Prospects for Offshore Wind Development in Central Europe: How to Boost Offshore Energy in the Baltic, Black and Adriatic Seas? CEEP POLICY PAPER SERIES

CEEP Policy Paper series

Prospects for offshore wind development in Central Europe: How to boost offshore energy in the Baltic, Black and Adriatic seas? CEEP POLICY PAPER SERIES:

Prospects for Offshore Wind Development in Central Europe: How to boost offshore energy in the Baltic, Black and Adriatic seas? January, 2021

Central Europe Energy Partners, AISBL

Rue Froissart 123–133, 1040 Brussels Phone: +32 2 880 72 97 E-mail: [email protected] Transparency Register No. 87738563745-94

www.ceep.be

LinkedIn: www.linkedin.com/company/central-europe-energy-partners

Twiter: @CEEP_energy

Youtube: https://www.youtube.com/channel/UC03W8UPQ83171m6l203aglA

2 Table of Contents

Introduction 4

Offshore wind in Central Europe: current state of affairs 6

Analysis of National Energy and Climate Plans (NECPs) 18 and other documents

Conclusions and recommendations 28

Facts and Figures 31

3 Introduction

Offshore renewable energy constitutes an im- this with 40 GW of ocean energy, together with portant element of the ongoing shift from fossil other types of emerging technologies. It will be fuels to more sustainable forms of energy pro- based on the vast potential across all of Europe’s duction, in order to reduce CO2 emissions and sea basins. fight global climate change. Offshore wind energy installations are growing at a rate of nearly Its main goals aim to create new opportuni- 20% annually worldwide and are recognised as ties for industry, green jobs generation, and a key element in achieving emission reduction strengthen the EU’s global leadership in off- targets. The EU Long Term Climate Strategy shore energy technologies, as well as to ensure has indicated wind energy as the leading power the protection of the natural environment, bio- production technology by 2050, with projec- diversity and fisheries. It is worth noting that tions of up to 450 GW of offshore wind capacity the strategy also aims to promote the scale-up installed. of offshore energy capacity, cross-border cooperation between states on long term planning The announcements of the European Commis- and that deployment will be encouraged by sion concerning the increase of the greenhouse the Commission. Nearly EUR 800 billion will gas reduction target from 40% to at least 55% be needed between 2020 and 2050 to meet the by 2030, compared to the levels in 1990, can be proposed objectives based on the Commissions’ an important trigger of its development in the estimations. To help generate the required in- EU. With increasing efficiency and falling investment, the Commission will provide a clear vestment prices, offshore wind energy may turn and supportive legal framework, help mobilise out to be an appropriate means to achieve the all relevant funds and ensure a strengthened increased climate goals. supply chain1.

In order to ensure that marine renewable en- It is worth emphasising that 67% of wind energy contributes to the EU’s ambitious energy produced in Europe comes from 5 coun- ergy and climate goals, the European Com- tries (Germany, Spain, Sweden, Denmark, UK). mission has prepared the EU Strategy on Meanwhile, Central European countries, while Offshore Renewable Energy which has been not being leaders in wind farm deployment, released in November 2020. The strategy pro- have installed important capacity in recent years: poses to increase EU’s (without UK) offshore Poland (6 GW) ranks 7th among EU countries wind capacity from 12 GW to at least 60 GW in terms of total installed wind power capacity by 2030, and to 300 GW by 2050 to help meet and significant wind installations are also in Ro- the goal of climate neutrality within this time mania (3 GW). The remaining countries of the frame. The Commission aimed to complement region rank lower with their installed capacity

1 Boosting Offshore Renewable Energy for a Climate Neutral Europe. 2020. https://ec.europa.eu/commission/ presscorner/detail/en/ip_20_2096

4 below 1 GW: Bulgaria (691MW), Croatia (652 In drafting this analysis we wanted to find the MW), Lithuania (548 MW), Estonia (320 MW) answers to several questions: Firstly, the di- and Latvia (66 MW)2. Due to the presented agnosis of the wind potential of sea basins in potential, the indicated countries have already question. Secondly, an indication of region- have some experience and knowledge of the al offshore projects and potential cross-bor- wind farm sector and these competences may der links that may be developed in the ana- well prove useful in the development of offshore lysed countries and finally, identification of wind energy. the current state of offshore development in the field of planning and constructing. More- The offshore market in Europe shows a constant over, one of the partial goals is to recognise upward trend, with the percentage of new in- the role of offshore wind energy in the NECP stallations connected to the grid in 2019 being and in achieving the European Green Deal. 24% with a historical record of 3.6 GW of new capacity. Total capacity of European (including Highlighting elements related to the policy and UK offshore wind farms) is 22.072 MW (110 regulation framework for offshore wind is an- offshore wind farms), which is generated by other goal of the analysis. Support schemes for 5.047 grid-connected wind turbines located in offshore wind development in the form of case 12 states3). Five countries remain the leaders studies is indicated as another element of the (UK - 45%, Germany - 34%, Denmark - 8%, paper, together with financial challenges for de- Belgium - 7%, the Netherlands - 5%), which velopment of offshore wind in Central Europe. have 99% of the installed capacity across the continent. The dynamic development of the The structure of the paper consists of two main industry is noticeable, and the average size of sections and conclusions. The first section refers wind farms in construction were doubled over to the current state of offshore wind in Central a period of one decade. Europe, including but not limited to: offshore wind potential, ongoing projects and plans (if At the same time, countries in Central European any), existing political and legal frameworks, as regions such as Poland, Estonia, Lithuania, Lat- well as challenges of offshore wind farms. The via, Romania, Croatia and Bulgaria, which are second section pertains to an analysis of nation- the subject of this study, do not have offshore al energy and climate plans in order to identify wind farms in operation at the moment, but the the targets, policies and measures of offshore preparation for their construction has begun, wind farms, estimated cost of necessary invest- albeit at different stages of development4. ments and national strategies to mobilise capital, including use of the EU instruments and The purpose of this study is to examine current cross-border links. state and possible prospects of offshore wind development in Central Europe. The reference area is limited to the Baltic Sea (in the basin of which 10% of energy obtained from offshore wind farms in Europe is currently produced), Black Sea, as well as the Adriatic Sea and selected coastal states: Poland, Lithuania, Latvia, Es- tonia, Romania, Bulgaria and Croatia.

2 Wind Energy in Europe in 2019 – Trends and statistics. WindEurope. 2019. 3 Offshore wind in Europe. Key trends and statistics 2019. WindEurope. 2019. 4 Wind Energy in Europe in 2019 – Trends and statistics. WindEurope. 2019.

5 Offshore wind in Central Europe: current state of affairs

1.1. Offshore wind in the European Union:state of play

The total number of offshore turbines connected In addition, because of more stable wind re- to the grid in EU countries is 5.047. The North sources and the depletion of close to shore lo- Sea remains the largest location, gathering 77% cations, wind farms are being situated further of the total European capacity (figure 1). At the offshore (with the average distance to shore of end of 2019, the average rated capacity of in- 59 km). The farthest wind farms from shore in stalled turbines was 1 MW larger compared to Europe produce energy from a distance of over the previous year and reached a capacity of 7.8 100 km (Hornsea in the UK, Hohe See and Alba- MW. Another observed trend shows that the size tros in Germany) and the wind farms currently of wind farms almost doubled in the last decade under construction reflect this increasing trend, (from 313 MW in 2010 to 621 MW in 2019). namely deeper and further from the coast.

