Picture: Europower
The Norwegian government's decision to only provide support for one area on Utsira Nord is a setback for Norway's investment in floating offshore wind. It also casts doubt on whether there will be funding for new projects in Norway in the long term. Not least, it is a blow for the Government's own export initiative Hele Norge Eksporterer (All of Norway exports), where floating offshore wind is at the top of the list.
Strictly speaking, Norway does not need power from floating offshore wind. We have opportunities to limit our power consumption, including stopping electrification of the oil and gas sector and phasing out power-intensive industry. The latter will likely happen by itself when electricity prices increase because of a negative power balance. We can invest in other and cheaper technologies such as onshore wind power or hydropower. But none of this seems to be desired politically.
In large parts of the rest of the world, the picture looks different. Japan has an electricity mix of 30% coal, 30% gas, 20% hydro and solar power, and 10% nuclear power (down from about 40% before the Fukushima accident). They are now in the process of developing offshore wind, and due to few areas with shallow water they will quickly be forced to switch to floating technologies. Similarly, Europe will be completely dependent on floating offshore wind to meet its goals of renewable energy production, as there are not enough areas with an acceptable level of conflict for solar power, onshore wind, and bottom-fixed offshore wind.
Over the past year, we have seen a number of investments by Japanese companies into European floating offshore wind projects and companies, including Odfjell Oceanwind and our GoliatVIND project. Floating offshore wind in Norway is as much about global technology exports as it is about national power supply. The knowledge and experience of Norwegian companies is attractive, and creating a domestic market and showcase for Norwegian players was also the starting point for developing Utsira Nord. This seems to have been forgotten along the way.
The recent award of a contract for difference equivalent to NOK 2.7/kWh to the Green Volt project in the UK shows that larger projects have not resulted in significantly lower costs as many have claimed. This is because floating offshore wind is still immature. The world has not yet seen the turbine sizes that will be used on Green Volt and Utsira Nord. Immaturity entails risk for everyone involved, be it the developer, suppliers, sources of capital or insurance companies. This, in turn, means increased costs. Unfortunately, larger projects mean even greater risk. More projects are needed to drive costs down, and this journey is made most cost-effective by practicing first on smaller projects before we scale.
So what can and should we do in Norway?
Strengthen funding and framework conditions
The Energy Partnership launched by the Minister of Energy this spring was intended to obtain financing for offshore wind investments from the petroleum industry, in exchange for the industry itself gaining access to the power they need to electrify the sector. This financing can be combined with oil tax to get even more wind power for the money.
Divide Utsira Nord into smaller projects
In addition to the disadvantages that only one project entails, the "one win" strategy has also unfortunately proven risky. Many “winning projects” are never realized or are greatly delayed. It often ends with renegotiation of conditions, where the developer is in a good position against authorities that have made themselves dependent on single or few individual projects. In practice, the winner is given an option to play Monopoly against the state.
The solution is more players and real competition. If there is only NOK 35 billion available, then it should be spread over at least 2 smaller projects of 250 MW as done in France. Flexibility should be baked into the support competition so that developers can choose not to develop the entire area in the first phase, as in Celtic Sea based on learning from Scotwind. Support for only one large project will reduce the appetite to spend money on maturing projects before support competition, which in itself increases the risk of speculative bids with limited technical and commercial maturity.
Build out the projects that are already ready to go
There are currently four grid-connected floating offshore wind projects in Norway, all of which have matured longer than Utsira Nord: GoliatVIND of 75MW (5x15MW), as well as three individual licences at METCentre outside Karmøy. ENOVA has the toolbox ready to help these projects get off the ground, and these projects will undoubtedly make a positive contribution to the much-needed de-risking of technology and the development of supply chains, with associated cost reductions.
With such a strategy, there is still hope that Norway can take a global leadership in floating offshore wind.
