Offshore wind and the 2020 EU target

1. Offshore wind and the 2020 EU target 7th Interparliamentary Meeting on Renewables Berlin, 6 October 2007 Christian Kjaer Chief Executive, European Wind Energy Association

2. We are already paying the cost of inaction • For every $20 increase in the price of oil, the cost of Europe’s gas imports rises by €15 bn annually, given the unfortunate link between oil and gas prices • The increase of oil prices over the past few years from $20 to $80 thus adds €45 bn. to EUs annual gas import bill • For comparison, EU invested €9 bn. in wind energy in 2006

3. Offshore wind – the challenge Both in terms of offshore infrastructure and technology development, offshore wind energy should be seen as a strategic resource that Europe needs to develop if we are ever to achieve competitive electricity markets in Europe; reach a larger degree of energy independence; reduce risk exposure to unpredictable fuel prices; ensure low and predictable energy costs; while reducing the environmental impact of energy production.

4. 27 EU Heads of State adopted on 9 March 2007: • 20% energy efficiency target by 2020 • 20% reduction of greenhouse gas emissions (30% if other countries commit) by 2020 • 20% binding target for renewable energy by 2020 • - Including 10% biofuels target Proposals for EU legislative package expected in December 2007

5. 27 EU Heads of State agreed on 9 March 2007: • Improved cross-border exchange “notably through interconnection, taking into account the integration of onshore and offshore renewable energies” • Welcomes appointment of European coordinator, including coordinator for connecting offshore wind power in Northern Europe

6. The European Commission “Wind could contribute 12% of EU electricity by 2020. One third of this will more than likely come from offshore installations” (Commission’s Energy Package 10 January 2007)

7. 20% target: How much renewable electricity, wind power and offshore wind power? • 2020: app. 35% renewable electricity is needed to reach the 20% target for renewable energy • Today: 15% incl. 10% large hydro and 3% wind • Excluding large hydro the share of renewable electricity must increase from 5% to app. 25%, in 14 years depending on power demand • From 3% (50 GW) to 11-14% (180 GW) wind power in 2020 (depending on 2020 demand) • Offshore wind power contribution to EU demand by 20201 between 1.8% (20 GW) and 4.5% (50 GW) • Without offshore wind power we will not reach the target • Without infrastructure we will not meet the target 1 EC baseline scenario EU demand (2020): 4163.7 TW/h

8. Offshore wind development in Europe (1991-2006) Source: EWEA, BTM consult (2007), Emerging Energy report (2007) and Douglas Westwood (2007)

9. Offshore wind status

10. Planned New Offshore Wind Capacity (2005-2015)

11. EU wind power past 14 years … and next 14 years? • Offshore in 2020?: • Avg. annual onshore growth EU 1992-2006: 33.4% • Offshore in 2020 at 33.4% annual growth: 49.350 MW

12. Low Medium High Offshore wind development (Cumulative, GW) Scenario 3

13. Wind Energy in EU (2006 – 2030) and electricity share 12% 8% 5% 3%

14. EU policy needed to reach targets • A renewable energy offshore policy for Europe, including offshore infrastructure (wind, tidal, wave) • Grid extensions and upgrades financed by – ownership unbundled – TSOs (grids are natural monopolies) • Removal of administrative barriers (one-stop-shop approach) • Removal of grid access barriers including excessive technical requirements • Increased cooperation on interconnectors • Dramatic refocus of R&D spending, taking into account historic levels of funding

15. Effect of scenario incl. 35 GW offshore wind in 2020 • 220 Mt of CO2 avoided p.a (22% of EU reduction target) • Avoided CO2 cost p.a. (€20 / tonne CO2): €4.4 bn • Avoided fuel cost p.a. ($48 / brl oil): €12 bn • Avoided fuel cost p.a. ($93 / brl oil): €18 bn • €25 bn avoided fuel cost at €/$=1.00 1 EC baseline scenario EU demand (2020): 4163.7 TW/h

16. Is there enough capital? Investment required between 2005 and 2020 to reach 180 GW in 2020 or 12% of EU electricity consumption will require app:€215 billion Combined 2005 profits of Exxon Mobil, Shell, BP and Chevron:€78 billion Cost of energy subsidies 1995-1998 per year*: Fossil fuels and nuclear: $215 billionRenewables and efficiency: $9 billion *Source: UNDP

17. Barriers to competition according to the Commission There is an urgent need to address inefficiencies, distortions and historically determined institutional and legal issues related to the overall structure, functioning and development of the broader European electricity markets. The Commission points out four key reasons for the lack of success in achieving a competitive market: • Lack of cross-border transmission links • Existence of dominant, integrated power companies • Biased grid operators, and • Low liquidity in wholesale electricity markets The four main barriers outlined above are not only barriers to creating effective competition in European power markets, they are also the main institutional and structural deficiencies preventing new technologies such as wind power from entering the market.

18. True prices are an advantage for wind On strictly economic terms, wind energy’s future competitive position will to a large degree be determined by the fuel cost of competitors; the cost of CO2; and the degree to which liberalising electricity markets will start reflecting the true cost of building new capacity EWEA calls for real competitionin the Internal Energy Market

19. EWEA’s position • EWEA welcomes the effort to create an undistorted Internal Electricity Market (IEM) • EWEA supports to eventually adopt support mechanisms for renewables that are compatible with an undistorted internal market • Due to the natural interactions between the conventional power market and renewable power market it is premature to force renewables into a distorted Internal Energy Market – it would distort both markets • Any shift must be well prepared to maintain investor confidence and follow after more effective competition in the IEM has been achieved • A hasty move towards a EU-wide support system would put EU-leadership in renewables at risk

20. Reminder “the issues relating to compatibility of support mechanisms and the desirability of not distorting cross border trade are concerns which are secondary to the main objective of ensuring a certain level RES production in each Member State on the basis of individual national targets”.. European Commission’s Strategy Paper “Medium term vision for the Internal Electricity Market” (1 March 2004)

21. IEA: same production, different market share ??? World - 2004 TWh % electricity Mtoe % primary energy Nuclear 2.740 16% 714 6% Hydro 2.809 16% 242 2% Source: IEA

22. IEA: same production, different market share European Union - 2004 TWh % electricity Mtoe % primary energy Nuclear 988 31% 257 14.6% Hydro 300 10% 26 1.48% Source: IEA

23. The Root Problem of Energy Importing Nations • They are going to import an ever growing share of our energy at unpredictable (but most likely higher) prices in competition with the rest of the world and at unbelievable environmental cost. • Regardless of whether they are successful in energy diplomacy or not, they have no idea about the future cost of energy they will be paying to maintain current supply • The economic future of Europe and other importing nations can be planned on the basis of known and predictable cost of electricity, derived from an indigenous energy source free of the security, political, economic and environmental disadvantages associated with the current energy supply structure

24. Turn the climate and energy challenge into an opportunity in the 21st century energy battle Follow a strategy of developing, deploying and exporting renewable energy technology to a world that, few years from now, cannot afford to live without it.

25. Offshore wind – 2007 European Offshore Wind Conference (December 2007) www.eow2007.info