Figure 1. Annual and cumulative offshore wind installations

Source: Offshore Wind in Europe - Key Trends and Statistics 2019. WindEurope 2019

6 Of note is that floating installations are signifi- capacity as bottom-fixed wind farms. France is cantly increasing, showing the potential of such the only country providing auctions for floating technology and first demonstration projects are wind in the NECP and will launch three auc- already in operation in Sweden, Portugal and tions (250 MW each with the target price from Norway. Turbine sizes reached almost the same 110 to 120 Euro/MWh) till 20225.

Figure 2. Cumulative installed capacity by sea (MW)

Source: Offshore Wind in Europe - Key Trends and Statistics 2019. WindEurope 2019

Sea profile:Baltic

The location of the wind farms in the Baltic The average annual wind speed in this area, at Sea offers cost reduction due to the smaller an altitude of 100 meters, ranges from 9 m/s to depths and the shorter distance from them to 9.75 m/s (map 1). Based on WindEurope sce- the shore. Moreover, the wind conditions of the narios, the capacity of wind offshore installa- Baltic are characterised by more stable (though tions in the Baltic Sea is forecast to be 85 GW by weaker) winds compared to the North Sea6. 2050. According to the European Commission,

5 Offshore Wind in Europe - Key Trends and Statistics 2019. WindEurope. 2019. 6 Maritime Activities in the Baltic Sea. HELCOM Maritime Assessment. 2018. 7 Study on Baltic offshore wind energy cooperation under BEMIP. European Commission. 2019. https://www. ea-energianalyse.dk/wp-content/uploads/2020/02/1811_rap.pdf, pp. 34 7 the energy potential of the Baltic Sea is es- after the North Sea. The Baltic’s cumulative po- timated at 93.5 GW7 (differences resulting tential capacity, with a generation of 325 TWh/ from the calculation methodology used). As year (93 GW), could cover around 30% of the such, the Baltic Sea could become the sec- total energy consumption of Baltic countries in ond largest wind energy production area 2016.

Map 1. Baltic Sea wind potential

Source: Global Wind Atlas, https://globalwindatlas.info

The Baltic Sea region could play the key role as an example, the wind power generation po- in developing different wind technologies tential is estimated to be at least 10 to 12 GW, and creating the energy supply chain. How- and the generation potential is 50 TWh per ever, one should remember that offshore en- year. This represents about one-third of Po- ergy should be transported to the onshore land’s annual electricity demand (electricity locations and thus the grid enhancements in consumption in 2019 reached 169 TWh)9. Fur- the region should follow the installations of thermore, according to estimates of the Polish the farms. Also, the interconnection capaci- Wind Energy Association, in 2050 Poland may ty improvement could be an important aspect have 28 GW of offshore wind farms, thus pro- of the development of electricity market of ducing up to 60% of the expected annual elec- Central and Eastern Europe8. Taking Poland tricity demand10.

7 Study on Baltic offshore wind energy cooperation under BEMIP. European Commission. 2019. https://www. ea-energianalyse.dk/wp-content/uploads/2020/02/1811_rap.pdf, pp. 34 8 Boosting offshore wind energy in the Baltic Sea. WindEurope. 2019. 9 Raport 2019 KSE. Polskie Sieci Elektroenergetyczne. 2020. www.pse.pl. 10 Vision for the Baltic Sea. Vision for Poland. PWEA. 8 Map 2. Potential offshore locations and interconnections in the Baltic sea

Source: Baltic Integrid final report

In summary, the shallow waters of the Bal- offshore wind installations. Current plans in- tic Sea, characterised by low salinity and good clude the construction of offshore wind farms wind properties, as well as close locations to in many locations in all countries of the sea ba- the shore, are conducive to the construction of sin, including few hybrid projects.

9 Sea profile:Black

Based on the World Bank Group’s estimations, could diversify the regional energy portfolio are the Black Sea wind power resource could reach the western sectors of the Black Sea, belonging a level of 435 GW11. This enclosed basin is the to Romania and Bulgaria12. The wind potential third biggest sea in Europe (after the Medi- of the maritime areas close to the Bulgarian and terranean and the North Sea). The Black Sea Romanian coastlines, using a scale of annual coastline is about 3400 km in total, with the average wind speed at 100 meters, ranges from bathymetry characterised by a narrow shelf 6.50 m/s to 7.75 m/s (map 3). However, specific except for the north-west area. Long term ob- grid efficiency issues in delivering energy from servations confirm that the most suitable areas an area highly concentrated in energy produc- for implementing the offshore wind farms that tion have been identified for Romania.

Map 3. Black Sea wind potential

Source: Global Wind Atlas, https://globalwindatlas.info

11 Offshore Wind Technical Potential in the Black Sea. World Bank Group. 2020. 12 Onea F., Rusu E., Evaluation of the Wind Energy Resources in the Black Sea Area. Conference Paper. 2012.

10 Sea profile:Adriatic

The theoretical offshore wind potential of Croa- Adriatic Sea offshore wind farm is affected by tian territorial waters is estimated to be approxi- the specific local wind conditions (the strong mately 150 TWh (primary data required further and gusty Bora wind and Scirocco). validation). The Croatian 2020 energy strategy was to install 1000 MW of wind turbines13. Additionally, numerous Croatian islands decrease wind velocity and enhance atmospheric The assessed offshore wind energy potential turbulence15 and as a result, wind potential near in seven dedicated locations was estimated at the Croatian coast varies greatly. In the windiest 2,469 MW. Strong winds are present on the areas, analysing the results of studies carried out Adriatic Sea, however, due to its semi-enclosed at an altitude of 100 meters, it reaches 6.50 m/s character and the resulting limitations on avail- to 7.75 m/s, near-shore (annual average). In the able space, there is little chance for develop- area of the aforementioned islands, the indica- ment in this area14. Croatia’s ability to develop tors reach an annual average of 5.75 m/s (map 4).

