Great Efforts Required To Achieve EU Countries’ National Offshore Wind Energy Targets

25 January 2023 10:18 RaboResearch

The current EU offshore wind energy target for 2030 is 60 GW. However, the individual member states are more ambitious, with the sum of their national offshore wind energy targets currently at 107 GW, by far outweighing the EU target.

Woman observing an offshore windfarm at Redcar in the northeast of England.

To accelerate the EU’s energy transition and independence from Russian fossil fuels, the European Commission presented its REPowerEU Plan, aiming at 510 gigawatts (GW) of installed capacity of on- and offshore wind energy by 2030. The current EU offshore wind energy target for 2030 is 60 GW, which is expected to be revised upward following the increased wind energy ambition presented in the REPowerEU plan and the revision of Renewable Energy Directive (RED III). Cumulatively, the EU-27 countries have installed about 204 GW of wind energy capacity as of the end of 2022, of which 8% (16.1 GW) is offshore wind energy. More than 88% (14.2 GW) of that offshore wind capacity has been installed since 2013. Germany has been the largest investor with 7.6 GW of installed capacity, followed by the Netherlands with 3 GW of installed capacity (see Figure 1).

Figure 1: Offshore wind capacity installed in the EU-27 between 2013 and 2022

Source: BloombergNEF, Rabobank 2023

The sum of the EU member states’ national offshore wind energy targets for 2030 is about 107 GW, by far outweighing the EU’s current 60 GW target.[1] If the 107 GW target is realized, it will equal 21% of the EU’s 510 GW wind energy target for 2030, as indicated in the REPowerEU Plan. To reach the 107 GW target, almost 91 GW of additional offshore wind capacity needs to be installed across the EU by 2030. This amounts to 11.4 GW of new capacity installed per year, on average, over the next eight years – a challenging rate to achieve. Market sources indicate that the average yearly installation will fall behind what is required (see Table 1).

Considering known projects in the pipeline for 2023 to 2030, data from BloombergNEF suggests that EU countries will collectively have installed around 69 GW of offshore wind capacity (new and existing combined) by 2030. Recently, it was announced that Ørsted has concrete plans to build 18 GW of offshore wind capacity, of which 1.5 GW is planned to be operational by 2029. Considering this project, the forecasts would increase to 70.5 GW of capacity achieved by 2030. In January, in line with the 70.5 GW calculation, another market intelligence source, 4C Offshore, a TGS Company, revised its forecast for EU countries’ joint installed capacity by 2030 to 68.5 GW.

To reach the expected 70.5 GW of capacity, collective installation between 2023 and 2030 would amount to about 54.4 GW, representing a 6.8 GW average aggregate installation rate per year in the EU. This annual installation rate would be 4.6 GW less than the yearly requirement to reach the sum of the member states’ national targets. At the current estimated speed of investments, such a gap would result in about 36.5 GW of total missed installation capacity, putting the 107 GW capacity out of reach of the EU countries. These forecasts flag quite a big gap to be bridged between current plans and expected higher future targets.

It should be noted that if these forecasts are accurate, the sum of the member states’ installed capacity in 2030 would exceed the EU’s current 60 GW target by around 10.5 GW. However, given that the EU is expected to increase its renewables target for 2030 from 40% today to up to 45% in the ongoing revision of the Renewable Energy Directive (RED III), the additional offshore wind volumes pledged by member states will be much needed to realize any new EU offshore wind energy target.

[1]. Estimates derived from BloombergNEF and 4C Offshore, a TGS Company. WindEurope estimates that this number could even be 110 GW.

