Europe Energy Review October 2022

By Tsvetana Paraskova

The energy crisis in Europe, exacerbated by Russia shutting down the key Nord Stream gas pipeline to Germany, and the EU’s plan to tackle the consequences of the crisis, once again dominated Europe’s energy scene this past month. A new gas pipeline from Norway to Poland was inaugurated, while more offshore oil and gas developments were approved in September. In low-carbon energy, Scotland unveiled its government programme, UK associations called for acceleration of renewables development, and companies announced wind, solar, batteries, and carbon capture projects.

Oil & Gas

Russia shut down in early September the Nord Stream gas pipeline to Germany, claiming technical issues with gas turbines at compressor stations and saying the pipeline would not open until the West lifts the sanctions against Russia which, Moscow says, currently prevent repairs of those turbines outside Russia.

At the end of September, Sweden, Denmark, and Germany suspected a sabotage at both Nord Stream pipelines which leaked gas in the Baltic Sea. Sweden and Denmark issued vessel navigation advisories, while Norway heightened the emergency preparedness for infrastructure, onshore, and offshore installations on the Norwegian Continental Shelf.

“Based on the information we have seen so far, much indicates acts of sabotage,” Norway’s Petroleum and Energy Minister Terje Aasland said on 27 September.

A day earlier, the Petroleum Safety Authority Norway (PSA) urged increased vigilance by all operators and vessel owners on the Norwegian Continental Shelf (NCS), after operator companies had recently given warnings and notifications of a number of observations concerning unidentified drones/aircraft close to offshore installations.

On the same day, the leaders of Norway, Denmark, and Poland inaugurated the Baltic Pipe natural gas pipeline from Norway to Poland via Denmark and the Baltic Sea. The Baltic Pipe project, running from the Norwegian sector of the North Sea, crossing Denmark from west to east and landing in Poland via the Baltic Sea, will bring gas from Norway to Poland. The benefits will go beyond Poland.

“The Baltic Pipe is a key project for the security of supply of the region and the result of an EU policy drive to diversify sources of gas. The pipeline will play a valuable role in mitigating the current energy crisis,” European Commissioner for Energy, Kadri Simson, said.

To tackle the soaring costs of energy for households and businesses, the European Commission proposed a cap on the revenues of companies that produce electricity at a low cost and a “crisis contribution” tax on fossil fuel companies. The Commission hopes the proposals – if approved – would raise 140 billion euros for EU member states to directly cushion the blow from the surging energy prices, European Commission President Ursula von der Leyen said in her State of the Union address.

The Commission also proposed an obligation for the EU to reduce electricity consumption by at least 5% during selected peak price hours.

The plan to cap revenues may fall short of the intended goals, at least where renewable energy ambitions are concerned, Rystad Energy said in research.

“The renewable industry is Europe’s best shot at producing affordable and secure power, but this policy reduces the private sector power providers’ ability to invest,” said Victor Signes, analyst renewables at Rystad Energy.

“The renewable power industry is not only helping to keep the lights on in Europe, but also picking up the bill too. If renewables are to take their proper place in Europe’s power mix, they will need support in turn in the not-too-distant future,” Signes added.

Commenting on the planned EU intervention on the energy market, Fabian Rønningen, senior power analyst at Rystad Energy, said: “Despite the unprecedented size and scale of the intervention it is designed to be short term and does not address longer term supply issues. The stage is set for bigger and potentially more forceful interventions as Europe continues to decouple its energy supply from Russia.”

The Danish Energy Agency approved on 21 September a plan for development of the Solsort oil and gas field west of Denmark’s coast in the North Sea. The expected start of production at the field, operated by Ineos, is at the end of 2023. The Solsort field is expected to account for 12% of Danish oil production and 5% of gas production in 2024.

Low Carbon Energy

First Minister Nicola Sturgeon said on 6 September that Scotland “will do all we can to speed up our development and use of renewable energy.”

This autumn, Scotland will seek approval for the Fourth National Planning Framework, which will support the delivery of renewable energy projects, Sturgeon said in a speech presenting the Programme for Government 2022-2023.

“We will press the UK government to speed up fundamental reform of the energy market and break the link between the cost of gas and the price of renewable and low carbon electricity,” she added.