Map 4. Adriatic Sea wind potential

Source: Global Wind Atlas, https://globalwindatlas.info

13 Hadzic N., Kozmar H., Tomic M., Offshore renewable energy in the Adriatic Sea with respect to the Croatian 2020 energy strategy. Renewable and Sustainable Energy Reviews. 2014. 14 Farkas A., Degiuli N., Martic I., Assessment of Offshore Wave Energy Potential in the Croatian Part of the Adri- atic Sea and Comparison with Wind Energy Potential. Energies. MDPI. 2019. 15 Liscic B., et. al. Offshore Wind Power Plant in the Adriatic Sea: An Opportunity for the Croatian Economy. 11 Transaction on Maritime Science. 2014. The wind conditions of the Baltic Sea, Black are insignificant in terms of average values Sea and Adriatic Sea in relation to the ref- (9.40-9.38-9.25). On the other hand, there is a erence countries are presented in Table noticeable difference of up to 3 m / sec in the 1. The best wind conditions are those in average wind speed on the Adriatic coast of the Baltic Sea. There are some differenc- Croatia in relation to the coast of the Baltic Sea. es between individual locations, but they

Table 1. Wind potential in individual countries

Annual average wind speed at 100m (m/s)

Area Country Minimum value Avarage value Maximum value

Poland 9.00 9.40 9.50

Lithuania 9.25 9.38 9.50 Baltic Sea Latvia 9.25 9.38 9.50

Estonia 9.00 9.25 9.50

Bulgaria 6.25 7.00 7.50 Black Sea Romania 7.50 7.55 7.75

Adriatic Sea Croatia 5.00 6.50 7.50

Source: Own analysis, based on: Global Wind Atlas, https://globalwindatlas.info

1.2. Projects in the phase of development

Country profile: Poland

Based on the analysis of the Polish Wind Ener- locations) of development of the offshore sector gy Association, in 2050, 28 GW of capacity may are identified, namely: be installed in the Polish EEZ, which will cover - Oder Bank, with a projected market area of approx. 60% of annual demand. According to 420 km2 (with 1.8 GW of power available in the forecasts, wind farms will produce 140 TWh first stage); of electricity with the current total annual con- - Central Bank, with a projected market area of sumption of 170 TWh for electricity16. 360 km2 and a similar available power potential; - Słupsk Bank, with the greatest projected mar- In the draft of the Polish Maritime Spatial Plan, ket area of 1100 km2 and available power po- three different potential areas (geographical tential of 4.4 GW in the first stage.

16 Vision for the Baltic Sea. Vision for Poland. PSEW. 2020.

12 The projects in the Polish offshore areas are in - The Baltic Power project owned by PKN Orlen different stages of development: is at an advanced stage of development and the company has received the grid connection con- - PGE Baltica is working on three wind farm ditions. Preliminary geotechnical tests of the projects, two of which are at an advanced stage seabed have been completed. of implementation with a projected start of op- - Polenergia has two legally binding environ- erations in 2025-2026. Baltica III project has a mental decisions to build Baltic II OWF and connection agreement for maximum 1045 MW. Baltic III as well as connection agreements and Baltica II, has received a proposal of technical environmental decisions to build the trans- conditions for connections to the national grid mission infrastructure. The projects are jointly for 1489 MW. In 2019 PGE signed a preliminary developing with Norwegian Equinor (it has ac- agreement with Danish Orsted describing the quired 50% stake)17. framework for cooperation for acquiring 50% shares in Baltica II and Baltica III. Another PGE There are a number of other OWF projects project - Baltica I is at an early stage of prepa- owned by EDPR and RWE which are in the ear- rations and would not start work before 2030. ly stages of implementation (see Table 2). Table 2. Current state of implementation of offshore wind projects in Poland

Permission to Technical Area Environmental Seabed Connection Project name erect artificial conditions for (km2) approval exploration agreement islands connection

Polenergia and Equinor- MFW 128 1,56 GW NO NO 1,56 GW In progress Bałtyk I

Polenergia/ Equinor - Bałtyk II 128 2 x 1,2 GW YES YES 1,44 GW 1,2 GW Polenergia/ Equinor - Bałtyk III 128

PGE Baltica II 189 1,5 GW YES In progress 1,5 GW In progress

PGE Baltica III 131 1,0 GW YES In progress 1,5 GW 10 GW

PGE Baltica I 108 0,9 GW NO NO 0,9 GW NO

RWE Baltic Trade Invest FEW 42 0,35 GW In progress In progress 0,35 GW In progress Baltic-2

PKN Orlen - Baltic 1,2 GW In progress YES 1,2 GW In progress Power 131

EDPR - B-Wind 42 0,4 GW In progress In progress In progress NO EDPR - C-Wind 49

Grupa BALTEX - 0,8 GW NO NO NO NO Baltex-2 66

Grupa BALTEX - 1,5 GW Baltex-5 111 NO NO NO NO

Total 1261 11,41 GW 7,95 GW 2,2 GW

Source: Przyszłość Morskiej Energetyki Wiatrowej w Polsce, Raport PSEW, 2019

17 Polenergia i Equinor wspólnie zrealizują MFW Bałtyk. Polenergia. www.polenergia.pl 13 The Polish transmission system operator PSE is measures under the 10-year development plan preparing the internal network for the connec- (TYNDP) published by ENTSO-E. It is predict- tion of OWF and the necessary investments in ed that the interconnection of systems will ac- grid enhancement has been planned and some celerate the development of offshore wind tech- of the works are ongoing. It requires huge in- nology, increase the level of security of supply, vestments in Pomeranian region and actually and influence the achievement of affordable en- remodeling of the Polish power network which ergy prices and sustainable development of the was based in the stable thermal generation lo- European electricity market19. cated In the south of the country. So far offshore wind farms with a total capacity of 10.1 GW The development of wind energy in Polish mar- (5.25 GW from the Żarnowiec station area with itime areas and related investments on land, new Żarnowiec II station and 4.85 GW provid- such as the installation terminal in the port of ed by Słupsk Wierzbięcino station area together Gdynia, may become a permanent element in with Słupsk Wierzbięcino II station) were pro- building Poland’s market position in the Baltic vided for the connection18. Sea. The signed multinational agreements open the way to the wide use of Poland’s potential in In addition to internal connections, similar future projects of the Baltic states. The Port of investments in inter-state interconnectors are Gdynia has been indicated as the target location also planned to stabilise and develop the Eu- of an installation port for the needs of offshore ropean energy infrastructure based on large wind energy, with a total investment of PLN 500 volumes of electricity from offshorewind million (app. 120 million EUR). farms in the future. These are, for example,

Map 5. Potential locations in the Baltic sea

Source: Baltic InteGrid. Final report. 2019

18 Plan rozwoju w zakresie zaspokojenia obecnego i przyszłego zapotrzebowania na energię elektryczną na lata 2021-2030. PSE. Konstancin - Jeziorna, 2020. 14 19 TYNDP 2018 Regional Insight Report. ENTSO-E. 2019. Country profiles: Lithuania, Latvia, Estonia

The University of Klaipeda is conducting com- for 2023 on offshore capacity. The potential of prehensive research on the possible develop- wind farm could have a total capacity of 700 ment of offshore wind farms on the Lithuanian MW20. Baltic Sea shore. The governmental objective is to investigate the area of offshore development Estonia and Latvia signed a memorandum of to support energy transformation and develop- understanding in September 2020, to develop ment of renewables. an offshore wind farm − the first agreement of its kind in the region. Signed documents mark The port of Klaipeda, with its advantageous lo- the first step taken in the project with a cost-ef- gistical location, could become an installation fective analysis to be carried out. The promoter centre for investments in Lithuania’s offshore of the offshore wind farm construction project capabilities. Investments in port infrastructure is Eestii Energia. The infrastructure will con- in Lithuania as well as in Latvia, should be im- sist of 160 turbines with a total capacity of 1 plemented by around 2025. In the next phase, GW21. Estonia and Latvia intend to jointly con- the intention of the Lithuanian Energy Agency duct analyses to identify the best location for an is to implement the plan for a dedicated area offshore wind farm. The installation should be and conduct a strategic environmental impact completed by 2030 and is intended to produce assessment. 3.5 TWh of energy, or around 40% of the energy currently consumed by Estonia. In September 2020, the Lithuanian company Ignitis signed the cooperation agree- By 2030, Lithuania wants to have installations ment with Ocean Winds, a joint venture with a capacity of up to 700 MW, and the first between the Portuguese EDPR and the energy from offshore farms available by 2028. French company Engie. The partners intend Offshore production could cover up to 25% of to take part in an special auction planned the total energy consumed in the country22.

