In a comprehensive report authored by Prof. Catherine Banet (CERRE Research Fellow/University of Oslo) and Prof. Bert Willems ( CERRE Research Fellow/ Université Catholique de Louvain), a roadmap for scaling up Offshore Wind Energy (ORE) in Europe through EU regulatory action has been unveiled.
In the wake of the energy market disruption stemming from Russia’s invasion of Ukraine, the European Commission has presented the REpowerEU Plan. This strategic initiative aims to bolster security of supply and sustainability by accelerating the roll-out of renewable energy generation. Offshore wind will be a critical pillar in this process, given the the large potential capacity and the substantial drop in costs due to continuous innovation. However, adverse market conditions and regulatory hurdles make a speedy transition difficult. The increased demand for the wind industry puts strain on the supply side, and higher interests rates, material prices and inflationary risks create “the perfect storm”, driving up costs. The report focuses on identifying the regulatory hurdles, and highlighting the actions the EU can undertake to leviate those.
The report identifies four key areas where precise EU intervention can support the scaling of offshore wind:
- Planning: The report advocates for joint planning and co-optimization of National Energy and Climate Plans and firm investment commitments, in particular for offshore wind projects. The identification of responsibilities for planning needs improvement.
- Permitting: Streamlining and expediting permitting procedures for offshore wind generation and associated infrastructure at Member State level is essential.
- Cross-border projects: Offshore assets must be closely integrated with onshore markets for efficient price formation, through the market coupling mechanism. Regulatory uncertainty for wind farm operators needs to be minimized by among others creating financial congestion insurance. National TSOs should remain responsible for planning, owning, and operating offshore networks within their exclusive economic areas. Clear cost allocation rules for hybrid assets need to create win-win situations, be guided by cost benefit studies, encompass multiple projects, allow for forward looking onshore investments, and take into account future market design.
- Mutual and local benefits: The report highlights the potential mutual benefits and local advantages in developing offshore wind projects. If the expected differences in those externalities are small across projects they should be included as prequalification requirements. In case they differ significantly, they can be included in the procurement auction, but guidance is necessary to avoid increasing transaction costs.
