Boom time in the Baltic

As a continent, Europe leads the world in offshore wind development. Farms have gone from demonstrator status to vast utility-scale deployments in little more than a decade.

The EU’s goal of 20% renewable generation by 2020 has provided the main impetus, while a concerted effort by the wind industry to develop technology and deployment techniques has made that rapid progress possible.

WindEurope, the wind industry’s public voice, is now pushing to maintain that momentum by lobbying for tougher 2030 thresholds − 253GW of onshore and 70GW of offshore wind are the targets, totalling 30% of generation by 2030. The North Sea remains the most attractive offshore development area with almost 48GW due to be produced there by 2030.

However, within Europe, adoption rates vary considerably. While the UK, Denmark, the Netherlands and Germany have pioneered offshore technology and driven down costs, others have yet to put a single turbine in the water. National wind trade bodies are now working hard to change that. Despite huge onshore capacity and ambitious offshore plans, France is still on the starting line as legal challenges stall its planned utility-scale deployments in the English Channel and Atlantic. Its first farm will be a floating one, with three 8MW turbines on tensionleg platforms at the Provence Grand Large pilot project.

Water depth, a cash-strapped economy and low wind resources make offshore a tough nut to crack for Spain and Italy too. The tiny 30MW Beleolico project will be Italy’s only offshore farm when it’s commissioned in 2018.

Spotlight on the Baltic

Instead, it’s the Baltic that’s commanding attention. With excellent wind speeds and shallow coastal waters, there’s potential for almost 40GW. 9GW is the target by 2030 compared with just 1.5GW today. Signed on 28 September 2017 in Tallinn, Estonia, the Baltic Sea Declaration promotes ‘regional cooperation in spatial planning, grid development, capacity planning and support schemes’. The Baltic Sea Offshore Forum (BaSOF) comprising of Denmark, Estonia, Finland, Latvia, Germany, Lithuania, Poland and Sweden has been working towards this for years.

“The Baltic Sea will become the second-largest market by 2030,” says Andrew Canning, WindEurope’s press and communications manager. “We are trying to mirror the North Sea Declaration. It’s all about working together to unlock the potential that there is in the Baltic Sea.”

The first step is for governments to draft national energy climate plans that specify the offshore wind volumes they want to deploy post-2020. A clear longterm outlook will help create confidence and an attractive market for project developers and investors. Now working under the banner of WindEurope’s Baltic Sea Task Force, the eight aforementioned national trade associations are pushing politicians into action. For Germany and Denmark however, little pressure is needed.

Responsible for the largest share of today’s installed Baltic wind farms, they run respectively second and fourth globally in installed offshore capacity. Denmark in particular is the offshore exemplar, building Baltic fields like Rødsand I and II, Anholt and the groundbreaking Middelgrunden in 2000.

“Denmark’s offshore wind success is due to many factors such as the onestop- shop approach that the Danish Energy Agency (DEA) developed and that other countries have since adopted,” says Danish Wind Industry Association CEO Jan Hylleberg. “An early and far-sighted energy policy has led to many of today’s leading offshore wind companies being based in Denmark. Focusing on developing competitive test sites has also helped this.”

Already generating 40% of its electricity through wind, Denmark plans to meet all of its energy needs with renewable electricity by 2050. That contrasts with Estonia, the smallest Baltic state, which has zero installed offshore capacity today.

However, it has serious ambitions to lead the rest of the pack – WindEurope estimates the country could generate up to 60% of its electricity from wind by 2030. The Estonian Wind Power Association wants to see around 1,700MW up and running by 2020. But though Estonia is currently planning two large offshore projects – Liivi Laht (960MW) and Nelja Energia’s Loode- Eesti Meretuulepark (700–1,100MW) – thus far there’s been little political will to build offshore capacity because existing onshore wind, CHP and biomass helped Estonia hit its 2020 targets ahead of schedule. The EU’s upcoming RED 2 directive will be critical in shaping its and other Baltic states’ offshore ambitions.

“If they are not strict on reaching the 2020 targets then nothing will happen to reach the 2030 ones,” says Tuuliki Kasonen, general manager at the Estonian Wind Power Association. “There needs to be sanctions for countries that don’t make them.”

Estonia did confirm its Energy Development Plan this October: 50% of domestic electricity and 80% of heat from renewables by 2030. However, there is scant money to spare for subsidies. The existing support scheme is capped at 600GW/h annually and swallowed up by current capacity.

Instead, EU cooperation mechanisms set up under the original Renewable Energy Directive (RED 1) will help it fund development. ‘Statistical transfers’ allow renewable energy to be deducted from one country’s progress towards its target and added to another’s. In late October, Estonia signed the first ever such agreement with Luxembourg, which is currently less than half way towards its 2020 target.

“By developing offshore wind, we can help other countries that are lagging behind with theirs,” says Kasonen. “In return, we will get financing for more projects.”

Lithuania, Latvia and Poland

Estonia’s progress looks scorchingly fast compared with its neighbours. Though it has long since hit its 2020 target and is also about to ink a power transfer deal with Luxembourg, Lithuania’s already-permitted projects are mired in a constantly changing regulatory nightmare.