Country profiles: Romania and the Black Sea region

A recent study by the World Bank Group of wind energy into the energy system, has cre- showed that the technical potential for de- ated interest among investors in the region. The veloping offshore wind energy in Bulgaria Romanian energy companies Hidroelectrica and Romania alone is up to 100 GW23. Com- and Romgaz have made public statements of pared to the potential of the North Sea, this their interest to invest in offshore wind ener- is a much smaller amount, but in the region, gy technologies. Currently, the government is this may represent a huge volume of energy drafting laws regarding offshore wind energy. e.g., five times the capacity installed in Roma- The draft document proposes that the right to nia. Favourable natural conditions, which of- initiate and implement projects should be grant- fer the opportunity to introduce large amounts ed by the Ministry of the Economy, Energy

20 Ignitis Group to develop offshore wind farms with global energy leader Ocean Winds. 2020. ignitisgrupe.lt. 21 The first offshore wind farm in the Gulf of Riga, Estii Energia. 2019. www.energia.ee. 22 https://news.err.ee/1136850/estonia-and-latvia-sign-agreement-for-joint-offshore-wind-farm-plan 23 Offshore Wind Technical Potential in Romania. World Bank Group. 2020. 15 and Business Environment, by means of con- electricity production. The draft is undergoing a cessions, tender procedures or direct licenses. legislative process and, according to the timeta- The Ministry is also considering introducing ble, these actions should be finalised by the end support programs for investments in offshore of 202024.

1.3. Existing political and legal framework

It should be noted that the countries of the re- During the first phase, it is planned to sign a gion are still at the initial stage of development Contract for Difference (CfD) for 5.9 GW. In of offshore wind energy, and have not yet de- the second phase after 2025, the competitive veloped their respective legislative frameworks. auctions will be conducted. The support system Apart from Poland, only Lithuania is carrying will be financed from the existing RES fee. The out advanced work in this area. A package of act is to include a special tax on offshore wind draft laws to regulate offshore wind develop- farms, due to the fact that they are not subject to ment in the Baltic Sea was developed by the real estate tax. It obliges manufacturers to create Lithuanian Ministry of Energy and would cre- plans for the use of local materials and services ate a transparent regulatory environment in in the construction and operation process, and which to hold an offshore wind development to conduct technical dialogue with interested auction in 202325. suppliers and contractors. Producers are also required to report on the implementation of The proposed regulations in Poland are to in- this plan. The plans, reports and dialogue are troduce a two-phase model of the support sys- designed to act as a stimulus, enabling indus- tem which would enable significant accelera- tries related to the sector to prepare for cooper- tion of the investment process in terms of OWF. ation with manufacturers.

1.4. Existing challenges: financing guarantees and other challenges

One of the key conditions for the development an increase in the participation of local suppli- of offshore wind energy is the stability of the ers and contractors in the supply chain. regulatory regime, mainly the support system, which is a cornerstone of long-term develop- Further necessary elements of the development ment programs. Moreover, the support of the of offshore wind energy in the region are a spe- research and innovation system, based on fi- cial investment support system promoting the nancing research centres and the elimination of development of the industry and the simplifi- barriers (British model) should be considered cation of procedures, which significantly short- an important factor in the development of the ens the investment time and encourages entities sector. Another pillar of the system’s develop- to undertake activities in the renewable energy ment is multi constructing, which guarantees sector.

24 Romania to enact first offshore wind law. 2020. www.cms-lawnow.com. 25 Progress in development of offshore wind in Lithuania and Poland. www.ceep.be. 16 In the case of Poland, there is a need for the sus- and the main consumption sites are located in pension of a dozen administrative procedures the centre and western part of the country. Also, regarding the issuance of Sea Area Develop- changes in TSO’s approach to the integration of ment Plans. These procedures are to be resumed renewables together with developing new lines after the adoption of the Sea Area Development and flexibility options create challenges for con- Plan, which, at the latest, is to take place by the sistent exploitation of the offshore wind poten- first quarter of 2021. According to the Polish tial of the Black Sea. Wind Energy Association, the process of apply- ing for the necessary permits for the construc- The challenge for Croatia in terms of offshore tion of a wind farm in the Baltic Sea may take wind development is its tourism-based econ- up to 3-7 years. Due to the complicated nature omy and the reluctance of local communities of the proceedings for issuing the above-men- in any investments that may interfere with the tioned plans, it should be considered that these coastal landscape. Another element is the weak- permits will be granted no earlier than 2022. er wind conditions compared to the Baltic Sea. However, given the effects of the COVID 19 One of the biggest challenges identified in the pandemic on the tourism sector, the develop- area of offshore wind energy are issues related ment of offshore wind energy may become an to financing such long-term investments (25-30 industry which is looked on more favourably years). At the same time, it should be assumed to enable the country to recover from the crisis that this perspective will be extended to 50-60 caused by the reduction of tourist traffic. years when repowering (replacing generators). Offshore investments are characterized by a Elements related to the security aspects of the low level, but guaranteed and stable long-term Baltic states may affect the ambiguous position source of capital return, hence the great interest of individual governments regarding the con- in investment funds (e.g. Great Britain) or pen- struction of offshore wind farms. This is espe- sion funds (Denmark). It should be noted that cially true of the island of Saaremaa in Estonia the involvement of foreign capital increases the and its strategic location in the Baltic Sea. One financial credibility of the investment26. should bear in mind that security issues in the Baltic sea, due to the Russian naval presence in As far as the Black Sea’s offshore development is the basin, still goes beyond simple economic concerned, new wind technologies must com- calculations. pete with the oil and gas industry in this region which has been developed over decades. The adoption or creation of a suitable regulatory In addition, there is also the Russian presence framework for a meshed offshore grid should be and activity in the Black Sea region which is an considered as a greater challenge for the Baltic alternative gas transport route towards southern countries than the technical implementation. Europe for Russia. This issue applies to the Baltic There are only a few approaches and ideas as to Sea area, reflected in the Nord Stream projects. how an offshore grid could be firstly regulated and operated. Furthermore, a strong commit- The biggest challenge in the development of ment and cooperation from the Baltic States to offshore wind energy in Romania is linked to coordinate the expansion of offshore in the area the grid capacity of evacuating the energy from is required, to assure manufacturers and opera- offshore areas to the mainland. Dobrogea re- tors the certainty of support in the development gion is highly concentrated with generation of their activities. capacities such as nuclear and onshore wind

