There were no bids for the large offshore wind supply in the North Sea. Zero. What causes it?
It depends, among other things, on together with the fact that great uncertainty has been created in the market due to the government's stop-and-go policy of the past year: Last year, the open-door scheme was abruptly shut down, which gave wind turbine companies the opportunity to set up offshore wind after a first-come, first-served principle, thus closing the door to 23 GW of additional offshore wind and creating new uncertainty in the market. Since then, new requirements were set for state co-ownership, tighter delivery times and lengthy mapping, which weakened the supply as a business case. Yes, there have also been additional costs in the wind turbine market, which since 2022 has struggled with increasing inflation throughout the value chain, but it is getting under control.

Last year, the German state received a total bid of DKK 94 billion. DKK from companies that want to set up 7 GW of offshore wind in the Baltic Sea, so if we had approached the process like the Germans and stuck to a reformed open-door system, instead of delaying and bureaucratizing the tender, Climate Minister Lars Aagaard would hardly stand around inventing bad excuses now. It is deeply disappointing that the Danish offshore wind adventure has come to a standstill. It damages the wind turbine industry, and the politicians should have red ears.

Lobbyists in the industry and the hydrogen business now claim that the companies cannot get finance in the wind projects because there is no clarity about the hydrogen pipeline to Germany. They are therefore pushing to get the state to put its hand on the stove here and provide money or state loan guarantees to build an expensive new hydrogen infrastructure. They do this because the green hydrogen produced in electrolysis plants will swallow large amounts of green electricity from the sea wind.

Havvinden's business cases cannot be fixed with a hydrogen tube

But the equation hardly holds. In reality, it is very uncertain that a good business case can be created for exporting large quantities of green hydrogen with a hydrogen pipe to Germany and spending up to DKK 130 billion. DKK over 15-20 years to build a new hydrogen infrastructure across the border. And there are several reasons for this:

Firstly: Green hydrogen cannot compete with direct electrification because there are large conversion losses compared to the technological alternatives powered by direct green electricity. Even a number of the heavy and energy-intensive industries, such as aluminum and steel, appear to be electrified, and up to 92-98 per cent. of Europe's industry can be powered by green electricity. Even innovative cement factories are on the move. We will see a price race between direct electricity and hydrogen, with the latter losing out. If nations invest in building large, heavy hydrogen economies and a heavy hydrogen gas infrastructure, they will be crushed in the global competition by the nations that, among other things, China puts green power into the economy.

Secondly: Hydrogen should be used sparingly and to a limited extent. We will need green hydrogen to produce the next generation of e-fuels for air and long-distance shipping, for e-fertilizers and the chemical industry. When you produce these green fuels with green electricity, it effectively corresponds to an indirect electrification of air and maritime transport, which can eliminate fossil fuels. But green hydrogen is very expensive to produce, and i.a. therefore, it should not be used in road transport and in the heating sector, because here the electrical solutions, which are much cheaper, win

Thirdly: Price always makes a difference. Green hydrogen is several times more expensive than fossil hydrogen, so it can only manage on the market with heavy government support if much higher CO2 taxes are introduced or the EU makes even tougher displacement requirements.

Fourthly: Competitive pressure challenges the business case for exporting green hydrogen. Although Denmark has enormous wind resources in the North Sea, green hydrogen from Denmark can hardly compete with the price of green hydrogen from Spain, France and North Africa, which not only have large amounts of wind energy, but are also enriched with much larger solar resources. Several analyzes show that green hydrogen from Denmark can be more expensive than, for example, green hydrogen from Spain, Polish onshore wind or Dutch offshore, and the Germans are hardly so stupid that they will buy more expensive hydrogen from Denmark if they can get it cheaper from other countries ?

Fifth: Localization is best. Global hydrogen production today is highly localized because it is both expensive, difficult and risky to transport hydrogen over long distances. It is the world's smallest molecule, and the risk of leakage – with fatal climate effects and major health risks – is significant. It takes three times as much energy to transport hydrogen as gas, and over a 30-year period, according to energy expert Paul Martin lose at least 10 times as much energy by transporting hydrogen over long distances as by sending green electricity through high-voltage lines.

