The Polish Offshore Wind Sector Deal signed on 15 September 2021 is another milestone in the development of this sector in Poland, next to the Act on the Promotion of Electricity Generation in Offshore Wind Farms of December 2020. This article is part of a series of comments on the main challenges to be met in order to make the plans contained in the sector deal a reality.
Rafał Miętkiewicz, Tomasz Chyła, Ignacy Łukasiewicz Institute for Energy Policy, Rzeszów University of Technology:
According to the announcements made by governmental bodies in “Energy Policy of Poland until 2040”, by 2030 offshore wind energy will be of 5.9 GW capacity. The first wind installations in Polish maritime areas are to be created in 3 years (year 2024). By 2040 the level of 11 GW is to be reached. The National Reconstruction Plan provides the support of offshore wind energy as an important element in the development of the country’s economic potential, with investments of EUR 3.25 billion (including EUR 437 million for the construction of the External Port of Gdynia).
Offshore wind energy, which is to play the role of one of the pillars of the national energy system in the future, is the subject of numerous discussions, seminars and conferences. They resulted in comments and analyses, which focuses mostly on partial problem areas. The polemics lack, in the opinion of the authors, a clear indication of the interdisciplinary character of the undertaken subject matter. It means the need for a holistic approach to the problems of offshore wind farms in the Baltic Sea, which will have a strong impact on many areas of the functioning of the state. Such an understanding of the subject will allow for an effective use of multidimensional opportunities of civilization and to carry out a fair economic transformation after building resilience and security of the state and its citizens.
The analysis aims to identify and discuss key areas that pose serious challenges to efficient implementation of the intended visions, and achievement of strategic objectives in building national energy security based on maritime potential. A thorough observation of investment projects aimed at the development of the offshore wind energy sector allows to identify a few problem areas, on which should be the focus of efforts to eliminate the barriers or reduce risk.
The most important challenges include;
- delays in administrative and legislative procedures,
- coordination of project implementation at the national and international level,
- pace of development of offshore wind turbine technologies,
- availability of installation and servicing ports mainly at the first stage of the stage of investment execution,
- availability of installation and service fleets and specialized national staff to support it,
- ensuring the assumed level of local content,
- perception of Polish maritime areas as a “reference market”,
- increase of risks and costs on the side of investors,
- the need to correlate the development of offshore wind energy with visions of decarbonization of industry and transport based on hydrogen technologies,
- safety issues of offshore wind farms, including elements of cyber security,
- insufficient pool of human resources, both at the professional level and higher education and lack of training centers.
a) Administrative and legislative challenges
One of the main challenges faced by companies involved in the development of offshore wind energy are delays in the preparation of projects and administrative procedures. It should be mentioned that this is not only a Polish domain. In one of the WindEurope reports, it was indicated that administrative issues in Europe contribute to the weakening of the projects’ realization, aimed at achieving the assumed 55% CO2 reduction by 2030. The average rate of installation of new capacities is 15 GW per year vs. the average rate of installation of new capacity is 15 GW per year, while the required level is 27GW per year. In case of Poland, a major challenge is the administration of projects that are being implemented for the first time in the country’s history. The lack of executive acts, procedures and staff experienced in their implementation may cause many months of delays in work schedules.
The long awaited Act on the Promotion of Electricity in offshore wind farms (Journal of Laws of 2021, item 234), which came into force at the beginning of 2021 introduced significant changes in the Act on Maritime Safety, dated 18.08.2011. The amended regulations specify the types of expertise which the manufacturers are obliged to present for approval to the Director of the maritime office, the Minister of National Defence and the minister in charge of internal affairs. At the same time, the Act imposes an obligation towards certain ministers to specify detailed scope of the above expert opinions, qualifications and experience of persons authorized to prepare them. The Polish Wind Energy Association has already pointed out the need to make first amendments to the provisions of the discussed “Offshore Act”, aimed at reducing the risk for investors, which should ultimately lead to lower prices of clean electricity supply to consumers. The important matter, considering the opening of the investment potential of the Baltic Sea as well as rapidly changing regulatory and legal environment, and dynamic development of technology, is the need to increase the frequency of updating the Maritime Area Development Plan (every 5 years instead of every 10 years).