Lithuania’s Association of Wind Energy Producers predicts nothing will happen until at least 2020, when legislation is finally amended. Political infighting and a focus on developing gas-fired generation are the reasons.

Latvia is in a similar situation. Its two existing projects are still undeveloped and there’s little pressure to change. Latvia was already close to its 40% target by the end of 2015. Poland is also yet to see its first offshore farm running. However, it has two large projects – Polenergia’s Baltic Srodkowy II and III at 600MW each – that already have environmental permits and grid connections. Other projects, totalling over 9GW, are at earlier stages but there’s still much work to do to address permitting and tendering processes, which currently place a lot of risk on investors.

“The Polish Government is deciding on its future energy mix out to 2035,” says Janusz Gajowiecki, president of the Polish Wind Energy Association (PWEA). “We need to withdraw a large number of coal power plants over the next decade, and the government has said offshore wind will play an important part.”

The potential economic benefits are a big reason for that. Unlike most other Baltic countries, Poland is already seeing substantial income from wind-related supply chain investment. The country manufactures crew transfer vessels, generators, cabling, towers and jackets. KK Wind Solutions builds control systems in Szczecin, Euros has a blade factory in Zory-Warszowice and LM Wind produces large blades in Goleniów.

“We already produce the heart and brains of turbines, and many other parts,” says Gajowiecki. “Next we need developers like DONG and EON to come here and help us with their knowledge.”

Finland and Sweden

Up in the north, Finland opened its first offshore wind farm in September: the 42MW Tahkoluoto project. The country has a well-developed regulatory structure supported by the Finnish feedin- tariff (€83.5/MW/h for 12 years) as well as a €20-million demonstration subsidy. Using gravity base foundations, it’s the first farm built to withstand Arctic weather and pack ice. The average temperature in the closest city of Pori is just 4.2°C and it’s below freezing five months of the year.

In neighbouring Sweden, there was a burst of offshore activity up to 2013, but progress has stalled since then. Many current projects are permitted but they will all expire by the early 2020s due to lack of development.

“Onshore has been cheap in relation to offshore, so it couldn’t compete,” says Charlotte Unger Larson, CEO of Swedish Wind Energy Association (SWEA). “Real offshore development hasn’t really started.”

At 54% renewable power production, the country leads the way in Europe. This is laudable, but again there’s little pressure to invest in new assets. However, a big decision taken this spring changes everything; namely, 100% renewable electricity production by 2040. Old nuclear power stations in the south of the country will be shut down and, already fully developed, new hydro can’t begin to fill the gap. New offshore wind is therefore needed in the south, although free grid connections look like the extent of the subsidies on offer.

“We’ll need to replace about 60TW/h of nuclear and the politicians are realising that offshore has to come to support that,” says Larson. “But offshore prices are going down so rapidly, I don’t think our government will advocate a new support scheme.”

‘Meshing’ the European grid

Though there is some potential to reuse nuclear connections, coping with new offshore generation in the south will require grid investment – a common theme around the Baltic. With 80% of land-based power produced in the north, new lines are also needed to transmit it to the more densely populated south. The Baltic Declaration incorporates the goals of the EU’s Baltic Energy Market Interconnection Plan (BEMIP), which aims to build a ‘mesh’ between allied countries. These interconnectors enable power sharing and common electricity markets. BEMIP has already inspired numerous links including LitPol (500MW) between Lithuania and Poland, the submarine HVDC Estlink (1GW) connections between Estonia and Finland, and the 700MW Nordbalt between Sweden and Lithuania.

“If you are installing cables for offshore wind, why not use them for a double function?” says Kasonen. “Then, they can transmit power to land and to other countries too.”

A further ambition for countries like Poland and Estonia is to cut their networks’ ties to Russia. Their grids were originally built in the time of the Soviet Union and power generation is still synchronised with the Russian network.

So, like offshore wind itself, there will be multiple benefits from a Baltic mesh, but it will take years more lobbying to push national governments to take action and invest. It won’t be easy, but by working together with the EU, the wind industry associations should see 9GW – or more – flowing into Baltic grids by 2030.

The falling cost of offshore wind generation

It seems that with every new set of auction results, the levelised cost of energy (LCOE) for offshore wind achieves new record lows. In the results from the UK’s latest CfD round, the winning bids were 50% less than those of just five years ago.

In November 2016, Vattenfall won the right to build and operate the 600MW Kriegers Flak farm with a record low bid of €50/MWh. The recent Danish subsidy agreement actually saw the industry asking for less support than it was finally awarded, while the first zerosubsidy contracts were awarded in Germany in early 2017.

The economic benefits of European wind

Europe’s wind power industry may attract €351 billion of investment by 2030 if countries adopt ambitious reforms and targets for their energy systems in the coming year, according to a September 2017 report by WindEurope.

In 2018, the EU will publish the exact form of the ‘Clean Energy for All Europeans’ package it will mandate under the second Renewable Energy Directive. By upping the overall 2030 renewable target to 35% instead of the current 27%, WindEurope predicts the wind industry could create 716,000 new jobs over the next 12 years.