The momentum gained by the transition to clean energy is proving many doubters wrong, even in one of the world’s pioneers in renewable energy, Denmark. “When we first shared this idea in 2017, people called it Never-Never Island,” recalls Hanne Storm Edlefsen, vice president of Danish grid operator Energinet. “They said it was too early and would be too difficult, technologically.”
Just four years later, the project once considered as whimsical as Peter Pan’s imaginary, faraway land is becoming reality. In February, Denmark’s government gave the green light to build the world’s first energy island, an artificial landmass located 80km off the Danish coast that upends the current approach to offshore wind.
With a capacity of 10GW, it will dwarf the world’s existing and planned offshore wind projects, which seldom exceed an installed capacity of 1GW. Until now, offshore wind farms have been constructed as individual units that connect directly to a single country. The island in the North Sea, however, will collect power from up to 600 wind turbines scattered across an area the size of 64 football pitches, and transmit it to Denmark, Germany, Belgium and the Netherlands. The island itself will feature a harbour, operation and maintenance facilities, accommodation and, further down the line, a ‘power-to-X’ plant to generate electrofuels such as green hydrogen or ammonia.
Exactly 30 years after building the world’s first offshore wind farm, Denmark is once again taking the industry to the next level. “This isn’t just development along the continuum — this is really a pathbreaker,” says Thomas Dalsgaard, a partner at Copenhagen Infrastructure Partners (CIP) who is advising on the project.
Advanced real-estate investment
The island, which will be run as a majority state-owned public–private partnership (PPP), is still in its infancy. The private partner will be selected in 2023 and power generation will begin in 2030. Even then, it will be 3GW flowing solely to Denmark, with more capacity and pipelines to other countries added over time. But the business case is compelling.
Offshore wind is one of the most expensive forms of energy and cables account for some 15% of total expenditure. Bundling power from multiple wind farms and sending it to shore via a single transmission cable cuts costs substantially. Mr Dalsgaard says it is these savings, plus economies of scale and the benefits of a closer maintenance hub, that “brings this vision to life”.
The other major selling point is a reduction in intermittence. Excess power can be converted into electrofuels or stored in utility-scale batteries onsite, and dispatched when wind power is low. These processes, neither of which are feasible at conventional wind farms, make wind a more reliable source of electricity and eliminate the risk of prices dropping below zero when supply markedly outstrips demand.
“From an investor perspective, [negative pricing] is one of the main challenges of offshore wind,” says Torben Möger Pedersen, chief executive of PensionDanmark, which pioneered pension funds’ investment in the sector a decade ago. “Until now, we have thought of each wind farm as an isolated asset. But now we are thinking about offshore wind as part of a system by using these surrounding technologies.”
PensionDanmark is part of a consortium called VindØ, which is entering the race to become the government’s PPP partner. The entire venture is tipped to cost DKr210bn ($33bn), making it Denmark’s largest ever construction project, but Mr Pedersen downplays the magnitude of the task. The PPP does not extend to the wind farms themselves, but rather covers the construction and management of the artificial island. He estimates that this will cost around €1.2bn and describes it as “an advanced real-estate investment” whereby VindØ leases out space to the government and private sector participants who will run the island’s various operations. “There are certain risks associated with the construction phase, but once the island is up and running, it is a medium-to-low risk asset,” he says.
With the PPP limited to the island itself, the project’s risks and rewards can be shared out. Maria Nilaus Tarp, director of Invest in Denmark, assures there is space for international names. “Denmark is a leader in offshore wind, but foreign-owned companies are an integral and essential part of that ecosystem,” she says, noting that Sweden’s Vattenfall and Germany’s RWE have leading roles in Danish offshore wind.
First in a product series
As revolutionary as the project is, it could mark the beginning of an even more ambitious era for offshore wind. The Never-Never Island touted by Energinet back in 2017 sprung from its work with a consortium of European utilities called the North Sea Wind Power Hub (NSWPH). For five years, it has been conducting studies and building political consensus to establish a network of 15 interconnected energy islands across the North Sea, which transmit power to surrounding countries, including the UK. Tim Meyerjürgens, chief operating officer of Dutch grid operator Tennet, says Denmark’s island is “the first concrete project in line with the NSWPH programme”, and that the consortium is already planning another 12GW island to be operational by 2035.
This network of islands is envisaged to also act as an offshore power grid, with countries buying and selling electricity through the cables. “We’ve done some studies to compare point-to-point connections with a grid, and we think there is a cost benefit of at least 30%,” says Mr Meyerjürgens. These savings will be vital to meeting the European Commission’s target of growing the bloc’s offshore wind capacity from 25GW to 300GW by 2050. Mr Meyerjürgens observes that each country working alone to connect each wind farm to shore means “we will never get there in time”. CIP’s Mr Dalsgaard agrees the current approach “is going to be way too expensive in terms of cable costs”.
The benefits of energy islands and offshore grids are not limited to the North Sea. The VindØ consortium has already identified up to 12 potential energy hubs in Asia, noting its strong winds, many natural islands and aggressive goal to reach 600GW of offshore wind by 2050. Indeed, the lofty climate targets set by governments around the world require more efficient ways to integrate offshore wind into energy systems and Denmark’s planned island is the best bet to-date. As Mr Pedersen notes: “This isn’t an isolated project. It’s the beginning of a product series.”
This article first appeared in the April/May print edition of fDi Intelligence. View a digital edition of the magazine here.