Dutch Minister of Climate and Energy Rob Jetten admits that wind power is facing serious financial headwinds.
Jetten: consumers should expect substantially higher electricity prices than initially anticipated.
The increased costs are not primarily linked to global market developments but rather to the extra €10 billion required for connecting offshore wind farms at sea to onshore infrastructure.
Reality has returned to the European offshore wind sector, bringing financial challenges to the forefront. These challenges are not solely due to higher interest rates but are increasingly driven by supply chain constraints, Power Purchase Agreement (PPA) issues, and investor caution. In a surprising announcement, Dutch Minister of Climate and Energy, Rob Jetten, has informed the market, government, and parliament that the costs of offshore wind projects in the North Sea will be significantly higher than previously assessed. Minister Jetten, a member of the left-wing liberal democrat D66 party, has also indicated that consumers should expect substantially higher electricity prices than initially anticipated.
This news has come as a shock to mainstream political parties and renewable energy sector operators. They had been advocating offshore wind and other renewables not only as a means of addressing climate change but also as a progressively cost-effective alternative. In the coming years, the development of hundreds of gigawatts of offshore wind capacity is required to establish a comprehensive renewable energy supply capable of significantly reducing or eliminating the reliance on fossil fuels. While some major projects have already been completed, many are still in the construction phase or awaiting investment decisions.
The increased costs are not primarily linked to global market developments but rather to the extra €10 billion required for connecting offshore wind farms at sea to onshore infrastructure. The Dutch state-owned company, TenneT, now faces higher financial burdens and increased risks. Previous assessments of TenneT’s plans indicated financing needs of approximately €2 billion per year for the next several decades. However, new assessments reveal investment requirements of €3.6 billion per year, equivalent to €0.04 per kWh. In reality, these costs will ultimately be passed on to consumers through net tariffs, the fees for the delivery or transport of energy. The average Dutch household consumes 2,800 kWh per year.
In response, Minister Jetten has pledged to explore ways to reduce the additional costs for consumers. One proposal is to use the same offshore-onshore connections for offshore solar projects. However, this concept is still in its infancy, as there are currently no viable large-scale offshore solar projects.
Energy News Beat