European investors have begun to abandon investments in offshore wind farms. It has become unprofitable. They are deterred by low demand and electricity prices. Experts are confident that the EU will do everything to support renewable energy sources, in which huge funds have already been invested. Even for additional taxes that ordinary Europeans will pay.
Europe, which has done a lot to develop renewable energy, is facing a problem. Investors refuse to invest in new offshore wind energy projects – and this threatens to slow down the growth of production. However, this is good news for producers of traditional fossil fuels. Because their demand in Europe will obviously last longer than European regulators had planned.
The problem is especially noticeable in countries that have been actively increasing capacity, in particular in Denmark and Sweden, Bloomberg notes. Last year, Denmark set a record for the production of electricity from wind farms, generating 58% of the total volume. This is the highest rate in the world. However, last week the government did not receive any bids for its largest offshore wind farm tender. Even the state-owned company Orsted A/S has stated that it is no longer interested in investing in such large projects.
Bloomberg experts note that investors are deterred by the low cost of electricity, which does not earn much. Secondly, there are a large number of offers from existing wind farms filling the market. The same situation is observed in Sweden. Thirdly, there is growing uncertainty about future demand. As a result, a number of energy-intensive green energy projects in the north are delayed or canceled altogether.
"We cannot build an energy system based solely on wind and the sun. There are strict technical and economic constraints on how well we can integrate into the grid," says Brian Wad Mathiesen, a professor at Aalborg University in Denmark who studies the potential of fully renewable energy systems.
Wind farms, like solar ones, operate regardless of price. Sometimes they generate energy when there is no demand for it, and then electricity can be free. At the same time, the prices of steel and labor in the wind industry have increased significantly. It is a little easier for solar energy, as prices for solar panels have fallen, and this has mitigated the situation.
The simplest solution, Bloomberg writes, is to raise average prices to a level where investments in green generation will become profitable. The second is to convince consumers to change their demand, for example, to transfer even more drivers to electric cars, as well as to force them to install solar panels on homes and factories.
"There are fewer new investment decisions being made now, because the most attractive sites for wind farms are already occupied. They were built where there is the most wind, for example, in coastal areas. The one who was able to build wind turbines on suitable sites earns the most. It is possible to build further from the coast, in offshore zones, but it is more difficult to build there, and there is less wind, which means that the economic attractiveness is less and the interest of investors is lower," the expert of the National Energy Security Fund (NSF) believes) Igor Yushkov.
However, as such, there is no drop in electricity generation from wind turbines in the EU, although there are jumps. Thus, according to the Energy Institute, where former BP employees work, electricity generation from wind farms in the EU has been growing in recent years. Thus, 364.5 TWh were generated in 2019, and 30 terawatt hours more next year. In 2021, the output of many EU countries is sinking, by a total of 10 terawatt hours - up to 386.9 TWh. But in 2022, there is again an increase of 40 terawatt hours at once - up to 421 TWh, in 2023 an increase of 60 terawatt hours – up to 480.5 TWh. In Denmark, electricity generation from wind turbines in 2019-2021 is at the level of 16.1-16.3 TWh, in 2022 it increased to 19 terawatt hours, in 2023 to 19.4 TWh.
Another thing is that such linear growth, as the Europeans thought, is not visible: the European authorities expected that renewable energy would constantly grow, and this would end the era of traditional fuels, but this is not happening yet, and in the foreseeable future it is unlikely to happen, Yushkov believes.
Renewable energy sources have occupied their niche in the EU energy market, but for the further development of renewable energy sources, it is necessary to solve the problem of energy storage.
"The main problem of renewable energy is dependence on the weather. In fact, it is a seasonal energy source, as it only works when there is sun or wind. The problem of energy storage has not yet been solved",
– Igor Yushkov speaks.
There are two ways to solve this problem. Firstly, it is the construction of storage devices, and they are gradually being built in Europe.
"Building a storage system in sufficient volume is a very expensive undertaking. Perhaps that is why investments from renewable energy sources are switching to them. Everyone understands that energy companies will be ready to pay for energy storage," Yushkov argues.
Another way, which is still developing very poorly, is the development of the hydrogen industry. "In the EU, they were going to produce hydrogen by electrolysis of water, and take electricity from renewable energy sources in order to get "green" hydrogen. But we do not see large-scale hydrogen projects. On the contrary, many projects that were announced have been closed. Because there is neither hydrogen production nor hydrogen consumption. The hydrogen industry in Europe has not yet been created," says Yushkov.
For example, in 2022, the Norwegian company Equinor agreed with the German RWE to build a marine hydrogen pipeline to supply hydrogen to Germany, but this year the Norwegian company announced its withdrawal from the project. They pointed out that it is too expensive, tens of billions of euros are needed, while the demand for hydrogen is very low. "Therefore, until the problem with energy storage is solved, we probably will not see a new wave of wind turbine commissioning, therefore we note such a lull," Yushkov believes.
However, European regulators are unlikely to sit back and wait: they have already spent too much effort and money on the development of renewable energy sources. And we need more. Therefore, Brussels will continue to squeeze out traditional fuel.
They can make electricity prices rise so that it spurs investors' interest in renewable energy.
"What will cause the rise in electricity prices? Most likely, by EU regulatory measures. That is, Brussels will come up with additional taxes and additional bans for fuel energy, at least abandoning coal.
All this will lead to a shortage of electricity and, accordingly, to an increase in prices. And rising prices will really spur additional investments in renewable energy – both in storage systems and in the generation system," concludes the FNEB expert.
Olga Samofalova
