European energy giants chase Norway’s offshore offering

Author: Anne Petersen

2021/06/18

LONDON (ICIS)--Norway’s decision to open two areas in the North Sea for an estimated 4.5GW of offshore capacity has attracted strong interest from major energy companies.

JOINED FORCES

Announcements from 12 applicants have poured in over the past three weeks.

These include:

- Anglo-Dutch major Shell announced on Thursday that it will work with Norwegian utilities Lyse and BKK to seek permission to develop both of the newly opened areas, Sørlige Nordsjø II and Utsira Nord.

While Sørlige Nordsjø II is suitable for fixed-bottom turbines, Utsira Nord will need floating turbines and the Norwegian government has signalled that subsidies will be available for Utsira Nord developments to encourage floating wind farm technology.

- Energy giant BP announced Monday that it was making a joint bid with Norwegian state-owned utility Statkraft and Norwegian developer Aker Offshore Wind for a wind farm in Sørlige Nordsjø II. This area should accommodate up to 3GW of capacity.

- Danish energy company Orsted announced on 9 June the establishment of a partnership with Norwegian companies Fred, Olsen Renewables and Hafslund Eco to apply for licenses in both areas.

- Belgian developer ParkWind and Norwegian marine supply chain manager NorSea said in early June that they have established an alliance to apply in the upcoming license round,

- German utility RWE and Norwegian state-owned Equinor announced in late May that they had signed a collaboration agreement with Norwegian renewable developer Hydro REIN to jointly prepare and submit an application to develop in the Sørlige Nordsjø II area.

The strong interest is explained by “good wind resources, stable political and economic framework, established practice for offshore energy production with experienced and locally anchored participants, and prospects for support for the development of floating offshore wind,” according to Eivind Helsoe from Energy Norway, an industry organisation representing 300 Norwegian energy companies.

ONLY THE BEGINNING

The rush to participate in the tender demonstrates the importance of having an offshore presence and production for energy companies. And the chances to develop offshore in the North Sea have been few and far between in the last year.

Danish 0.8-1GW Thor Offshore Wind Farm has pre-qualified six applicants for the tender, among them Vattenfall, Orsted, an RWE consortium and a consortium of Total Renewables and Iberdrola Renewables. A decision on the winner is expected by the end of this year.

The UK has toned down its tenders for offshore developments and the last German offshore tender was three years ago.

In contrast, the Norwegian government is promising that these two areas are only the beginning and expects to open more areas for offshore development within the next two years as part of its new plans to establish offshore wind as a future export commodity for Norway.

Helsoe warns against putting too much emphasis on the opening of any more areas: “There is room for a lot of offshore wind in the already announced areas. Given that grid development and access to markets are crucial for profitability, enough space in existing areas will probably be more interesting than in future areas in the short term.”

MORE EXPORT

The Norwegian focus on offshore comes as the country is getting ready to export to the UK through the new 1.4GW North Sea Cable.

Already, Norway exports to Denmark, Germany, the Netherlands and Sweden and the new cable is expected to add €1-3/MWh to the Norwegian power prices annually, according to research by the Norwegian Water Resources and Energy Directorate.

With 4.5GW of added capacity from the coming offshore build-out, the output from the new wind farms should more than compensate for the new cable.

However, Norway is facing increasing domestic demand as the energy transition to electricity over oil for heating and petrol for cars is well under way, and the country was in power deficit for a few weeks over the winter.

ICIS analysis estimates that without the newly opened offshore capacity, Norway’s energy surplus would be lower by 5TWh a year by 2030 compared with 2021, and the surplus in 2030 would be 13% of the yearly demand rather than the 18% it is now.