26 Forum Development Vision 2020 in Gdynia. Baltic Sea & Space Cluster. Conference materials.

17 Analysis of National Energy and Climate Plans (NECPs) and other documents

2.1. Targets, policies & measures

Country profile: Poland

Poland’s Energy Policy to 2040 (PEP 2040) as- support for offshore wind farms of 25 years28. sumes an increase in the share of renewable energy sources in all sectors and technologies. This It is worth noting that development opportu- is to be made possible primarily by the develop- nities are perceived by individual regions. The ment of photovoltaics and offshore wind farms. Invest in Pomerania report indicates the strong One of the key assumptions of the document is position of the Pomeranian Voivodeship in that offshore wind energy will be implemented terms of the potential of companies (mainly the from 2025, and the installed capacity will reach shipbuilding industry), design centres capable approximately 5.9 GW in 2030 and 8-11 GW of implementing large projects, strong research in 2040. At the same time, it is indicated that and development centres and a significant num- in order to achieve such a level of RES deploy- ber of students (7,000) in fields directly related ment, it will be necessary to develop network to the sector29. infrastructure, energy storage technologies, and to expand gas units as backup sources. One of An important initiative, based on British solu- the determinants of the introduction of offshore tions, is the inter-ministerial sectoral agree- power sources, the improvement of the reliabili- ment of July 1, 2020 concluded between, inter ty of power supply, and increasing the possibili- alia, the Ministry of State Assets, the Ministry of ty of cross-border exchange, is the expansion of Maritime and Inland Navigation, and Ministry the transmission infrastructure27. of National Defence, in the Sector Deal formula. The goal is to increase the share of the Polish The act on promoting electricity generation industry in production, supplies and services to in offshore wind farms is planned to be ad- the offshore industry by 50 percent. The agree- opted in Poland by the end of 2020 or early ment also contains significant provisions for the 2021, along with the publication of the final creation of an installation terminal with a loca- version of the Polish Energy Policy 2040. The tion in the port of Gdynia30. last version of the act indicates that in the first phase, the support would be granted through There is a positive support to launch regional administrative decisions issued by the pres- initiatives (at the voivodeship level), the aim ident of the NRA for the wind farms with a of which is to exchange experiences, promote total capacity of 5.9 GW. The support granted knowledge and connect entities from various in subsequent years, with capacity of 4-5 GW, fields such as academic and scientific centres will be determined by the formula of com- interested in the sector’s development. petitive auctions, with a maximum period of

27 Polish energy Policy till 2040 28 Ustawa o promowaniu wytwarzania energii elektrycznej w morskich farmach wiatrowych. 2020. 29 Focus on offshore wind energy in Poland and Pomerania 2020. 2020. 18 30 List intencyjny o współpracy w zakresie rozwoju morskiej energetyki wiatrowej w Polsce. Country profile: Romania

According to the Romanian 2021-2030 Inte- net wind power capacity over the next decade grated National Energy and Climate Plan, the is expected to increase steadily from 2953 MW total share of renewable energy in Romania’s in 2020 to 5255 MW in 2030. In spite of this gross final energy consumption is expected to upward trend, it is difficult to find references to reach 30.7% by 203031(fig. 3 and 4). The biggest the construction of offshore wind energy infra- impact on the development of the RES sector structure in the Romanian energy plan. At the in the local energy system is seen as the pro- moment, the country is not implementing any duction of energy from wind, geothermal, solar, infrastructure projects related to offshore wind biomass and hydro. With regard to wind ener- technology. However, the Romanian Govern- gy, according to the forecast presented in the ment has taken steps to create a law on offshore report, the indicative trajectory of the installed wind energy.

Figure 3. Indicative trajectory of the net installed capacity per source [MW]

Source: Based on: The 2021-2030 Integrated National Energy and Climate Plan, April 2020. https:// ec.europa.eu (eolian – wind).

31 The 2021-2030 Integrated National Energy and Climate Plan.

19 Figure 4. Evolution of the Romanian electricity generation capacities, without investment in new capacities

Source: Based on Romanian Energy Strategy 2016-2030, with an outlook to 2050. Ministry of Energy. http://energie.gov.ro.

Country profile: Croatia

The Croatian energy sector will be transformed biomass, energy from small hydropower plants over the next decade and one of the most im- and geothermal energy (fig. 5). Regarding wind portant targets for Croatians by 2030 will be energy, a steady growth rate is expected over the to achieve a 36.4% share of renewable energy next 10 years from 734 MW in the base year 2020 sources in gross final energy consumption. The to 1364 MW in 2030. When analysing the de- National Energy Strategy for 2021-2030 pro- velopment of offshore wind energy in Croatia, it vides for significant investment in renewable en- should be noted however that at present, there are ergy sources, such as solar energy, wind energy, no projects linked to offshore wind technology.

20 Figure 5. Expected power plants capacities

Source: Based on: Integrated National Energy and Climate Plan for the Republic of Croatia for the period 2021-2030, December 2019. https://mzoe.gov.hr

Despite this, some of the untapped potential plan, it was mentioned that the possibilities of the Croatian maritime area has been no- for speeding up the transition to green energy ticed by the European Union. In its assessment should be explored in Croatia, referring in this of Croatia’s final national energy and climate thread in particular to offshore wind farms32.

Country profile: Lithuania

The wind farm is of strategic importance polit- energy produced in its power plants will come ically for Estonia, Latvia and Lithuania, since it from renewable sources. In the long term, by would help reduce reliance on Russian electric- 2050, the Lithuanian energy system is to be ity imports, which accounted for 19% of Baltic 100% RES-based. Among the renewable sourc- consumption in 2019. es, the key role will be played by wind technologies, which will achieve at least 55% of the In Lithuania, it is stipulated that country’s production by 2030, and no less than by 2030, approximately 45% of the 65% by 2050.

31 Assessment of the final national energy and climate plan of Croatia, European Commission. October 2020

21 The first auction for the construction of offshore of capacity will be available for distribution33. wind farms is planned for 2023. It is to be based on contract for difference, already used for ex- According to forecasts, in the future, offshore ample on the British market, under which the wind technology may cover up to 25% of Lith- parties to the agreement are obliged to pay the uania’s electricity demand. Based on research difference between the current value of selected carried out by scientists from Klaipeda Univer- assets and the value existing on the date of the sity, approximately 3.35 GW of wind power can contract. On the Lithuanian market, 700 MW be installed in the Lithuanian Baltic Sea area34.

