Offshore wind energy: can we create a success story?

Preparatory work for the development of the offshore wind energy industry in Lithuania is progressing rapidly, as the government has now approved a package of draft laws that will create the necessary regulatory environment. Some important next steps are the preparation of a measured and attractive conditions for the auction to be held in 2023, as well as the development of the grid infrastructure and the acceleration of the necessary research.

The package of draft laws approved by the government includes provisions for several important aspects. First, a model of financial support for offshore wind energy development is planned. Following the example of other European Union countries, the so-called contract for difference (CfD) model was chosen. Secondly, the responsibility for the installation of transmission networks for connections with the offshore power plants will be entrusted to a transmission system operator. We hope that these important changes will be adopted at the autumn session of the Seimas.

Experts from the Lithuanian Wind Power Association have evaluated the draft legal acts positively. “We appreciate the efforts of both the Ministry of Energy and the entire Cabinet of Ministers in promptly taking actions to anticipate and harmonise the regulatory environment required for offshore wind energy. The decisions that were have taken the best international experience into account, after the insights and recommendations of the country’s specialists were studied and the solutions were adapted to the Lithuanian situation. We hope that this will be a strong impetus for the further development of the sector,” said Aistis Radavičius, Director of the Lithuanian Wind Power Association.

Radavičius noted that the 700 MW wind park planned for the Baltic Sea area, about 35 kilometres from the shore, is larger than the average size of such projects – the average offshore energy project in Europe has a capacity of about 560 MW. The wind park in the Baltic Sea should produce about 2.5-3 TWh of electricity per year, or up to a quarter of Lithuania’s energy demand.

Other important actions

According to experts, the next essential steps for ensuring the successful development of the offshore wind energy sector are the creation of an auction procedure that is appropriate to the existing situation, strengthening the necessary infrastructure and improving the procedure for issuing permits. 

First, it is important to take into account the lessons we have learned from the failed onshore auction and to avoid the recurrence of a similar situation. An attractive auction model where the state incentives are optimised for both the electricity producer and the consumer would help in this regard. Protecting the low market prices provided by the CfD model is of paramount importance for the producer, while the consumer is more concerned about participating in a successful auction to provide competitive electricity prices. Thus, an auction model that would stabilise the producer’s income for a period of at least 15 years may attract a solid circle of participants, which would then ensure sufficient competition and an attractive electricity price. It is also true that the financial decisions of the auction participants will be partly determined by the research commissioned by the Energy Agency, so it essential that these studies are carried out with a high degree of quality and accuracy. The project developers will also need to be given enough time to examine the results in detail.

Next, with regard to the legal basis for the auction, it makes sense to start strengthening the electricity transmission infrastructure. This would avoid a situation where the producer that has won the auction is ready to commence the construction of the park, but then has to wait until the necessary grid infrastructure is completed. Clear commitments and work schedules would bring greater clarity to both sides. In addition, it is important to strengthen not only the onshore grid, but also to lay power export cables and install a substation some 35 km away from the shore.

The third important aspect is the issuing of permits. By establishing a so-called one-stop-shop, the permit issuance procedure would avoid bureaucratic or administrative obstacles to the implementation of the project and the work of the successful developer could proceed smoothly.

“The list of preparatory projects for offshore wind energy development includes some long and complex processes. However, the decisions the institutions have made to consult with experts, examine good practices, and to share information on a regular basis is giving us a lot of optimism. At the same time, we are starting to notice interest in the emerging opportunities in Lithuania from foreign companies with extensive experience in offshore wind energy, including Germany, Denmark, the Netherlands and Belgium,” said Radavičius.