Sixth: The German chemical industry is expected to demand a lot of green hydrogen in the future, but the problem for the Danish offshore business case is that land-based solar and wind in Germany are cheaper in lifetime costs than Danish offshore wind. The Danish state should not waste money on a hydrogen pipeline across the border to service the German chemical industry or Dutch refineries, because there does not seem to be a solid market pull or a sensible business case for it. Also in the future, it will be more cost-effective for the Germans and the Dutch to set up more wind turbines and solar cell systems - what they currently does at a much faster pace than Denmark – and then produces the green hydrogen locally where it is to be used. Likewise with Denmark.

Seventh: We need more green hydrogen in Denmark, so don't export the molecules. In the Green Transition Denmark's climate and energy plan for a fossil-free Denmark in 2040, we propose that more green hydrogen must be produced in Denmark, but that it must be used to locally produce e-fertilizer and e-fuels for the ships and aircraft on the long distances that bunker energy in Denmark. Highly localized industrial clusters should be built – e.g. in Esbjerg, Åbenrå and a few other places - where local production of both renewable energy and e-fuels can be scaled up in strong industrial clusters. It will also ensure more Danish jobs and more green value creation in areas that may otherwise be challenged by emigration to the larger cities. Calculations carried out by EA Energy Analysis for RGO show that in 2040, Denmark must produce approximately 90 petajoules of green e-fuels in order to decarbonize Danish ships and planes abroad. At the same time, the advantage is that it is much easier and cheaper to export e-fuels than the raw hydrogen molecules, if the demand is there in the market.

How to solve it: Put turbo on the electrification

So how to create a better business case for more offshore wind in Denmark? There is another, faster and more direct way than hydrogen to create increased demand for green electricity, and that is the direct electrification of all sectors. That transition should be accelerated, and here the politicians can make a big difference with forward-looking regulations.

Only 19 per cent of Danish society is electrified today, and that electrification has been stalled for the last two decades. One of the reasons see i.a. appears to be that green electricity has paid higher taxes, charges and grid tariffs than fossil fuels - at least if the latest figures published by European Energy are to be believed. Another reason is that massive government support has been given to the burning of wood biomass and biogas, which prolongs the combustion society. In this decade alone, over 30 billion is given. DKK in state support for biogas, and from 2022 to 2029 biomass burning will receive almost DKK 5 billion. DKK in direct state aid. That form of state support distorts the market in favor of combustion energy at the expense of the green power from renewable energy. And that delays the electrification of Danish society.

More than half of Denmark's energy consumption is still fossil, and if you add heating biogas and biomass, it is still up to 87 per cent. of all energy in Denmark that is burned. Only 13 per cent comes from completely clean energy solutions such as solar and wind energy, geothermal energy, hydropower and heat pumps. In the future, Denmark's fossil energy consumption and power plants should be electrified, which is also more efficient, as large energy losses are avoided in the process. In rough figures, it will require us to use three times as much green electricity in the future if we are to convert the existing fossil and biomass consumption into electricity. If this Danish electricity consumption is to be covered by offshore wind alone, one can safely list the 23 GW of offshore wind that was already in the open-door pipeline, which the government unfortunately slammed the door on.

The timing is important, and the expansion will realistically take place in several stages. The large energy islands in the North Sea and Bornholm have now been postponed because the project economics have become enormously expensive. There is no reason to cry about that. The construction does not fit together. The state does not have to pay for the expansion with offshore wind. Instead, you can choose a market-based development without requirements for state co-ownership and create a new model for profit sharing. Instead of running strict retail management on the part of the Danish Energy Agency, we can allow the developers of the renewable energy to bid themselves with the solutions in relation to capacity, net coupling and turbine density, as long as they meet set requirements for the environment and biodiversity. It is a new kind of open-door model, and Germany has shown the way, and they have received the European Commission's acceptance that it is also within the competition rules.

