The energy transition to renewables has now reached an inflection point. The Ukraine war is not only exacerbating the vast increases in global gas prices we’ve seen in early 2022, but has caused Western governments to place an even greater emphasis on energy security.
This crisis, coupled with the renewed global commitment to renewables made at COP26 in Glasgow last December, means the urgency to meet our decarbonisation targets through the rapid deployment of renewable energy generations is now more important than ever.
Wind power, and especially offshore wind, is the clear candidate to lead this effort. For one thing, it provides the opportunity to invest at scale, especially in Europe where it bypasses the constraints caused by limited land and high population density associated with onshore wind and solar.
Second, when dealing with wind power, you are dealing with established, listed corporates and Tier 1 partners such as Siemens or Ørsted, and the security and expertise that comes with them. This, plus the fact that the technology has also matured substantially, provides an attractive balance of risk and return for investors.
Finally, the myth that renewables are more expensive than fossil fuel alternatives has also been dispelled – they are the only part of the energy mix mitigating against rapidly rising inflation.
So where are the opportunities for wind?
As we look to rapidly end our reliance on the volatile fossil fuels market, Europe provides the strongest track record, with 80% of the world’s installed offshore wind.
The North Sea is a particularly good environment due to its shallow, homogenous seabed, while France and the Benelux countries, Poland, and the Baltic Sea have also been identified as geographies with excellent potential for fixed offshore wind.
The newer floating technology meanwhile has the potential to significantly boost renewable capacity on the East Coast of America.
Here in the UK, ramping up the development of floating offshore is backed by the influential Conservative Environment Network and their caucus of MPs.
It is not just Western countries either – Japan, Taiwan, South Korea and Vietnam are all rapidly expanding capacity, while China is in the process of building an extensive local-to-local market.
Concerns over fluctuating supply are being effectively mitigated too. One of the more legitimate worries about renewables in recent years is that they are intermittent and cannot be effectively stored.
This is where recent developments in green hydrogen come in – using surplus electricity supply from windy spells to power electrolysis and make dense, easily storable hydrogen fuel. The cost curve for hydrogen is coming down as these technologies are manufactured at scale, and with greater investment hydrogen will play an increasing role in integrated renewable energy systems.
The deployment of new offshore wind capacity is happening at pace and in increasingly diverse geographies. Now is the time to double these efforts, to ensure we fill the gaps in our energy supply caused by foreign aggression, to dampen the volatility of the fossil fuels market, and to combat the relentless pace of climate change.
Of all the methods to do this; renewables - and specifically the development of wind power - through PPAs and other offtake agreements can help to accelerate the build-out of a growing sector at this pivotal moment in the energy transition.
Joost Bergsma is the chief executive of Glennmont Partners from Nuveen