The UK’s North Sea Transition Authority (NSTA) received 26 bids in the UK’s first-ever carbon storage licensing round. A total of 19 companies expressed interest in the 13 areas on offer, which are off the coasts of Aberdeen, Teesside, Liverpool, and Lincolnshire, NSTA said on 22 September. The NSTA will now evaluate the bids with a view to awarding licences in early 2023. The first carbon injection could take place as early as 2027, the authority said.

RenewableUK urged in early September the new Prime Minister Liz Truss to speed up the roll-out of new renewable energy projects to help bill payers and boost the nation’s energy security.

“Industry wants to work with Government on our plans to break the link between the exorbitant cost of gas and the price of electricity. This will enable billpayers to benefit more from the vast amounts of low-cost electricity being generated by wind and other renewables, by no longer allowing gas to call the tune in the energy market,” RenewableUK’s CEO Dan McGrail said.

77% of people throughout the UK think the new Government should use new wind and solar farms to reduce electricity bills, and 76% of people support building renewable energy projects in their local area, a poll by Survation commissioned by RenewableUK showed.

The overall pipeline of onshore wind projects – operational, under construction, consented, or being planned – in the UK has increased by over 4 gigawatts (GW) in the last twelve months, from 33 GW in October 2021 to 37 GW today, a new report by RenewableUK showed in early September.

The current pipeline of blue hydrogen projects is expected to exceed the 2030 targets in the UK, according to an analysis from Westwood Global Energy Group. Blue hydrogen projects account for over 16 GW of total announced hydrogen capacity in the UK and Norway, equivalent to around 90% of the hydrogen projects total for the same region. The UK alone accounts for 13 GW capacity.

“The scale of blue hydrogen developments makes them a necessity to ensure 2030 regional targets are met – in fact, the current pipeline of announced capacity for UK projects would exceed targets if all achieved their planned start-up dates,” said David Linden, Head of Energy Transition at Westwood.

In the EU, the Commission approved in September “IPCEI Hy2Use”, the second Important Project of Common European Interest in the hydrogen value chain. The project involves 29 companies and 35 projects from 13 EU Member States: Austria, Belgium, Denmark, Finland, France, Greece, Italy, the Netherlands, Poland, Portugal, Slovakia, Spain, and Sweden. IPCEI “Hy2Tech” is focused on the development of novel technologies for the production, storage, transportation, and distribution of hydrogen as well as applications in the mobility sector. The Member States will provide up to 5.2 billion euros in public funding, which is expected to unlock additional 7 billion euros in private investments.

In company low-carbon energy projects, Flotation Energy and Vårgrønn announced an offshore wind partnership to support oil and gas decarbonisation in Scotland. Together the partners will generate renewable energy from offshore wind farms to enable the electrification and decarbonisation of offshore oil and gas installations in the North Sea. Any excess power will be made available to benefit UK consumers, the firms said.

Carlton Power has chosen to build its third hydrogen hub in the UK on land within the Langage Energy Park, the first of its kind in Devon and Cornwall. The 10-MW hydrogen hub project will provide local companies - for example energy intensive industries or those with transport fleets – with easy access to hydrogen fuel.

Equinor and Wintershall Dea have agreed to pursue the development of an extensive Carbon Capture and Storage (CCS) value chain connecting continental European CO2 emitters to offshore storage sites on the Norwegian Continental Shelf. An approximately 900-kilometre-long open access pipeline is planned to connect the CO2 collection hub in Northern Germany and the storage sites in Norwayprior by 2032.

Horisont Energi and Neptune Energy signed a Memorandum of Understanding (MoU) to develop the Errai Carbon Capture and Storage (CCS) project in Norway.

France-based hydrogen producer Lhyfe opened the world’s first offshore renewable hydrogen production pilot site at the end of September. Lhyfe will produce the first kilograms of renewable green hydrogen at quay and then at sea, operating automatically, in the most extreme conditions. The company has voluntarily set the bar high by installing its production unit on a floating platform, connected to a floating wind turbine, Lhyfe said.

Saipem and Siemens Energy have signed a Memorandum of Understanding (MoU) to jointly develop a concept design for a 500 MW high-voltage alternating current (HVAC) floating electrical substation for use in offshore wind farms.

“The new joint solution will significantly optimize critical technical parameters, such as weight, electrical efficiency, and asset longevity, thus lowering the production costs and enabling an unprecedented number of countries to benefit from large-scale offshore wind generation,” said Agustin Tenorio, Vice President Transmission Systems at Siemens Energy.