The North Sea, Europe’s stormiest body of water, could soon become the center of Europe’s offshore wind industry. This would be a long-awaited economic and geopolitical boost for all of Europe.
Take a Meccano metal construction kit and imagine it was made for gods. With wings as long as Big Ben, rotors and tower parts the size of a school building, shafts and generators so heavy they have to rotate every 20 minutes to avoid being crushed by their own weight: together they cover an area of about 150 soccer fields. Stacked together, they create something as imposing as the Eiffel Tower, but with greater utility: wind turbines for the North Sea.
Appearance of Esbjerg, hub of the European offshore wind industry. A good two-thirds of all wind turbines off the Danish coast come from the port city with 72,000 inhabitants – enough to supply 40 million European households with electricity. In Esbjerg, the tinkering has only just begun.
The municipal port operator is planning to triple the capacity required for wind power projects by 2026. Local engineering offices, which in the past mainly supplied the fossil energy industry, are now working for the wind power industry.
Meta bought 212 hectares of farmland outside of Esbjerg to build a data center powered by renewable energy for its social networks. Meanwhile, cables are being laid on the high seas, which are to be used to handle 30% of international data traffic in Norway. The mayor of Esbjerg traveled as far as Vietnam and Washington, D.C., as part of this success story.
With strategic skill and a little luck, a merger in Esbjerg would be conceivable, which could make a new economic base in the North Sea possible. For Europe, this opens up the option of achieving ambitious climate goals and dissolving the energy supply of autocratic states like Russia under Vladimir Putin.
Its newly created corporate champions are Europe’s best – and perhaps last – chance to stay relevant on the globe. In addition, they could change the political and economic balance of the continent with an alternative to the sputtering Franco-German economic engine.
The North Sea has always been an area of great economic importance. Bordering six European countries – Belgium, Great Britain, Denmark, Germany, the Netherlands and Norway – numerous important sea routes meet here. The water’s strong tides wash nutrients onto the shallow seabed, favoring fishing.
After the discovery of rich oil and gas deposits in the North Sea basin in the 20th century, the production of Great Britain and Norway peaked in the 1990s at 6 million barrels (approx. 950 million liters) per day – about half the production capacity of the today’s United Arab Emirates.
Brent, a Scottish oil field, gave its name to the global price benchmark. Now that the riches of the North Sea are coming to an end – and demand for what’s left is dwindling due to growing concerns about climate change – new and lucrative uses for the turbulent body of water are on the horizon.
The most important resource lies in the inexhaustible power of the sea: bad weather. With an average wind speed of ten meters per second, the North Sea is one of the stormiest bodies of water in the world. When The Economist visited Esbjerg, the wind was blowing twice as fast – enough to push the wholesale price of electricity towards zero. The bottom of the North Sea is mostly soft, which makes it easier to attach the turbines to the seabed (floating turbines have not yet been deployed on a global scale).
In addition, the water depth does not usually exceed 90 meters, which means that wind farms can be erected further away from the coast under better wind conditions. Ed Northam of investment firm Macquarie Group, which owns 40% of all UK offshore wind farms in operation, explains that offshore its turbines were operating at up to 60% utilization – while onshore they were only running at 30-40% of maximum capacity.
2022 was by far the busiest year in the North Sea with an auction of 25 gigawatts (GW). Tenders worth almost 30 GW are already planned for the next three years. Annual new connections are expected to grow from under 4 gigawatts today to over 10 gigawatts by the late 2020s.
At a meeting in Esbjerg in May, the European Commission and four North Sea countries agreed to commission 150 GW of wind power by 2050, five times the European and three times the current world output. In September, the same group and five other countries decided to increase it to 260 GW – the capacity of 24,000 large turbines. This ambition is made possible by applying Moore’s Law, which describes the exponential increase in computing power.
Three decades ago, the world’s first offshore wind farm – Vindeby in Denmark, consisting of 11 turbines – had a total capacity of five megawatts (MW). A modern turbine generates up to 14 megawatts, while a wind farm can count over 100 turbines. Thanks to more robust cables and transformers at sea for converting AC to DC, long-distance, low-loss transmission has become possible – and with it, the generation of more electricity over longer distances.
Several wind farms under construction now have a capacity of more than one gigawatt, the typical output of a nuclear power plant. Dogger Bank, a wind farm located between 130 and 200km off the UK coast and due to come online in summer 2023, will reach a record 3.6GW at full capacity in 2026.
Economies of scale reduce costs and make offshore wind energy competitive with other energy sources. In July, the UK awarded contracts for five projects, including Dogger Bank, at a price of £37 per megawatt-hour – less than a sixth of the country’s wholesale electricity price as of December.
Bad weather is not always a blessing: Unpredictability can affect the power grid. Technological advances and cost reductions, on the other hand, enable wind turbine operators to brave the elements. One of the possibilities is to expand the interconnected grids, initially between the farms and the mainland – so far most wind farms only have an inefficient land connection – but also between the farms themselves.
