Energy Transition Digest: 25 November - 8 December 2024

1. No Bids in Denmark's Offshore Wind Tender

The first stage of the Danish offshore wind tender closed on December 5 with no bids from the industry players.

So what? Unsubsidized offshore wind is not financially viable in Denmark in the current market environment. Despite initial interest, developers did not submit any bids, naming high inflation, cost of capital, and supply chain bottlenecks as key challenges.

Details:

• The Danish Energy Agency's two-staged tender offered rights to develop offshore wind farms with a minimum of 6 GW capacity with developers' option to allocate up to 10 GW.
• No state subsidies are offered, while developers must pay annual concession fees over 30 years of project life and grant the state a 20% stake in each project.
• Several sustainability requirements, such as recyclable wind turbine blades and nature-inclusive design, were also included in the tender terms.

2. ArcelorMittal Delays Decarbonization Plans in Europe

安赛乐米塔尔集团 announced it would delay investment decisions on lower carbon emissions "hydrogen ready" DRI-EAF facilities in Europe.

So what? The announcement's timing raises a question: is it really a poor investment case, or is the company trying to put pressure on the new European Commission cabinet ahead of the scheduled CBAM review and Steel & Metals Action Plan publication?

Details:

• As part of its decarbonization program, the company planned to replace some of its blast furnaces in Europe with hydrogen-ready DRI-EAF facilities.
• Weak trade protection against cheap imports from China, high capital and operating costs of new investments, slow takeoff of green hydrogen, and lack of price premium for green steel are cited as reasons for the delayed investment decision.
• ArcelorMittal has already secured ~€3bn of government support from several European countries to reduce emissions in its European operations by 35%.

3. Japan-Australia Hydrogen Cooperation Faces Setbacks

Several Japanese companies, including 川崎重工业株式会社 and Kansai Electric Company , are abandoning hydrogen partnerships in Australia.

So what? Reality is catching up on ambitious plans to build an intercontinental hydrogen supply chain. Citing long permitting, technological challenges (e.g., CCS for blue hydrogen), and rising electricity costs (for green hydrogen), companies are reassessing their plans.

Details:

• Kansai Electric Power has exited a green hydrogen project in Queensland, citing higher-than-expected production costs. Partners Marubeni and Iwatani remain involved.
• Kawasaki Heavy Industries' blue hydrogen project in Victoria is put on hold due to long permitting and increased scrutiny from the Australian side over carbon capture capabilities.
• Hydrogen initiatives are being scaled back elsewhere, too: Fortescue planned to cut jobs in its green hydrogen business, and Equinor pulled out of a hydrogen partnership with RWE .

4. Kazakhstan Advances Wind Power Component Localization

SANY Group and SAMRUK-KAZYNA will build a wind turbine component manufacturing plant in Kazakhstan, while Envision Energy will localize wind turbines and energy storage systems in partnership with "Samruk Energy" JSC and Kazakhstan Utility Systems.

So what? As Chinese wind turbine OEMs look for export markets amid a cutthroat price war at home, Kazakhstan (and the broader Central Asia) market presents expansion opportunities – sizeable enough to establish a manufacturing base in the region.

Details:

• SANY's facility will be built by the end of 2025 with an estimated cost of $114M, will create 300+ jobs, and will allow wind power projects to reach a 30% localization level.
• As of 1H 2024, wind power provided ~4% of Kazakhstan's electricity with an installed capacity of 1.4 GW.
• Kazakhstan's latest wind energy tenders delivered tariffs as low as $0.01/kWh.

5. UK to Extend Nuclear Plant Lifetime Amid Project Delays

EDF announced life extensions at the four nuclear power plants in the UK.

So what? The projects to build new nuclear capacity in the UK are further delayed, so life extension of the existing reactor fleet might be a way to keep providing low-carbon energy to the grid.

Details:

• According to the company, the Heysham 1 and Hartlepool nuclear power plants will operate until March 2027, and the Heysham 2 and Torness plants will operate until March 2030.
• The four plants will require sustaining capital investments of ~$1.7bn to support the extension, which still needs to be approved by the regulator.
• Earlier this year, the British government further delayed the final investment decision on the Sizewell C nuclear power plant project and the selection of an SMR technology provider.

Other News Headlines:

• 西屋电气公司 and CORE POWER will develop a floating nuclear power plant.
• If Germany takes a political decision, 4 GW of nuclear capacity could be restarted by 2028.
• Space Solar plans to deploy a 30 MW space-based solar power demonstration project for Reykjavik Energy (Iceland utility) by 2030.