What will it take to tap the green energy of the North Seas?
How do we realise the full potential of the offshore winds of the North Seas at the lowest cost as quickly as possible while ensuring reliability?
To begin with, it will require an updated approach. Until now, the buildout of offshore wind has been the result of a discussion about how much renewable energy we can afford and dependent upon national planning and the allocation of sites and subsidies.
Now that renewable energy has proven to be cheaper than fossil fuels– and with the need to drastically accelerate the green transformation to limit climate change – this approach and our focus must change. We need to change the conversation in order to identify and agree upon the principles on which future policy can be built. We suggest these four as a starting point for this new conversation:
1. Carbon pricing as a driver for investments
2. Collaboration between countries and regulators
3. Competition for full scope of projects
4. Confidence that the green transformation is possible
Better carbon pricing
Offshore wind energy is moving closer to the market prices of electricity. While this is great news for the green transformation, incentives are still needed to promote investment in renewables and to decommission fossil generation assets.
Renewable developers and financiers need long term visibility of electricity prices. This means the buildout speed and cost of offshore wind energy is affected by political factors, e.g. by the way market for energy is designed, as well as the price on CO2 emission allowances, as determined by the European Emissions Trading Scheme (ETS). Factors that can increase stability and long-term visibility for investors include:
Increased EU carbon reduction target
To have a fair chance of limiting the global temperature increase to less than 1.5 degrees by 2100, European carbon emissions needs to be reduced by more than 95% by 2050.
Given the cost reductions in renewable energy, increasing the European carbon reduction target to at least a 45% reduction by 2030 compared to 1990 is a realistic option. This could be translated politically into a higher price on carbon emissions, which in turn would increase confidence in building subsidy-free renewable energy and make it more likely to achieve net-carbon neutrality by 2050.