European Nations Back 'World's Largest Energy Hub'

Written by Martin Lynch, European News Editor for IIR News Intelligence (Sugar Land, Texas)

Summary

A North Sea energy hub based around offshore wind and clean hydrogen production has received the backing of 10 European nations, including France, Germany and the U.K..

A North Sea Energy Hub

European leaders and energy ministers have committed to cooperating on the creation of what they called the world's largest energy hub in the North Sea based around the rollout of more affordable and secure offshore wind and hydrogen. 

The Goals

North Sea countries have agreed to deliver 100 gigawatts (GW) of offshore wind power through joint clean‑energy projects by 2040. The governments have committed to commissioning at least 10 GW per year, and up to 15 GW in ideal conditions, between 2031 and 2040. These will include new 'offshore wind hybrid assets' - windfarms at sea that are directly connected to more than one country through interconnectors. At the North Sea Summit held in Hamburg, a series of declarations were signed setting out specific actions and timelines that will de-risk investments to connect electricity grids across borders in the region and strengthen the energy system 'against physical, cyber or hybrid attacks.' 

Who's Involved?

The Hamburg Declaration was signed by Germany, France, Belgium, Iceland, Ireland, Netherlands, Luxembourg, Denmark, Norway and the U.K.. Alongside the main declaration, others were signed by more than 100 key industry players and transmission systems operators (TSOs) promising to accelerate cost-cutting, more employment and power interconnectors between nations. The outcome was welcomed by the European Commission (EC) which said it came against the backdrop of a changing geopolitical landscape, high energy costs and severe impact of climate change. Commissioner for Energy and Housing Dan Jørgensen said: "In these turbulent geopolitical times, Europe must stand strong and united and choose independence. That means doubling down on clean, safe, home-grown energy. It means building on our natural strengths, and few are greater than the North Sea and its vast offshore wind potential. It means strengthening our interconnections so that affordable energy can flow freely across our continent. And it means securing our industrial leadership while guaranteeing our security. This is Europe's path to true independence."

The Commitments

The following commitments were signed at the summit:

• Leaders' Declaration on building a North Seas power hub for a resilient and competitive Europe.
• Joint Offshore Wind Investment Pact for the North Seas by region's leaders, industry and TSOs to strengthen energy security, competitiveness and decarbonisation through electricity and hydrogen networks and invest in jobs and skills in the sector.
• Ministerial Declaration on closer coordination to accelerate offshore wind and hydrogen projects, including through better cross-border planning and financing.

What The Pacts Actually Mean

This breaks down into a series of solid commitments from all parties. In the Investment Pact, governments have pledged to provide planning and investment security and de-risk offshore wind projects, as well as committing to set a rollout of 100 GW out to 2040. It will include the provision of two-sided Contracts for Difference (CfDs) as the standard for offshore wind auction design. The wind industry has pledged to cut the costs of offshore wind by 30% towards 2040 compared to 2025 levels. It expects this to mobilize 1 trillion euro (US$1.18 trillion) of economic activity for Europe, creating 91,000 additional jobs, and investing 9.5 billion euro (US$11.3 billion) in the value chain, including manufacturing, port infrastructure and vessels. TSOs will identify 20 GW of 'economically promising' cross-border projects by 2027 for deployment in the 2030s, along with a workable cost-sharing structure. 

The State of European Offshore Wind

Today, Europe has 37 GW of operational offshore capacity (22 GW in the European Union (EU) and 15 GW in the U.K.) and is the second largest offshore wind player after China, which has 52 GW of offshore capacity. Offshore wind globally has doubled in capacity since 2021, with China leapfrogging Europe in just four years to become by far the biggest market. The EU has a stated goal of having 84 GW of installed offshore wind capacity by 2030 and 300 GW by 2050. Today, it is lagging well behind its own targets. It should be noted that at the original banding together of the Hamburg Declaration signees in 2023, they had an overly ambitious aim to roll out 120 GW of offshore wind by 2030. For additional information, see May 3, 2023, article - EU Nations Promise to Double Offshore Wind Targets.

According to Europe's wind industry representative body, WindEurope, which signed an industry-wide declaration of investment support at Hamburg: "Europe needs much more offshore wind. But Europe is not building enough offshore wind to meet its energy goals. It was meant to have 120 GW by 2030. But we only have 37 GW today and at best we are likely to reach just 70 GW by 2030. This shortfall is due to inflation, uncertain electrification rates across Europe, and high-risk auction frameworks that impact the commercial viability of offshore projects." 

Key Takeaways

• 10 European nations and the wider wind industry have committed to creating the world's largest energy hub in the North Sea.
• They will deliver 100 gigawatts (GW) of offshore wind power through joint clean‑energy projects by 2040. 
• Today, Europe has 37 GW of offshore wind capacity and will struggle to hit 70 GW by 2030--far short of its 84-GW target. 

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