Country profile: Latvia

According to the plans presented in Latvia’s presented in the report, wind potential in the National Energy and Climate Plan for 2021- Latvian part of the Baltic Sea is estimated at up 2030, one of the main objectives for the trans- to 14.5 GW35. Achieving such a large produc- formation of the Latvian energy market will be tion capacity will not be easy due to the high to achieve a 50% share of RES in the national technological and financial needs. At present, energy mix. Among the various low-emis- the Latvian government is not taking signifi- sion solutions, investments in offshore wind cant steps to develop offshore wind farms. Nev- power plants will have an impact on the real- ertheless, it is in the initial phase of a project ization of this assumption. Based on the data in cooperation with neighbouring Estonia36.

Country profile: Estonia

Estonia is a country that is to a large extent national electricity demand (approx. 16 TWh) independent in terms of its energy supply by 2030. Estonia, which has a large wind po- thanks to bituminous shale. However, this raw tential in its maritime area, has conditions to material is highly CO2 intensive and thus de- install up to 7 GW of offshore wind energy. creasing its share in power generation constitutes a significant challenge for the coun- In order to take advantage of favourable envi- try. According to the national energy plan, ronmental conditions, a joint 1 GW offshore 70% reduction in greenhouse gas emissions wind farm project is being implemented in co- is planned by 2030, and by 80% in 2050 com- operation with Latvia37. The two countries are pared to 1990. This plan will be implemented currently preparing an application for funding mainly by investments in the RES, the vol- under the EU’s Connecting Europe Facility38. ume of which is intended to cover 50% of the

33 National Energy and Climate Action Plan of the Republic of Lithuania For 2021-2030. Ministry of Transport and Communications. 2020. 34 Power Horizon Scenario: 3.5 GW of offshore wind in Lithuania shows strong effects of price cannibalization. ICIS, 2019. https://www.icis.com. 35 Study on Baltic offshore wind energy cooperation under BEMIP. European Commission. 2019.https://www. ea-energianalyse.dk/wp- content/uploads/2020/02/1811_rap.pdf, pp. 34 36 Latvia’s National Energy and Climate Plan 2021–2030, 2020. 37 Estonia’s 2030 National Energy and Climate Plan. 2019. 22 38 Latvia and Estonia sign MoU for joint offshore wind farm. 2020. mkm.ee. 2.2. Estimated cost of necessary investments

The offshore wind, despite the significant de- It is assumed that, in the first stage of invest- crease of costs in the last years, still remains ments in Poland, sea windmills with a capacity expensive technology due to the high upfront of 6,000 MW, at the current cost of their con- expenses it generates (mainly connection to struction (MW - EUR 2.5 million), the entire onshore). Therefore, most of the countries of investment will cost around EUR 15 billion. The the region, being rather small and with lower expected financial outlays for the implementa- economic level than EU average, have hurdles tion of offshore wind energy investments are to handle it. presented in table 3.

Table 3. Investment outlays for the development of wind energy in the offshore domain in Poland

Expenditures per MW with AC link in Investment outlays Years Power [GW] million EUR / MW [billion Euro]

MIN MAX MIN MAX MIN MAX

2025-2029 2,28 2,51 2 3 4,56 7,53

2030-2034 2,05 2,26 6 7 12,3 15,82

Total 8 10 16,86 23,35

PLN 73 101,11

Source: Rączka J. (2018). Energetyka morska Z wiatrem czy pod wiatr?. Forum Energii. Analizy i dialogi. forum-energii.eu/public/upload/articles/files/Morska energetyka wiatrowa_ost_net.pdf (08.03.2020)

Other calculations indicate amounts varying offshore wind farms will amount to approx- from PLN 120 to 130 billion (app. EUR 30 bil- imately PLN 1.3 billion in 2030. The launch lion, according to Ministry of State Assets), with of offshore wind farms will reduce the energy the first stage of the investment being expected price by approx. PLN 20 per 1 MWh. Also, re- to cost approximately PLN 50 billion. gional assessments suggest that aggregate costs could be reduced up to EUR 5 per 1 MWh of In Polish conditions, the estimated state bud- Baltic offshore through the use of hubs39. Add- get revenues from taxes on energy produced by ing 550 MW of offshore capacity to the ICIS

39 Study on Baltic offshore wind energy cooperation under BEMIP. Final Report. ener/c1/2018-456. 2019.

23 Power Horizon model indicates Estonian and investments in marine conditions. The first off- Latvian prices would drop by EUR 2.85/MWh shore wind farm in the Black Sea is intended to and for Lithuania by EUR 2.59/MWh from be built by the Romanian power company Hi- 2027-203040. droelectrica. The plans of a 300MW wind farm were announced in June 2020, and the company With regards to the Black Sea, it is hard to spec- has estimated its costs to be circa EUR 545 mil- ulate on the costs of offshore wind energy in- lion (RON 2,9 bn). Another Romanian compa- vestments, because there are no concrete plans ny interested in expanding its business into off- for the development of such investments in the shore wind is Romgaz. Simultaneously, a debate region so far. Estimated costs of wind farms on a draft law regarding the necessary measures can be based only on onshore investments, for operations and construction of offshore which are, however, not applicable to similar wind has started in the Romanian Senate.

2.3. National strategy to mobilize capital including use of the EU instruments

Between 2014 and 2020, the European Union from renewable sources. The Modernisation has allocated EUR 80 billion to research under Fund is funded from the auctioning of up to the Horizon 2020 program. In the period from 2% of the total EU ETS allowances for the peri- 1998 to 2018, the wind energy industry was od 2021-2030, and therefore, its total revenues supported with grants for 225 projects, amount- depend on the carbon price. However, the esti- ing to EUR 565,5 million through the Frame- mated amount is assumed to reach EUR 14 bil- work Programs. The financial mechanism that lion for the period 2021-2030. can support the development of wind energy in the Baltic Sea region is the Connecting Europe Another example of support for financing the Facility (CEF) program (2021-2027). Under development of offshore wind energy are funds this mechanism, the countries can implement from the European Fund for Strategic Invest- cross border-projects aimed at joint planning, ments (EFSI) and InvestEU. EFSI was used to strengthening of cost-effective solutions for re- develop the Northwester 2 offshore farm in newable energy sources, as well as system inte- Belgium, which was granted a loan of EUR 210 gration, energy storage and infrastructure con- million by the European Investment Bank, with version. a guarantee of half of the amount by the fund. The remaining EUR 100 million was guaran- A noteworthy funding instrument is the Mod- teed by the Danish governmental export credit ernisation Fund, which envisages support for agency (EKF). Support for the farm operator 10 lower-income EU Member States in their will take the form of certificates that will be sold transition to climate neutrality (Bulgaria, Cro- to the operator of the Belgian transmission sys- atia, Czechia, Estonia, Hungary, Latvia, Lith- tem, thus receiving a premium over the energy uania, Poland, Romania and Slovakia). The price obtained in the market. program involves the modernisation of energy systems of the respective countries through A new financial instrument established by the growth of generation and use of energy the EU in 2020 is the Next Generation EU

40 Joint Baltic 1GW offshore wind farm set to weigh on prices. www.evwind.es.

24 (NGEU), which aims to stimulate an eco- intended to support public investments in the nomic recovery after the crisis caused by the green and digital transitions, as well as the resil- COVID pandemic. Its total budget is EUR ience of national economies. Flagship areas for 750 billion, distributed through grants and investments and reforms include development loans, 30% of which is planned to support of clean technologies and acceleration of the use climate-related projects within three pillars: of renewables.

