Forget Utsira Nord

COMMENT: Instead of spending tens of billions in state aid on large prestige projects, the government should think much smaller and smarter.

The development of fixed offshore wind on the Southern North Sea II will cost the state up to NOK 23 billion in subsidies. This project is considered “cheap” in offshore wind development on the Norwegian continental shelf. In any case, in relation to floating offshore wind at Utsira Nord, which is the next large area the government plans to allocate.

What a project may need in state support is a demanding calculation exercise, and there is a lot of uncertainty surrounding it. But those who have tried, including Europower, have concluded that Utsira Nord may need state aid of around NOK 80 billion.

Little to earn

Bottom-fast offshore wind is a well-known technology, and there is little new to learn for Norwegian suppliers and builders. For a large proportion of the components or technology, Norwegian suppliers have neither sufficient expertise nor the opportunity to be involved. So the chances are high that it is international suppliers who will profit the most from the development of Sørlige North Sea II.

Floating offshore wind, on the other hand, is an immature technology and an area where Norwegian suppliers may have a chance to test and develop this technology.

But the way the government is doing this is completely the opposite of what was planned when the offshore wind investment was launched.

When the Solberg government and the then oil and energy minister Tina Bru (H) opened the door for the development of offshore wind on the Norwegian continental shelf in 2020, the plan was primarily that it would create a domestic market to ensure that the supplier industry could develop new technology.

Don’t need that much

The Støre government has instead, after they discovered that the large plans for the use of power will lead to a power deficit in Norway, turned this into a project with the aim of getting us more power.

The goal is to develop around 1,500 turbines on the Norwegian continental shelf by 2040.

But Norway does not really need offshore wind on such a large scale as the government is proposing, if the goal is not to export the power. And Prime Minister Jonas Gahr Støre (Ap) and the government have said at the launch of these plans that it is, because the Norwegian power grid will not be able to handle 30 GW of power from offshore wind.

“Not everything can land in Norway. We don’t have a system designed for that, and we don’t need that much power,” said Prime Minister Jonas Gahr Støre to Teknisk Ukeblad.

On the other hand, there is great interest in floating offshore wind in other parts of the world. Like for example in Japan. If Norwegian companies get the opportunity to develop the technology in smaller facilities here at home, this could be an opportunity for Norwegian supplier companies globally.

Smaller projects

In March, the news came that Enova would give NOK 2 billion in support to the GoliatWind project in the Barents Sea. Here, Bergen-based Odfjell Oceanwind, Haugesund-based Source Galileo and Japanese Kansai Electric Power Company will build five giant turbines that will be connected to Vår Energi’s Goliat field.

The Goliat platform is already supplied with power from shore, and the transformer station in Hammerfest can also be used to transfer produced power from the offshore wind farm. It will be able to supply power to the platform and to shore.

This is a so-called demonstration plant that will test out new technology. If it receives a license from the Ministry of Energy by August, this could be in operation as early as 2027.

Equinor’s Hywind Tampen received Enova support of NOK 2.3 billion in 2019. It consists of 11 turbines, and production started in 2022. The offshore wind plant can cover around 35 percent of the annual power demand on the five platforms Snorre A and B and Gullfaks A, B and C, according to Equinor.

But Enova’s rationale for supporting this project was not emissions cuts or more power production. It was to “bring floating offshore wind one step closer to commercialisation”. First and foremost, this is a test environment for the further development of floating offshore wind.

“If we are to succeed with our offshore wind investment in a demanding time in terms of costs, it is important to bring forward many different types of projects and gain as much experience as possible in this technology, for which Norway can be a leading provider internationally,” said Energy Minister Terje Aasland to E24 in March.

But why not just focus on these projects, and drop the entire development of Utsira Nord?

Big and late

In March, the government announced that the announcement of Utsira Nord will not take place until 2025. The reason is uncertainty surrounding the regulations for state aid, and that the government did not clarify this earlier with ESA.

Instead of splashing out with tens of billions in state aid for a single project that is in no way guaranteed to succeed, and which most likely will never be economically profitable, we need several smaller projects where the companies see business opportunities instead of the opportunity to rake into subsidies from the state.

Companies that receive start-up aid from Enova do not ask for huge sums in state aid. They use their own risk capital to develop new technology.

If the state had given the same amount of state aid to projects such as GoliatVind and Hywind Tampen, they could have received almost 10 demonstration projects for the same price as Sørlige Nordsjø II. With the estimates for state aid in Utsira Nord, they would be able to get almost 40 such projects.

It is generally not a good idea to bet on just one horse or put all your eggs in one basket. It is smarter to spread the risk.

It’s probably not quite as exciting as going out on a boat, talking about huge offshore wind projects that we don’t really need. But it is most likely a much better use of the community’s resources and a better way to support the Norwegian supplier industry and Norwegian offshore wind companies.

Commentator Hilde Øvrebekk