The wind developers must have a business case, and here the politicians have a very important role. It is not enough to make airy and hopeful future promises from Esbjerg to Marienborg. You also have to do your homework. Here, it is urgent above all to speed up the electrification of Danish society, so that the demand for green electricity increases in the coming years. We need to get out of the current stalemate. Politicians can start by removing all fossil subsidies, introducing a climate tax on wood biomass, lowering electricity taxes more and letting the state co-finance part of the electricity grid – as is also done in Germany. And then you should quickly clean up all the crooked support schemes that today massively favor the burning of wood biomass and biogas at the expense of solar and wind energy, heat pumps, geothermal energy and energy storage. And the double taxation of batteries should be removed, so that it becomes attractive to invest in future energy storage on batteries.

Far-sighted and proactive regulation is needed. You can, for example, adopt a 2035 end date for piped gas to households with gas boilers, and now ban the sale of new oil and gas boilers. Biogas can be used better and provides higher value if, for example, it is used to produce the next generation of e-fuels in aviation. The gas must not be burned off in people's households, because there are good alternatives in district heating and heat pumps. You should also ban the sale of new fossil-fuel cars from 2025/26 or put extra high penalty charges on new fossil-fuel cars so that they are priced out of the market completely. Preferably quickly.

A 100 percent electrification of road transport will, according to RGO's calculations require approximately 18-20 TWh, and according to figures from EA Energianalyse, electrifying road transport towards 2040 is a profitable private business. If the state subsidy for biomass is removed, and a climate tax is introduced on biomass burning, it can boost the electrification of the heating sector. Thus, industrial heat pumps and electric boilers, powered by clean solar and wind energy, will have a fairer competitive situation, which is only fair, as they are clean green heating solutions. A faster electrification of the heating sector, industry, road transport plus agricultural and construction machinery can increase the demand for green power in the coming years, and thus provide a better business case for the developers who want to set up solar cell systems or wind turbines on land and at sea. It is high time that the politicians took action in this toolbox.

Add green power to Denmark's competitiveness

The direct electrification of these sectors will be economically advantageous and strengthen Denmark's competitiveness. Green electricity produced with solar and wind is already cheaper than fossil energy, and it is a unique opportunity that Danish politicians should not let go to waste.
Electrification of all sectors in Denmark is actually much more important than betting on hydrogen export via a hydrogen pipe, for which the industry's lobbyists want the state's help. Towards 2035, there may not be more than 4-6 GW of green hydrogen production in Denmark. Perhaps Copenhagen Infrastructure Partners and other players dream of raising the figure to perhaps twice as much, but right now it seems that there is no business case for it, as many green hydrogen products do not reach the decisive investment decision .

In round numbers, 6 GW of hydrogen requires approximately 24 TWh of green power, and not much more is needed to produce e-fuels for planes and cargo ships that refuel on Danish soil. So instead of fantasizing about that hydrogen tube and imagining the Danes that it will cause our wind adventure to run aground, the politicians should get into work clothes and turbocharge the electrification of Danish society. We must also invest more in expanding the electricity grid for our neighboring countries. In the future, we must sell even more green electrons to our partners in the EU community, who must begin to free themselves from the fossil fuels that are currently imported for over DKK 390 billion. euros per year.

If the green transition is to speed up, it requires a sharp focus on the most cost-effective measures and having them scaled up more quickly. In Danish climate and energy policy, too much time and too many state subsidy kroner are currently being wasted on green hydrogen export, pyrolysis and CO2 capture. But you can get much more climate effect for the money if you instead focus sharply on electrifying Danish society and arrange support schemes, taxes and charges so that they promote more solar and wind energy, batteries, heat pumps and geothermal energy.

This is a slightly edited version of a comment that Bjarke Møller has written for the magazine Ræson, and which was published in the magazine on Wednesday 11 December 2024