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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Norway Just Triggered An Offshore Wind Energy Boom

Norway proposes to open two new areas in the North Sea with the potential to hold installed capacity of up to 3.5 gigawatts (GW) of offshore wind, as Western Europe’s largest oil producer aims to use its offshore oil and gas expertise to boost the wind power exports of Norwegian companies.

Before the end of the summer, Norway’s Ministry of Petroleum and Energy will propose the opening of an area, Utsira Nord, off its west coast in the North Sea, for offshore wind development, the ministry said on Tuesday. Utsira Nord could hold installed offshore wind turbines with a combined capacity of between 500 MW and 1.5 GW.

The ministry will also request input and comments on the possibility to open a second area, Sørlige Nordsjø II (Southern North Sea II), which could hold offshore wind capacity of between 1 GW and 2 GW.

Southern North Sea II is close to Norway’s maritime border with Denmark and could potentially connect offshore wind power generation from the area with Europe’s power grid, Norwegian Petroleum Minister Kjell-Børge Freiberg said.

Utsira Nord is suitable for floating wind power installation and generation, the ministry says, noting that the Norwegian government presented a floating offshore wind strategy in 2018.

Offshore wind power could offer a lot of opportunities for Norway’s companies as firms can use their experience in the oil and gas sector, and in the shipping, shipbuilding, and renewable energy industries to develop offshore wind farms, minister Freiberg said. 

Wind power costs have significantly dropped and are likely to drop further, Freiberg said.

“The development of wind power in Norway creates opportunities for suppliers and investors, from both Norway and other countries,” the minister said in September last year, noting that the government welcomes further development of wind power in the country. Related: Why The Oklahoma Shale Boom Isn’t Taking Off

Norway doesn’t plan any new subsidies for renewable energy as it believes that the development of energy sources alternative to fossil fuels should be market-based, Freiberg said.

The previous petroleum minister, Terje Søviknes, discussed last summer the potential construction of the first offshore floating wind farms in Norwegian waters with companies and other stakeholders.  

It’s not yet clear when Norway could have the two new potential offshore wind development areas in the North Sea operational, according to the current minister. The government is at the stage of talking to stakeholders potentially interested in its proposal to open more areas in the North Sea to offshore wind development, Freiberg said.

Wind power production accounted for 1.9 percent of Norway’s electricity generation in 2017, according to the latest available figures from the statistics office, Statistics Norway. While this percentage may look small compared to the share of wind power in other European countries, Norway prides itself on generating 96 percent of its electricity from hydropower, while thermal power generation accounted for just 2.3 percent of the 2017 electricity fuel mix, down by 0.6 percentage points from 2016. Wind power generation, on the other hand, jumped by 34.9 percent annually in 2017, the statistics showed.

Norway has the prerequisites to boost its wind power generation and supply chain and to potentially export offshore wind power to Europe. On the one hand, the government has the policies and plans in place to open areas in the North Sea to offshore wind development. On the other hand, Norwegian companies, especially state-held Equinor, have the offshore expertise from decades of oil and gas operations on the Norwegian Continental Shelf (NCS).

Equinor, which dropped last year the name Statoil to reflect its ambition to be associated with an energy—rather than oil—company, is building a material position in offshore wind, with projects in the UK, Germany, and the United States. Equinor’s Hywind Scotland offshore Peterhead in Scotland features floating wind turbines and is the world’s first fully operational floating wind farm. Related: Is This The Best Dividend Stock In Oil & Gas?

Yet, although costs for offshore wind are falling, they are still relatively high compared to other renewable energy options such as onshore wind and solar PV.

As turbine costs drop, interconnection and balancing the system in offshore wind power generation take up a higher share of overall installation costs, according to the International Energy Agency (IEA).

The trend to move offshore wind turbines in deeper waters adds to installation costs, but innovation in turbine technology, increased experience with project development, and economies of scale have helped to push down costs, the International Renewable Energy Agency (IRENA) said in a report last month.

The market for offshore wind is still relatively thin and there is wide variation in country-specific declines in the levelized cost of electricity (LCOE) since 2010, IRENA said.

By Tsvetana Paraskova for Oilprice.com

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