions is to embrace all Fossil free technologies and integrate them in every market or market clusters. This to get an optimal technology neutral solution on the Trilemma.