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Denmark

Denmark

Europe Offshore: Last Word - Offshore a lever to go carbon neutral

Today, 85% of Dong Energy's production comes from fossil fuels and 15% comes from carbon-neutral sources.

The company has embarked on a strategy to turn these numbers around and to achieve 85% carbon-neutral energy by 2040. We call the strategy 85/15.

One of the current key levers for implementing the strategy is offshore wind energy. In order to enhance the competitiveness of offshore wind, we are constantly looking to optimise our wind farm projects. Furthermore, a stable support scheme and an expanded offshore grid are essential to secure increased growth within the area of offshore wind energy - as is a high price on carbon emissions. Dong Energy has installed half of all existing offshore wind turbines globally and has an extensive pipeline of projects under development or construction. To give an example: off the coast of west Denmark we are completing construction of the world's largest offshore wind farm, Horns Rev II.

Our large offshore portfolio motivates us to look for new ways to streamline and industrialise the construction of offshore wind projects. In March this year, Dong Energy and Siemens Energy Sector signed an agreement for the supply of up to 500 offshore wind turbines. Before signing this deal, we purchased wind turbines on an individual project basis. Constant new technology and bottlenecks at wind turbine producers was a threat to the timely completion of a project. When constructing an offshore wind farm, producers of wind turbines, producers of foundations, suppliers of installation vessels, the grid operator and the wind farm operator all have to come together in a closely aligned time table. Delays in one part of the process are easily transposed to other parts of the same process. The Siemens agreement has reduced that risk.

A similar move to industrialise the market was the purchase of A2SEA, the market leading supplier of installation vessels. The purchase of A2SEA provides us with in-house knowledge and competence to optimise the complex offshore installation process and furthermore, to work more effectively with new installation and operation and maintenance concepts. In addition, we have increased flexibility by owning our own vessels. This again facilitates lower costs and faster commissioning of wind farms.

A premium to pay

Despite such efforts to bring down costs, support schemes will be an important prerequisite for many years to come. In north-west Europe the population generally supports onshore wind - only not in their backyard. The popular opposition forces energy companies to look to the sea for politically acceptable wind sites.

But going offshore comes at a price. Project development and construction offshore, as well as operation and maintenance, are far more difficult, and therefore more costly, than for onshore. A stable and predictable support scheme is the extra premium that society must be prepared to pay in order to move wind energy offshore, thereby rendering wind energy an economically attractive business case.

As wind energy moves offshore, so must the grid. In order to absorb more offshore wind energy the offshore grid must be expanded. This is especially true for the North Sea, situated between countries with ambitious offshore wind energy plans. A well developed offshore grid could distribute wind energy to the major consumption hubs of north-west Europe. This would provide the large consumer base that is necessary to absorb the massive energy production when wind speeds are high. A more integrated market will pave the way for more wind energy.

Similarly, smart grids can create the basis for more wind energy. A smart grid permits energy companies to communicate with the individual production and consumption units. This enables electric vehicles to know to recharge their batteries when wind energy is abundant and cheap. This again will pave the way for more wind energy.

To maintain supplies of energy and reduce emissions, offshore wind will play a key role in north-west Europe. As an integrated part of our strategy, Dong Energy is working to reduce offshore's costs. Politicians must complement the efforts of the industry. Firstly, by stabilising support schemes and ensuring the development of an offshore grid. Secondly, by agreeing on an ambitious climate policy that could translate into a high price on carbon emissions.

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