Navigating the Winds of Change: Denmark Delays North Sea Energy Island Tender

Denmark has paused issuing the tender for its Government’s prized project: the world’s first energy island. The North Sea Energi? could be the Nordic country’s largest ever construction project, but as it stands, with the taxpayer’s bill surpassing a cool DKK 50 billion ($7.9 billion), that’s far too high, according to Denmark’s Climate, Energy and Utilities Minister. The Government is sticking to their promise not to burden Danish taxpayers with a net-loss. So, while the first phase must still be completed by 2033, for now the brakes are applied. We take a look into the project’s development so far and what this self-check means for the future of the green transition in the Nordics and northern Europe.?

Overview

In a press release on Thursday 29 July, Denmark’s Minister for Climate, Energy and Utilities, Lars Aagaard, expressed concern over the proposed North Sea energy island’s current costs and risks. He defended the announcement by affirming that alternatives must be explored to achieve a "better and cheaper" solution. The Social Democrat-led government has taken great pains to ensure that their pet project will not be noticed in Danish taxpayers’ back pockets, an outcome estimates have so-far been unable to avoid. Despite this delay, the government remains committed to their ambition of establishing the first-of-its-kind energy island which was originally agreed as a means to achieve Denmark’s ambitious green goals and reduce dependency on gas imports, especially from Russia. Due to uncertainty in its timeline, the energy island has not formally been integrated into Denmark’s explicit plan to achieve carbon neutrality by 2050, however once operational it will prove to be a significant contributor in this key policy objective. The artificial island is planned to rise out of the open seas 80 kilometres west from the coast of Jutland. Its initial assignment—to be achieved by 2033—is to generate energy through 200 offshore wind turbines, each roughly 85% as high as the Eiffel Tower. That power—sufficient for three million households—will then be distributed back home and to neighbouring countries' grids, via Power-to-X technology and deep-sea cables. As it stands, we can’t expect to see any changes to the western-Danish seascape until later this year at the earliest, and no tender documents will be published before the summer holidays. The Danish Energy Agency is consequently now investing the additional time required to explore alternative options which must ensure a more economically viable project.

Timeline

The project has so far developed as follows:

1. June 2020: Danish Parliament reaches the Climate Agreement for energy and industry etc., which includes plans to establish two energy islands—a completely new concept—in Denmark, one in the North Sea (tender planned for 2022) and one near Bornholm, to produce green energy for millions of households in Europe.
2. February 2021: It is decided that the North Sea energy island will be an artificial island with a capacity of 3 GW initially, which will eventually be expanded to 10 GW. The island will be owned in partnership between the state and private actors to bring expertise in project development, technology, and financing.
3. September 2021: The overall framework for the tender is agreed by the Parliament. The construction and operation of the energy island will be tendered as a single tender, and dialogue with commercial players will take place to ensure optimal innovation and project proposals.
4. August 2022: The capacity of the Bornholm energy island is expanded from 2 GW to 3 GW. The North Sea energy island remains planned to have a capacity of 10 GW.
5. October 2022: Preparatory Tender Sub-Agreement II is passed by the Danish Parliament, deciding the tender for the North Sea energy island is to be a functional tender, with a focus on a flexible island concept combining a reclaimed island with electricity transmission and energy conversion on platforms. The tendering process will be a competitive dialogue.
6. 2023: Energinet begins planning, dialogue, and environmental impact studies for the onshore installations of the North Sea energy island.
7. June 2023: The Danish government postpones the tender for the North Sea energy island due to the current concept being deemed too expensive. They aim to thoroughly analyse other options for a better and cheaper concept before making a decision.

Despite the delay, the Frederiksen Government has shown every indication of resolve to get the North Sea energy island built: distributing 3GW of energy by 2033 and 10 GW by around 2040. As a key priority for Denmark's green transition, if-and-when these ambitious targets are achieved, the energy island will play a major role in phasing out fossil energy sources and providing green power to Danish and foreign end-consumers.

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International implications

The announcement of a delay in the tender process for the North Sea energy island could have significant implications for the EU and other North Sea countries, including Belgium, England, France, Germany, the Netherlands, Norway and Scotland. Each have set ambitious goals for offshore wind energy as part of their transitions to reliance on renewable energy sources. For the EU countries, this includes cutting greenhouse gas emissions by at least 55% from 1990 levels by 2030 and becoming climate neutral by 2050 as part of the European Green Deal. For Great Britain, equivalent focus is being placed on offshore wind energy as part of their ten-point plan for a green industrial revolution.

In April 2023, nine European countries pledged to multiply the capacity of windfarms in the North Sea by eight times the current levels before 2050. Belgium’s energy minister subsequently proclaimed that the North Sea would become "Europe's biggest green power plant." The countries involved in this commitment, including France, Germany, Belgium, and the Netherlands, have set targets to boost their combined offshore wind capacity to 120 GW by 2030 and 300 GW by 2050. By connecting to other North Sea countries, Denmark’s energy island will act as a central facilitator in that energy’s exchange and distribution, with its success expected to invite construction of further energy islands. Alternatively, ripples from its potential failure—even despite the rough Nordic waves—would still make their way to neighbouring Scandinavian, Continental and British shores, negatively impacting plans for similar projects throughout the region.

Likely next steps

While publication of the tender material—originally scheduled before the summer holidays—is now delayed, the Danish government remains committed to the project. Currently, the Danish Energy Agency is commencing a new thorough analysis of various options to develop a more cost-effective concept.

Lars Aagaard’s transparent call for responsible solutions late last week was met with a mild response by the public and industry, there being a broad acknowledgement of the situation’s reality. We can therefore expect a longer timeframe leading up to construction, though no definite date has been announced for the publication of the tender.?

Comment

The government's decision comes after a consortium led by Copenhagen Investment Partners and Allianz submitted a significant bid for two energy islands in the German North Sea, emphasising the region’s vast offshore wind potential as something of a treasure trove waiting to be cracked open. Calm heads must lead decision making at these early stages of such large-scale projects. While the delay may disappoint industry stakeholders, it would appear that Mr Aagaard is wisely wary of opening his own version of Aeolus' gift, a sign that bodes well for the long-term success of Denmark's green transition.

In Greek mythology, Aeolus was the god of the winds who guided the hero Odysseus on his journey. Aeolus also gave the hero’s crew a gift: a sack containing—unbeknownst to the crew—unfavourable winds. When their destination was almost in sight, members of the crew, believing the gifted sack contained great treasures, unadvisedly opened it and so released the bad winds which drove them back to their starting point.?

If Denmark can continue with prudence in developing a revised and realistic proposal for tender, this project is yet showing every sign of fending off the challenges ahead and welcoming a modern legend into our near reality.