EU Energy Ministers pledge co-operation on offshore wind: Leading energy companies put a figure on cost reductions
In Luxembourg yesterday Energy Ministers from 10 European Union (EU) member states signed a Memorandum of Understanding (MoU) to enhance their cooperation on renewable energy, in particular on offshore wind. It came on the same day as 11 leading energy companies publicly declared that offshore wind can reduce costs to 80 euros/MWh ($91/MWh).
The Ministers of Germany, Netherlands, Luxembourg, Norway, Sweden, France, Denmark, Ireland, Belgium and the U.K. signed the agreement, which aims to reduce the costs and accelerate the deployment of wind power at sea. It outlines a number of actions to help reduce costs in offshore wind, including cooperation on spatial planning, grids, finance, technical standards and regulation such as health and safety rules.
The MoU also highlights the need to coordinate the timing of offshore wind tenders and explore options for joint support schemes. "The agreement signed in Luxembourg today is a major step forward to fully realize the potential of offshore wind in Europe," Giles Dickson, CEO of WindEurope, said.
WindEurope estimates onshore wind energy in particular as cheaper than any other renewable energy and says that it is competitive with conventional power generation sources such as coal and gas.
According to the European Commission, the levelized cost of electricity (LCOE) of onshore wind ranges from 52 to 110 euros/MWh. When taking into consideration pollution costs and subsidies, which are not included in LCOE estimations, onshore wind is the cheapest generation source in Europe, says WindEurope on its website. But offshore wind is on a steady cost reduction pathway, it says, with expected costs of 100 euros/MWh by 2020 and 85 to 79 euros/MWh by 2030 depending on the projects pipeline.
Yesterday energy companies weighed in with good news on the potential projects. Senior management executives, including CEOs, from all of the following companies signed a declaration on costs falling to 80 euros/MWh ($91/MWh).
The companies that signed are: RWE Innogy of RWE (ETR:RWE), E.ON Climate & Renewables of E.ON SE (ETR:EOAN), Statoil (NYSE:STO), Siemens Wind Power – Siemens AG (FRA:SIE), Vattenfall AB, Adwen, EDP (ELI:EDP), Eneco Energie of Eneceo Holding NV, GE Renewable of GE (NYSE:GE), Iberdrola Renovables of Iberdrola SA (BME:IBE) and MHI Vestas of Vestas Wind Systems AS (CPH:VWS).
One other company– Dong Energy A/S – stated that it could not sign because:
“On 26 May 2016, DONG Energy published an offering circular in connection with the initial public offering and potential listing of its shares on Nasdaq Copenhagen A/S. As of the date hereof, the offering is not completed. Due to applicable rules and regulations, DONG Energy is restricted from making certain public statements until after completion of the offering and, therefore, DONG Energy is not a co-signatory of this statement.”
But the businesses who have already signed seem confident. “With the right build out and regulatory framework, the industry is confident that it can achieve cost levels below 80 euros/MWh for projects reaching final investment decision in 2025, including the costs of connecting to the grid. This means offshore wind will be fully competitive with new conventional power generation within a decade. The offshore wind industry is on track to achieve its cost reduction ambitions and will be an essential technology in Europe’s energy security and de-carbonization objectives,” says the statement from those mentioned here.
“As an industry, the joint and individual actions taken across the value chain will deliver lasting and tangible advancements that will establish offshore wind as an indispensable source of power generation,” it adds.
But it also cautions: “We recognize our responsibility to deliver industry and consumers with sustainable, secure and affordable energy. We look to policymakers to match this level of ambition.”
“This commitment is only possible with a stable, long-term market for renewables in Europe,” says the statement. “If the offshore industry is to realize its cost reduction goals, a strong pipeline of projects is needed to scale up offshore deployment and identify efficiencies in the supply chain. Following a record year for installations in 2015, a serious question mark remains over the post 2020 environment for offshore wind,” it adds.
Which only goes to show that, whatever the achievements, commitment to renewables by both business and policymakers in tandem is still very much a ‘carrot and stick’ game.
Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website http://www.dinamedland.com