Spotting the signs of the transition tailwinds

Initial overselling shouldn’t shadow what will be a solid delivery down the line for offshore wind, energy islands and green hydrogen.

There’s an almost predictable public response when new and potentially critical technologies emerge: enthusiasm is followed by outsized promises as funding needs and political attention come along. Overly optimistic timings are introduced. Hype fills our news feeds.

Knowing that some new things will fail, we soon begin to look for indications that this novel concept was too good to be true. Setbacks encourage doubts, which are sustained by failures to meet the always unrealistic schedule. Critical comments follow as no one likes being taken for a fool. Supporters hesitate. Development stalls.

Yet, this is not always the end. If the underlying idea and the need it services – industrially and/or socially – is strong enough, it may prevail.

At the moment, offshore wind is rising like a phoenix from the ashes of pre-2022 business plans. Once properly back in the air, close associates like energy islands and green hydrogen will play a strong part in this transition story. Arguably, this should be no surprise. There was never any alternative – CO2 emissions won’t curb themselves.

If in doubt that a corner has been turned, look no further than November’s list of troubled and cancelled offshore wind projects and see it shrink as you log the updates. The UK’s Norfolk Boreas and the US-based Beacon and Empire Wind are no longer shelved, and of Orsted’s many seemingly moribund US projects, only the Ocean Wind 1&2 projects look to be beyond saving.

Furthermore, the much-troubled 640MW Taiwanese Yunlin offshore wind farm has just completed a financial restructuring, benefiting investors such as GIP/Blackrock-owned Skyborn Renewables.

And energy islands, proudly featured only a couple of years ago before falling spectacularly off the radar, are back. Not only is Belgium’s Elia going ahead with plans for the small(ish) 3.5GW Princess Elizabeth Island, with construction to begin in March despite cost overrun, but Copenhagen Infrastructure Partners has just carved out an energy island development company.

Green hydrogen production will be at the heart of such islands. For every offshore-resistant LP, there are others keen to invest, implicitly betting on enough offshore wind capacity being added quickly enough for a hydrogen economy to reach critical mass.

The ongoing and ever stronger political support for green hydrogen has been spelt out in the EU’s revised Renewable Energy Directive, agreed upon in October 2023, and in the US hydrogen tax credit, though the ‘colour’ of the hydrogen in the latter may not quite be green.

Hydrogen is not ideal as a store of energy but needs must. Those emissions really won’t curb themselves.

The winds of change

If this assessment of the future fortunes of offshore wind sounds premature and if the doubts are still nagging, it is no surprise. Only six months ago, wind farms were scrapped on a near-daily basis, particularly in the US where they hadn’t even taken off yet at scale, and developers chose to pay huge fines throughout the latter half of 2023 to avoid being saddled with sad prospects.

To compound the issue, some turbines turned out to be technically troubled.

What felt forgotten amid the failing projects and the industry’s inability to meet politically agreed schedules for the roll-out, were all the projects that stayed on track, neatly meeting milestones. CIP’s 800MW Vineyard Wind 1 had first power on 2 January – three months after SSE’s UK-based 1.2GW Dogger A bank moved its first electrons. Ørsted’s 700MW Greater Changhua 1 & 2a off Taiwan is nearly done. Construction, connection, commissioning – it was happening all along.

Also, the stall in roll out was a regional and economic issue rather than a technological one. In China, offshore wind seemed to shrug off higher interest rates, weakened supply chains and higher commodity prices to venture forth undeterred.

Energy islands are known technology in a new guise, and offshore wind as well as the production and handling of hydrogen are not breaking new ground either. This turn around is therefore not a beginning but the continuation of an unstoppable global renewable infrastructure build-out.

CO2 emissions will be curbed, and investors in the energy transition should take heart.