Energy islands: How do we make them cost-competitive?

The concept of energy islands entered the spotlight when Denmark unveiled its ambitious net zero vision in the climate agreement for energy and industry in 2020. The plan outlined two energy islands, including an artificial island in the North Sea with a capacity of 3 GW that could be expanded to 10 GW.

Since then, the North Sea has captured the attention of nations looking to reshape the future of renewable energy production. European countries have settled on ambitious initiatives to harness the North Sea’s offshore wind potential and Belgium announced the construction of its own artificial energy island. The plan for the Danish North Sea energy island is maturing slowly as the initial concept is now being re-evaluated. As these projects take shape, attention turns to the broader context of energy islands and their profitability.

We asked John Ammentorp, country market director for Ramboll’s energy division in Denmark, about the prospects and challenges of making energy islands cost-competitive.

John Ammentorp: First, it’s about making energy affordable. Energy islands serve a strategic purpose, acting as near-shore environments as we explore areas farther away from the coast. By placing wind farms closer to the energy islands, we reduce complexity and cost, for example, by avoiding or minimising the need to lay down lengthy underwater cables to the mainland.

Secondly, it’s about flexibility and transporting energy where it’s needed the most. As more renewable energy is being deployed it is difficult to balance production and consumption. Energy islands can accumulate surplus energy during periods of abundance. When demand peaks, energy can be distributed where needed most urgently.

Developing and operating energy islands leads to costs across several dimensions. In terms of capital expenditures (CAPEX), we have costs related to the construction of the physical infrastructure, including the platform or artificial island, and the electrical infrastructure for power generation and transmission. Another dimension is operational costs, which depend on various factors including the specific design, technology used, geographic location, and the scale of the project.

Lastly, we have the technological development costs, such as high-voltage direct current (HV/DC) equipment and Power-to-X.

Scalability and flexibility are key to managing risks and uncertainties

Energy islands require huge investments. Their cost-competitiveness is dictated by risk reduction and diligent management of uncertainties. The key lies in developing standardised models that serve as the foundation for scalable solutions evolving in tandem with the market dynamics.

It’s important to adapt and leave space for integrating emerging technologies if the market suffers drastic changes. A modular approach keeps CAPEX costs under control and allows for adjustments to the project’s scope and scale. To achieve this, we need a strong supply chain and a shared understanding of how we make these projects viable.

Yes. Depending on how ambitious the project is, there are several configurations to consider. In many cases, simplicity may be key, involving an energy hub with one or more platforms. There is the option of building an artificial island, which has potentially more advantages in terms of hosting substantial capacities and large-scale Power-to-X technologies for the production of e-fuels. However, the artificial island approach has inherent risks because committing to its construction requires confidence in the full realisation of the projected capacity. Unlike jacket foundations, an artificial island is more difficult to scale over time, making accurate projections critical to ensure the long-term viability of the business case.

The future lies in technological innovation

Initially, a well-defined model serves as the blueprint, but technology is not static. Continuous research and development for the HV/DC equipment is important at the moment. Solutions that reduce the size of the HV/DC equipment will have an impact on the weight of the platform and the amount of steel used for its construction. The less steel we use, the less expensive it becomes both in terms of materials as well as in terms of transportation and installation of these heavy components.

Green hydrogen and e-fuels will also play a crucial role as it is cheaper to transport high volumes of energy through pipes, rather than cables.