Half of the 3 GW tendered by Norway are to be equipped with the option of establishing connections to other countries. National Grid’s Phil Sandy predicts a future with complex subsea grids comparable to those on land.
Another use of variable wind power is to break down water molecules to produce “green” fuels such as hydrogen and ammonia. In May, the European Commission and representatives of heavy industry committed to increasing EU production capacity for electrolysers, which are used to split water, tenfold by 2025. In total, 10 million tons of renewable fuels could be produced by 2030. In addition, the Commission proposed the establishment of a “hydrogen bank” worth 3 billion euros to finance the projects.
And investors are delighted. Private equity firm Copenhagen Infrastructure Partners (CIP) announced in August it had funded a €3 billion fund to invest solely in hydrogen plants. A dozen projects have already been announced in Europe; of these, the three largest are expected to supply a total of 20 gigawatts of green energy.
According to Topsoe, a Danish company specializing in the development of such technologies, the total capacity of its orders is 86 gigawatts.
The future of such infrastructure envisages an archipelago of “energy islands” in the North Sea, housing wind turbine maintenance personnel, pooling electricity and producing hydrogen in bulk for transport to land by ship or pipeline. According to the research company SINTEF, ten projects of this type are already being discussed. North Sea Energy Island, an artificial atoll around 100 km off the Danish coast, is to be tendered in 2023 and will act as the headquarters for ten surrounding wind farms with connections to neighboring countries.
One of the bidders, the joint venture between Ørsted, the Danish world leader in offshore wind energy, and ATP, a $150 billion local pension fund, envisages a modular design, with components manufactured onshore and assembled at sea. “We assume that the plant will still be functional in 100 years,” explains Brendan Bradley of engineering firm Arup, which is advising on the tender.
Thomas Dalsgaard from the competing consortium CIP assumes that the offshore production of green fuels will not only help to relieve the grid, but will also enable savings: hydrogen pipelines are only one-fifth as expensive as power lines.
There is more to the new North Sea economy than just the energy sector. In addition to electricity and hydrogen, carbon dioxide will also flow across the bottom of the North Sea. In some branches of industry such as cement production or the chemical industry, on the other hand, decarbonization is difficult or even impossible. However, CO2 can be captured and pumped into the depleted gas reserves of the North Sea.
In the past, this type of carbon capture and storage (CCS) was considered unattractive because it required high costs and was unpopular with environmentalists who feared an increase in the lifespan of fossil fuels. In the meantime, as with wind energy, costs have fallen, political resistance has eased and the number of projects is increasing.
A Rotterdam project called Porthos is now planning a pipeline that will connect Europe’s largest port to an empty offshore gas field via a compressor station. While a court recently suspended the project’s launch, Dutch regulators have already given it the go-ahead. After commissioning, around 2.5 million tons of CO2 would be absorbed annually over a period of 15 years – this corresponds to almost 2% of Dutch carbon emissions.
Similar plans are also being pursued in the port of Amsterdam. In the far north near the Norwegian city of Bergen, energy company Equinor and its partners have already completed work on a CO2 injection well as part of the Northern Lights project. According to Guloren Turan from the think tank Global CCS Institute, there are now more than 70 such systems in various stages of development in Europe.
One of the valuable resources increasingly traversing the North Sea is information. Following one of the newer transatlantic underwater data cables (called Havfrue, in English: mermaid) that land in Esbjerg and turn right at a fork in the middle of the North Sea, you reach the southern Norwegian city of Kristiansand. There is the N01 campus, which according to its operator Bulk Infrastructure is the “world’s largest data center campus operated with 100% green energy”. “We want to build a platform for sustainable digital services,” explains company founder Peder Naerbo.
The countries of the North Sea coast are an excellent place for storing and processing data. Low electricity prices make it possible to process numbers more cheaply, which usually result in high energy costs. The cold climate allows data centers to be tempered with outside air instead of expensive cooling systems. The location also has a highly skilled workforce, stable institutions and some of the most advanced data laws in the world.
Latency, i.e. the time it takes for data to be transmitted in and out of the computing clouds, poses ever smaller challenges as a result of constantly evolving technologies. This means that digital workloads can be processed in increasingly remote locations. And data centers are also pushing the limits in other European countries.
In 2021, data centers and other digital applications in Ireland accounted for 17% of Ireland’s electricity consumption. In order to prevent supply gaps, the Irish state energy supplier EirGrid will no longer supply electricity to new server farms.
According to data provider TeleGeography, the number of North Sea cables laid has increased by 13 since 2020, compared to just five more in the whole of the 2010s. Data centers are also experiencing a resurgence as major cloud providers commit to carbon neutral supply chains. The two major cloud providers Amazon Web Services (AWS) and Microsoft Azure have set up server farms in the Nordic countries.