Table 1: Gap between the forecast installation and the sum of the EU member states’ offshore wind energy national targets by 2030

*Note: All units are in rounded GW **Note: BloombergNEF data plus Ørsted’s recently announced 1.5 GW Swedish project Source: BloombergNEF, Rabobank 2023

National Targets Out of Reach for Most EU Countries

Germany leads the EU countries in generating offshore wind power, having 7.6 GW of installed capacity. Germany has also set the most ambitious national target among the EU-27 countries, at 30 GW to be installed by 2030. Based on this forecast, only Belgium (5.8 GW), Lithuania (0.7 GW), Poland (5.9 GW), and Italy (0.9 GW) are currently expected to reach their targets by 2030, while the remaining EU countries are at risk of falling behind their national targets. Portugal and the Netherlands, in particular, seem to have the largest gaps to bridge.

Estonia, Latvia, Finland, and Sweden have not yet set national targets. However, these countries do have projects in their pipelines. Estonia and Latvia are co-developing 700 MW to 1,000 MW of capacity in the ELWIND project. Vattenfall, in a joint venture with Metsähallitus, plans to develop and operate Finland’s first major offshore wind farm with a 1.3 GW capacity to be operated around (but most likely after) 2030. Ørsted also just announced plans to build 1.5 GW of offshore wind generation for Sweden to be operational by 2029.

Regional Collaboration to Boost Europe’s Offshore Wind Capacity

The North Sea and the Baltic Sea are the main marine zones in which most European offshore wind turbines are located and are planned to be installed by 2030. As Europe’s renewable powerhouse, the North Sea hosts 75% of the region’s offshore wind turbines. This percentage is expected to increase to 80% over the next five years.

The EU-27 and other European countries bordering the North Sea and the Baltic Sea are working together to maximize the potential for the rapid expansion of offshore wind energy in Europe. The regional collaboration, based on non-binding agreements, will mainly focus on co-developing offshore grids, interconnectors, offshore hybrid assets, joint projects, and system integration that reduce mismatches between supply and demand and allow cross-border trading of electricity between the countries.

In September 2022, the nine North Sea countries that form the North Seas Energy Cooperation (NSEC)[2] agreed to increase North Sea offshore capacity to 76 GW by 2030, with the longer-term aim to reach 260 GW of capacity by 2050. The countries’ planned contributions include:

· The contributions of Ireland, Germany, Denmark to the NSEC aggregate target equal their national offshore wind energy targets.

· The Netherlands has indicated it will contribute 16 GW of capacity to the NSEC target. The Dutch national target for 2030 is 21 GW.

· Belgium has planned to contribute 6 GW of capacity, 0.2 GW more than its current national target.

· France has indicated a contribution of a 4.4 GW, putting France’s national target at 18 GW for 2035.

· Norway, as a non-EU country, Norway has not set a 2030 target, but plans to contribute 30 GW of installed offshore wind capacity under the NSEC by 2040.

· Sweden has not yet set a specific target for the NSEC plan, and Luxembourg, which has no national maritime space, does not participate through specific offshore wind energy target contributions, but will contribute through the EU Renewable Energy Financing Mechanism.

If the aggregate target is reached, the EU parties of the NSEC could provide 15% of the EU’s 510 GW wind energy target by 2030. When Brexit took effect, the UK withdrew from the NSEC. Recently, however, the UK signed a Memorandum of Understanding (covering the time until June 30, 2026) with NSEC members and the European Commission to re-engage with the NSEC. The UK still needs to set a target.

In addition to the North Sea collaboration, eight countries[3] around the Baltic Sea signed the Marienborg Declaration last August to cooperate and facilitate the build-out of 19.6 GW of offshore wind capacity by 2030. The current installed capacity in the Baltic Sea is 2.8 GW, which means a sevenfold increase of capacity is needed to reach this 2030 target. National plans in the declaration include:

· Denmark has planned to contribute 6.3 GW of capacity to the Baltic Sea aggregate target. Combined, Denmark’s announced contribution to the Baltic Sea and NSEC targets would be 19.2 GW, while its current national target for 2030 is 12.9 GW. To reach its contribution to both regional targets, Denmark needs to scale up its national planned offshore wind capacity installations.