(1) support investments and reforms in EU An interesting opportunity for financial sup- Member States, port of offshore projects may be seen in the (2) stimulating the economy through incentiv- Three Seas Initiative Investment Fund, which ising private investments, was established in 2019 and is intended to pro- (3) evaluation of the experience of the crisis. vide funding for key infrastructure projects in the Three Seas region, i.e. Central and Eastern The first pillar refers to the Recovery and Europe. The section dedicated to energy proj- Resilience Facility (RRF), which is an im- ects includes support for investments in diver- portant part of the NGEU. The RRF was sity of supply, decentralized energy systems and agreed on 9 October 2020 and its budget growth in renewable energy. The amount of amounts to EUR 560 bn. This instrument is funding is set to reach EUR 4-5 bn.

2.4. Cross-border links

The development of the offshore farms at the spatial planning, grid development, capacity large scale will create the opportunities for clos- planning and support schemes. The objective er cross-border cooperation. Central European of the initiative is to establish a well-functioning countries has a good record of collaboration internal energy market and cross-border infra- in the energy sector and are conducting many structures across the Baltic Sea. cross border projects in electricity and gas. They are also active in the various programs created Regional cooperation could play a crucial role by the EU such as BEMIP or CESEC. Therefore in the Baltic region in overcoming several is- the development of offshore wind can be anoth- sues namely: different pricing zones and dif- er element of expanding the cooperation to the ferent patterns and technical standards. The sea basins. parties of the Baltic Declaration recognized that thanks to close cooperation they would In the Baltic sea, Poland has launched an ini- achieve more than they could individually. The tiative aimed at increasing the potential of the main platform of activities in this regard would Baltic offshore wind development. Its goal is be European Commission program the Baltic to facilitate projects deployment and to gener- Energy Market Interconnection plan (BEMIP). ate maximum economic benefits. According to Cooperation would focus on joint and hybrid the Baltic Sea Declaration, signed by Denmark, projects, smart networks, system integration Estonia, Finland, Latvia, Germany, Lithuania, and digitalisation. The goal is to build a flexi- Poland and Sweden in September 2020, the co- ble and resilient energy market through polit- operation should be strengthened in the area of ical, economic and technological integration.

25 By implementing hybrid projects, it would of innovative technologies such as Power-to-x41. be possible to reduce costs by shortening the Hybrid projects are implemented in one of the transmission lines. Currently, 30% of the cost of following forms42: building a farm is spent on building a connection with a grid. - Combined grid solution, - Modular grid, - Tie-in interconnector, The Baltic Sea region market presents a unique - Offshore hub, potential to play the role of a central energy hub - Neighbours OWF. for North-Eastern Europe. A hybrid offshore project connects into an offshore electricity in- The most advantageously implemented hybrid terconnector and therefore allows the offshore projects could bring savings of EUR 300-2500 wind power to be used by more than one country. million throughout the entire life of the installa- It increases the efficiency of space usage in the tion, while at the same time giving 5-10 percent sea and could potentially enable the integration lower construction costs43.

Figure 6. Example of offshore hybrid project

Source: Baltic InteGrid. Final report. 2019

In the Baltic Sea region, as part of the offshore The synchronization of the Baltic States with wind deployment, there is also a project focused the Continental European Network is to be on the integration of the markets in which implemented through two key investments offshore energy can play an important role. in this area. The first is the interconnector

41 Boosting offshore wind energy in the Baltic Sea. WindEurope. 2019. 42 Our energy, our future. How offshore wind will help Europe go carbon neutral. WindEurope. 2019. 43 Hybrid projects: How to reduce costs and space of offshore developments. 2019. https://ec.europa.eu. 26 between Poland and Lithuania, LitPol Link, with it a number of risks. It requires working out launched in 2015. The second is Harmony Link, a sufficient cross-border trading model, which HVDC submarine cable, which is now being enables accounting the cross-border flows. It is prepared, is set to provide market opportunities also a challenge for the transmission system op- for the regional electricity players. The project erator, who must maintain the balancing of the of synchronization is crucial in completing the national transmission network i.e. in case of the integrated electricity market of the EU. The dif- risk of congestion caused by unscheduled ener- ferences in electricity grids are due to historical gy or loop flows. In order to mitigate the threats reasons because they were developed to operate related to network congestion, the expansion with the Russian and Belarusian systems. The and modernisation of the transmission network project of synchronization fully opens the Bal- infrastructure is required. This is a very com- tic countries to the European market, which op- plex process, which depends on a wide variety erates under common and transparent rules, as of determined and undetermined factors: tech- well as providing the potential for wider energy nical, economic, regulatory, political and social, exchange, including the transmission of renew- as well as the associated higher costs. able energy produced in Baltic states.

It should be noted however that the development of cross-border electricity grids brings

27 Conclusions and Recommendations

The offshore wind is steady developing in the legally integrated market of the Baltic states cre- Central Europe region, however the differenc- ates opportunities for offshore investments to es in the state of development in particular seas make a significant impact on economic stim- persist. Baltic sea is the most advanced one, ulation and the building of new competences. where – in German and Danish waters farms It should be noted that investments in the area are already operating. Poland is the most ad- of offshore wind energy may result in economic vanced country in the region, as few projects recovery for many industries (and also on ports has already connection agreement. Lithuania is such as Gdynia, Klaipeda, Constanta, Varna, speeding up its preparations as well as Romania Burgas, Rijeka etc.). It would make the econo- and Estonia. Other countries are still in the pro- mies of the countries more competitive and ca- cess of discussions how to tackle offshore wind pable of offering relevant services and products or this discussion has not yet started. to the European and global offshore market.

Summarising the wind situation of the analysed Plans for the management of surplus ener- waters, the Baltic Sea, with annual wind speed gy from offshore wind farms through the use between 8 - 9.75 m / s is the most suitable area of hydrogen technologies present the poten- to develop offshore wind farms. Less conducive tial for further development. The energy pro- wind conditions are found along the Romanian duced by offshore wind farms can be success- Black Sea coast (6.5-7.5 m / s) and the Croatian fully stored in the form of hydrogen, which Adriatic coast (6.5-7.75 m/s), and in selected can then be used in transport or industry. The island areas, these values do not exceed 5.75 m/s use of offshore wind energy to produce green (all data presented for the altitude of 100 m). hydrogen in the electrolysis process enables the decarbonisation of heavy industry and the The presented waters and coastal states differ transport sector. Producing and selling green significantly, both in terms of the perception hydrogen to large industrial customers can of opportunities and threats resulting from the help stabilise offshore wind revenues, which development of offshore wind energy, as well will have to rely on the market price of ener- as the national approach to achieving climate gy. The concept is to use specialised ships ca- goals and the shape of energy systems. pable of carrying out the water electrolysis re- action on board. This will allow the production The countries of the Baltic region jointly pres- of hydrogen completely devoid of any “carbon ent a potential estimated initially at 93.5 GW footprint” and the storage of surplus energy. of offshore capacity44. Due to the natural wind The next step would be the combining of wind conditions and the increasing efficiency of turbine technology with other innovative meth- new installations, the share of offshore wind ods of obtaining renewable energy by installing energy in the volume of renewable sourc- generators which draw energy from sea waves es may increase significantly. The common, (rotors) in the area of farms. Wave Energy

