Global | Publication | December 2020
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The EU Strategy on Offshore Renewable Energy (ORES), published by the European Commission on 19 November 2020, represents a paradigm shift in EU offshore renewable energy policy in terms of both scale and speed of delivery.
The ORES proposes to increase Europe’s offshore wind capacity 25-fold from its current level of 12GW to 300GW by 2050, as well as add 40GW of other emerging technologies such as floating solar PV, wave and tidal energy.
This ambition will need significant investment—nearly €800bn between now and 2050—not just in offshore generation, but in energy infrastructure such as grids and ports. The ORES presents an opportunity but also a challenge given the timeframes to achieve it.
To enable the rapid deployment of offshore renewables, the ORES prioritises the development of a clear and supportive framework to support offshore renewable energy projects. Measures include:
The ORES proposes that the key to deploying offshore renewable energy in a cost-efficient and sustainable manner is the development of meshed grids, deployed beyond national borders. Most existing offshore windfarms have been connected directly to the onshore grid by individual point-to-point, or radial, links. Although this may continue in areas where offshore development is only just taking off, with the scale of development envisaged by the ORES, a more coordinated approach to offshore grid infrastructure is needed.
Hybrid projects, where the offshore grid infrastructure fulfils multiple purposes, are a stepping stone in the development of meshed grids. An example is an offshore windfarm, connected directly to an electricity interconnector between two or more member states, the grid serving both as an interconnector and as the grid connection for the project. WindEurope estimates that up to 7GW of offshore hybrids are already in the pipeline.
ORES prioritises the development of a clear and supportive framework to support offshore renewable energy projects.
Both hybrid projects and meshed grids require the interoperability of various national offshore systems. Coordinated grid planning is also required. And, due to the longer lead times of grid development (typically ten years or more), the ORES also identifies the need for anticipatory investments in both electricity and hydrogen infrastructure to deliver renewable energy onshore.
Cooperation between member states will be key. This may be achieved via regional cooperation agreements, and the regional cooperation provisions under the Regulation on the Governance of the Energy Union and Climate Action may also play a role. Under these rules, member states must submit draft integrated national energy and climate plans, identifying areas for consultation and cooperation with other member states to promote the Energy Union.
Structured cooperation between member states, transmission system operators and regulators will also be needed in the short term in each sea basin. In the longer term, as meshed grids develop, it may be necessary to establish an independent offshore system operator in order to take a more holistic approach to future system operation in offshore regions.
The ORES highlights that energy islands, hybrid projects and offshore hydrogen production are not adequately taken into account in the existing regulatory framework. In the staff working document published alongside the ORES, the European Commission notes that hybrid projects in particular do not fit well with current electricity network balancing and management rules, which promote cross-zonal flows of electricity. The solution tabled in the staff working document is establishing offshore bidding zones (i.e. market areas within which there is a single wholesale electricity price) in order to integrate offshore renewables into the market.
Structured cooperation between member states, transmission system operators and regulators will… be needed in the short term in each sea basin.
These offshore bidding zones will require special governance arrangements where they cross national network boundaries. The European Commission intends to assess the existing framework, including the effect on power prices and the distribution of incentives between generation and transmission, to consider whether clarification or more targeted rules are needed.
Importantly for investors in offshore renewable energy projects, the ORES highlights the need to consider whether revenue stabilisation will be needed in areas with high penetrations of renewables and weak electricity market prices. The ORES also recognises that dedicated support will continue to be needed for emerging technologies such as tidal, wave, and floating offshore wind and solar to allow appropriate scale-up and proposes to amend the state aid guidelines to allow this.
€30bn has been invested annually over the past decade in onshore and offshore grids in Europe. However, to meet the renewable energy targets envisaged by the ORES, €800bn will be required by 2050, of which two-thirds will be needed to fund the associated grid infrastructure.
Private capital will need to play a significant role. The EU taxonomy will allow investors better access to information to channel investment into sustainable economic activities. The European Investment Bank will have a role to play in de-risking offshore infrastructure. However, targeted, catalytic funding from EU sources will also be needed.
A number of funding mechanisms are envisaged in the ORES. For example, 37pc of the €672.5bn Recovery and Resilience Facility, part of the NextGenerationEU recovery plan, has been earmarked for the green transition and to support investments under the ‘Power up’ flagship initiative. This needs to be committed by 2023, and so the ORES is calling on member states to work with each other and companies to present a pipeline of mature projects for funding. Other sources of funds include the Connecting Europe Facility, which now has a new facility for cross-border renewable generation.
€800bn – Investment need for offshore infrastructure by 2050.
Member states may also contribute to offshore renewable energy deployment in other EU member states via the renewable energy financing mechanism, which comes online on 1 January 2021. Under this mechanism, member states can make financial contributions and receive a proportionate ‘statistical benefit’ from renewable energy produced by a project. The first EU-wide tender for projects is reported to be planned in 2021.
Support for new technology will be available from the InvestEU programme, Horizon Europe and the Innovation Fund. These funds might be used for the commercialisation of floating offshore wind technology or development of pre-commercial technologies such as floating PV, algae for biofuels and ocean wave and tidal energy. These funds can also be used to develop energy infrastructure such as offshore grids, flexibility, ‘power to X’, batteries and digitalisation. Funding may even be available for mature technology such as fixed foundation offshore wind turbines where improvements are needed in process optimisation and circular design.
Scaling up offshore renewable energy must be balanced with the need to preserve marine ecosystems and comply with existing EU environmental legislation and the common fisheries policy, as well as emerging policy such as the Biodiversity Strategy and the Circular Economy Action Plan. A key consideration will be safety and security to manage the risk of collision with vessels, fishing gears, military activities and/or dumped ammunitions and chemicals.
As a result, maritime spatial planning will be needed at an EU-wide level. While it is for member states to decide where and to what extent to expand offshore renewable energy in their exclusive economic zones, the ORES acknowledges that identification of the best sites and coexistence with other marine stakeholders may well be most effectively tackled at a regional level.
Cooperation in offshore renewable projects already benefits from a tapestry of initiatives covering the North Sea, the Baltic Sea, the Atlantic, the Mediterranean, the Black Sea and EU islands. These alliances and groups will be important in fostering regional cooperation. The European Commission also plans to encourage member states to integrate offshore renewable energy development into their national maritime spatial plans, in line with national energy and climate plans, by March 2021.
In the 30 years since the first wind turbine was installed in Denmark, offshore wind has achieved significant commercial success.
The ORES marks the next chapter for the development of offshore renewable energy in Europe. It identifies the challenges in developing offshore energy infrastructure that is fit for purpose to deliver the EU’s climate-neutrality target. But, more importantly, it provides a vision for member states, industry and other maritime stakeholders for the 30 years ahead.
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