· Lithuania has also indicated a 1.4 GW commitment to the Baltic Sea target, twice its current national target for 2030.

· Germany’s participation in the Baltic Sea cooperation would add 3.8 GW of capacity that, if combined with its input to the NSEC target, would be 3.8 GW higher than its national target.

· Poland’s involvement equals its national target.

· Estonia, Sweden, Latvia, and Finland have not set national targets but announced contributions of 1 GW, 0.7 GW, 0.4 GW, and 0.07 GW, respectively, to the Baltic Sea cooperation.

[2] NSEC countries are Belgium, Ireland, Denmark, France, Germany, Luxembourg, the Netherlands, Norway and Sweden

[3] Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, and Sweden

If the Baltic Sea’s offshore wind energy cooperation succeeds, it would achieve 4% of the EU’s wind target of 510 GW for 2030.

Combined, the Baltic Sea cooperation and the NSEC’s targets would provide 19% of the capacity needed to reach the EU’s 510 GW wind energy target by 2030, if fully realized. Figure 2 shows the parties’ announced contributions to the 2030 targets of both coalitions.

Figure 2: Country-level contributions to the aggregate offshore wind capacity targets of the NSEC and the Baltic Sea cooperation by 2030

*Note: Norway has not set a target for 2030 within the NSEC plan but plans to contribute 30 GW of installed offshore wind capacity by 2040. Source: WindEurope, Rabobank 2023

Last week, the EU member states agreed on new, ambitious long-term goals for expanding offshore renewable energy in the EU’s five sea basins: Northern Seas offshore grids, Baltic Energy Market Interconnection Plan offshore grids, South and West offshore grids, Atlantic offshore grids, South and East offshore grids. The sum of the announced goals represents an overall ambition to install 111 GW of offshore renewable energy capacity by 2030 – nearly twice as much as the EU’s 60 GW offshore wind energy target. The 111 GW ambition is expected to be achieved via the deployment of various offshore renewable energy technologies including floating photovoltaics, tidal and wave technologies, with offshore wind turbines as the predominant technology. The non-binding agreements build on regional cooperation tools established by the revised Trans-European Networks for Energy (TEN-E) regulation.

EU Member States Must Fill a 36.5 GW Capacity Gap to Achieve Their Combined National Targets

The EU is expected to meet its current offshore wind energy target of 60 GW capacity by 2030. In the near future, however, the EU will likely increase its offshore wind energy target in line with its aim to increase its renewables target for 2030 from 40% today to up to 45%. The new offshore renewable energy ambitions announced last week might also result in a higher concrete target specifically for offshore wind at a later stage. The sum of the EU member states’ national offshore wind energy targets (107 GW by 2030) already outweighs the EU’s current target, but projects currently in the pipeline would likely fall short of reaching national capacity ambitions.

EU countries had already installed 16.1 GW of offshore wind capacity by the end of 2022. This means that if they want to deliver 107 GW of capacity, countries will need to scale up installation almost sevenfold by the end of the decade. BloombergNEF data indicates that most EU countries are at risk of falling behind their national targets for 2030 with a cumulative gap that could be as high as 36.5 GW. To bridge this gap, the EU and its member states will need to overcome a number of challenges and bottlenecks in the offshore wind supply chain – for example, slow permitting and the lack of standardized wind turbine sizing – and make major investments in infrastructure.

These challenges will be discussed in a forthcoming article on offshore wind power generation in Europe. It should be noted, though, that various coastal countries seem to be trying to address this gap, as evidenced by the two coalitions aimed at jointly reaching the EU’s combined targets. It is too early to tell how successful these efforts will be in bringing installed capacity by 2030 closer to the EU’s wind energy ambitions, but it is worth noting that WindEurope told Rabobank that it expects that all the national targets will be met. It is also relevant to note that we have seen more activities from the member states and project developers recently, especially in the Nordic countries.