44 Study on Baltic offshore wind energy cooperation under BEMIP. European Commission. 2019, pp. 34. 28 Converters (WEC) use a fairly predictable there is a real risk that without specific invest- source but require further technological ad- ment measures in national suppliers, the idea of vancements. a national supply chain may remain an empty slogan. Another advantage, noticed during the COVID-19 pandemic, is the resistance of off- Unstable weather conditions and lack of de- shore wind farms to the impact of such events, mand side response tools emphasise the ne- resulting from the maintenance-free nature cessity of creating power generation back-up of the installation. In addition, there is also a units to maintain the stability of the energy sys- strong argument that the Green Deal may be- tem. In practice, the average factor of the use come one of the effective pillars of the strategy of installed capacity for offshore wind energy is to lead the European Union economy out of the around 50%. Therefore, it is essential to possess crisis resulting from the COVID-19 pandemic. within the system conventional power plants, or pumped storage power plants, or large scale One of the elements requiring in-depth stud- energy storage facilities. Potential solutions in ies and analyses is the area of cybersecurity of the form of energy consumption management, offshore wind energy as a potential target of energy storage management or cross-border cyber-attacks and hacking activities, for both exchange with neighbouring countries are also political and criminal motives. The effects of being developed. Thus, the development of off- cyber-attacks on elements of wind energy sys- shore wind energy and the entire sector of re- tems can range from financial losses (due to the newable energy sources requires the creation of interruption of energy supplies), a decrease in flexible capacities that enable a balancing of the energy output, reputational losses and even the power system. destruction of turbine elements. For this rea- son, elements of cyber security should cover all Recommendations levels and components of the supply chain of wind farms (construction, production and op- 1. As the offshore wind still remains a capital erational activity). intensive technology, it is crucial to provide relevant financial support to the projects in order With the introduction of wind energy into the to boost its development in the region. The EU energy mix, it will be necessary to develop ap- funds can play in this process a key role. A sup- propriate safeguards for IT systems manag- port mechanism for all levels of implementation ing the market. So-called virtual power plants of offshore wind energy development projects (VPPs) are indicated as a solution to the reli- for the Baltic, Black and Adriatic Sea countries ability of intermittent renewable sources. seems needed in order to accelerate the preparation of the investments. Attention should be paid to the development of the national supply chain and building nation- 2. The offshore wind technology is evolving and al sectoral competences already at the level of new solutions are coming to the market driv- concluded contracts and agreements (as part ing costs down and make it more efficient. It is of local content). The guarantee of knowledge recommended to provide financial support for transfer may play an important role in ensuring the implementation of multinational research that plans are respected regarding the role of na- projects aimed at increasing the level of inno- tional entities in the future of the sector, in the vation in offshore wind energy. Projects should respective countries and the world. However, be aimed at increasing efficiency of the turbines,

29 digitalisation and the use of technologies pow- the future shape of the EU electricity systems er-to-x. This will allow for closer cooperation of must be made in the near future. Thus, a strong the leading regional institutes in the exchange and clear financial incentive from the EU needs of experiences and joint investments in this to be envisaged, in particular for the invest- area, as well as building national and European ments in transmission infrastructure. There is a competences in this area. need to continue the use of already existing and well-functioning financial instruments such as 3. Given the need to speed up the deployment of CEF. However, the specific needs of investors offshore RES in the region, it is crucial to pro- will again differ between regions. Central Eu- vide clear view on how to shape the EU legis- rope will have to significantly strengthen their lation in this sector for the upcoming decades. onshore infrastructure in order to fully develop There is clearly a need for stable legislation at the their offshore network. EU level which is a key element for investment decisions, but at the same time, some challenges 7. The integration of offshore RES into the en- will have to be addressed at regional or national ergy systems is another important element to level. The situation in the Baltic and Black Sea be studied carefully. The new legislation should offshore sectors will differ significantly from the allow for enough flexibility to be developed by North Sea and the Mediterranean. Therefore, the markets and the Member States to decide on the new regulations should allow for flexibili- how to best achieve the climate neutrality de- ty to apply to regional or national, tailor-made pending on their national starting points. Cau- solutions for each maritime basin in the EU. tious approach towards the RES targets, while taking into account the national competitive 4. While the deployment of offshore RES will advantages and limitations, will allow to benefit require significant private investments, a bulk from the RES potential in the most cost efficient of activity will have to be conducted by the way. electricity operators. Transparency, impartial- ity, clear financing support instruments, and 8. Exchange of experience, know-how and reg- appropriate division of costs will have to be the ulatory solutions is common practice in many key principles of investments in generation and other sectors of the economy. Therefore a forum transmission infrastructure. These principles of countries developing offshore wind energy in can only be applied if the transmission infra- the region should be established so that experi- structure is constructed by the correctly unbun- ences can be exchanged to strengthen its poten- dled operators. tial, eliminate barriers (mainly international), and conduct joint investments. This will allow 5. Together with the construction of offshore for the minimizing of costs and increase the wind farms, it is crucial to enhance the trans- trust and effectiveness of actions taken. mission grids and substations inland, but also develop cross-border links, and expand energy storage facilities. Such infrastructure would allow for a flexible energy flow, strengthen national energy security and improve internal electricity market.

6. The process of the EU energy transformation is accelerating and the decisions regarding

30 Facts and Figures

Figure 1. Annual and cumulative offshore wind installations Figure 2. Cumulative installed capacity by sea (MW) Figure 3. Indicative trajectory of the net installed capacity per source [MW] Figure 4. Evolution of the Romanian electricity generation capacities, without investment in new capacities Figure 5. Expected power plants capacities Figure 6. Example of offshore hybrid project

Map 1. Baltic Sea wind potential Map 2. Potential offshore locations and interconnections in the Baltic sea Map 3. Black Sea wind potential Map 4. Adriatic Sea wind potential Map 5. Potential locations in the Baltic sea

Table 1. Wind potential in individual countries Table 2. Current state of implementation of offshore wind projects in Poland Table 3. Investment outlays for the development of wind energy in the offshore domain in Poland

31 Central Europe Energy Partners, AISBL

Rue Froissart 123–133, 1040 Brussels Phone: +32 2 880 72 97 E-mail: [email protected] Transparency Register No. 87738563745-94

www.ceep.be

LinkedIn: www.linkedin.com/company/central-europe-energy-partners

Twiter: @CEEP_energy

Youtube: https://www.youtube.com/channel/UC03W8UPQ83171m6l203aglA