Meta is located outside of Esbjerg. Long-established companies are also relocating a large part of their data processing to the north. Mercedes-Benz and Volkswagen operate their own data centers in former Norwegian mines, where they simulate wind tunnel and crash tests for their cars. Estimates by consulting firm Altman Solon suggest that demand for data centers in Scandinavia will grow by an average of 17% per year through the end of the decade.
A greater concentration of the European economy in the north seems realistic. “Energy in abundance attracts industry,” says economic historian Nikolaus Wolf at Berlin’s Humboldt University. The same happened in the early 19th century when the glut of hydroelectric power helped attract the cotton industry to Lancashire. Wolf and Nicholas Crafts of the University of Warwick calculated that by 1838 a 10 per cent drop in hydroelectric power in Lancashire would have resulted in a 10 per cent loss of jobs in the main textile industries.
Today, energy is easier to distribute via grids and pipelines than it was during the industrial revolution. The existing industrial centers across Europe have their own appeal. If cement kilns were moved to the North Sea coast, limestone would have to be transported there and cement back to the customers, which would make the process uneconomical (and also not very climate-friendly until zero-emission trucks are introduced).
Huge steam crackers, which break down hydrocarbons into smaller molecules in chemical plants, are also not likely to be relocated north any time soon: They require too large investments, are too integrated into existing supply chains and are already electrically powered.
In some industries, however, Wolf’s principle is still relevant – and could also benefit other northern locations that are not directly on the North Sea. Further north in Narvik on the Norwegian Sea, Aker Horizons, a company investing in renewable energy, is planning to build a green industrial center powered by offshore wind power.
In the Swedish town of Boden, near the east coast of the Scandinavian peninsula, H2 Green Steel is building a new steel mill, the first in Europe for half a century. It is not to be operated with coal or natural gas, but with green hydrogen, which is generated on land in one of the largest electrolysis plants in the world with the help of wind and hydropower.
In addition to exporting steel, H2 Green Steel also wants to export its sponge iron, an intermediate product that has already absorbed much of the energy needed to make steel. For Managing Director Henrik Henriksson, this would mean dividing the steel industry in two.
The energy-intensive parts of the process would be relocated to where they can be carried out most efficiently: in close proximity to renewable energy sources. Anything that requires more work and knowledge would remain in the core areas of the European steel industry, such as the Ruhr area.
In the German North Sea city of Wilhelmshaven, state-owned energy company Uniper has just completed Germany’s first liquefied natural gas (LNG) import terminal to replace some of the Russian gas that no longer flows through pipelines from Siberia. In addition to the LNG terminal, the company plans to set up crackers to produce hydrogen from ammonia.
In another section of the port near a disused coal-fired power plant, Uniper will build its own hydrogen plant and provide energy-hungry companies with sufficient space. “Wilhelmshaven will play an important role as the place where green energy comes ashore,” says Holger Kreetz, who is responsible for the management of the Uniper plants.
Other companies flocking to the north include makers of batteries for electric vehicles – these too require a lot of energy – and wind turbines, whose supply chain has recently faltered. The world’s largest turbine manufacturer Vestas will close a factory in China and reopen it in Poland to take advantage of the proximity to a new wind farm on the Baltic Sea.
As with any transition, there are certain problems. McKinsey’s Christer Tryggestad, another consultancy, warns that renewable energy will be cheaper elsewhere. Instead of investing in and around the North Sea, sunnier areas like the Middle East or Spain are better choices for companies. Not everyone is convinced that the EU can achieve its ambitious offshore wind development goals.
Vestas and other turbine manufacturers are already complaining about the lengthy approval times for new wind farms, which can take a decade or more. Offshore wind companies are warning they could soon run out of the people and machinery they need to keep their customers happy.
A final hurdle awaits on the other side of the Atlantic. President Joe Biden’s Inflation Control Bill will provide $370 billion in subsidies and tax credits for climate-friendly products and services if they’re made in America. The EU now fears that the subsidies could lure investors away from its shores. Whether the law violates international trade rules is currently being examined.
If the tightrope act succeeds, the new economic region on the North Sea is likely to have a significant impact on the continent. With the shift of Europe’s economic epicenter to the north, the political epicenter will also shift, predicts Frank Peter from the German think tank Agora Energiewende. A new distribution of power within the neighboring countries could be the result.
Coastal Bremen, one of Germany’s poorest states, could gain influence at the expense of wealthy but inland Bavaria. At the European level, Germany and France, who have used their industrial might to shore up the European Coal and Steel Community (ECSC), the precursor to the EU, might face a new bloc, that of Denmark, the Netherlands and – outside the EU – Great Britain and Norway is cited.
The thought of a de facto community for wind power and hydrogen on the North Sea may cause resentment in France and Bavaria. It would be a long-awaited economic and geopolitical boost for all of Europe.
This text first appeared under the title “Can the North Sea become Europe’s new economic powerhouse?” and was translated by Cornelia Zink.
*The post “How North Sea Storms Can Make Our Electricity Cheaper and Cleaner” is published by The Economist. Contact the person responsible here.