Another important aspect at the legislative level is to ensure that Polish companies participate in the supply chain during the construction and exploitation of Polish offshore wind farms. On 15 September 2021, “Sectoral agreement for the development of offshore wind energy in Poland” was signed in Warsaw. It was signed, among others, by representatives of government administration, investors, entities participating in the supply chain for offshore wind. The signatories were also representatives of organizations acting for the benefit of offshore wind, local government units, and entities related to widely defined education (from higher education, through research centers to certification bodies). In the assumptions and perception of market participants and future beneficiaries of these multi-billion investments, this Agreement is to secure the “Polish local content”, inter alia, by ensuring stable and favorable conditions for development of the domestic sector of production and services for offshore wind. Due to the fact that this is an agreement which has no legal basis, it should be recognized that in order to make this “wishful thinking” a reality, one should consider making changes to such legal areas as the Public Procurement Law, in order to, by example of Western European countries (e.g. Great Britain, Denmark, Germany), support domestic industry in business processes related to the Polish offshore wind farms project. In Poland, despite the lack of offshore wind farm investments so far, there are many enterprises manufacturing fragments or parts of onshore and offshore turbines for export. It is estimated that there are about 100 companies, which can
supply up to 50% of the key components needed to build offshore wind offshore wind farms (and in the whole supply chain about 400 Polish entities). The offshore energy sector generates demand mainly for products of the shipyard, construction or electric power industries, and metallurgy. Moreover, it provides developmental opportunities for financial and insurance sectors, industries related to risk analysis auditing, and the creation and management of surveillance and monitoring systems.
In order to take advantage of these enormous opportunities for the economy (which needs development stimulus while recovering from the covidium crisis), legal and administrative solutions, in opinion of some expert groups, should be directed at increasing the competitive advantages of Polish industry.
b) Multi-level coordination
Efficient and collision-free execution of offshore wind farm construction projects in Polish maritime areas requires coordination of works both at the national and international level (Baltic and and European). This includes ensuring the availability of resources (fleet, ports, production of farm components, cables, etc.) as well as bringing the power of individual projects ashore and further distributing it to final consumers (integration into the national energy system). At this point, it is worth noting that the Baltic countries have good experience when it comes to cooperation on many levels, as exemplified by the numerous initiatives that have been undertaken in the Baltic region. Relationships and trust built over the years at the national level can result in effective implementation of the provisions of the Baltic Declaration. In the context of regional cooperation, it is worth mentioning the large potential for development of offshore wind energy in the Baltic countries (the capacity of offshore wind estimated to reach by 2030: for Sweden about 0.6 GW, Finland between 0.3 and 0.5 GW, Latvia and Estonia about 1 GW, Lithuania 0.7 GW). Those having no technological advantage in these areas (like Germany or Denmark) will be looking for a co-operator.
Poland may become such a co-operator due to the most ambitious plans. The more so as the countries of the so-called Pribaltica through a connection with Poland will be synchronized with the European system of networks, which will obviously pose a challenge as far as the demand for reserve capacity, balancing the market and reducing the risk of power supply interruptions is concerned, yet will still be an undeniable argument for closer cooperation, in the context of, for example, building energy security of these countries in the face of growing political pressure from Russia. The aspect of integration of offshore wind investments with the power grid is extremely important in the perspective of connecting a huge volume of capacity. This involves both the construction and extension of the existing grid National Power System. This implies both the necessity to modernize and expand the grid and the construction of next transmission substations, which are scarce in Pomerania. Integration with the power grid will consist not only in taking the cables out of the sea, but also running them several dozen kilometers to the nearest transmission substations. The issue that may have a negative impact on the timely completion of offshore wind projects in addition to problems with coordination of the projects may be the lack of confirmed sources of financing for connection and transmission infrastructure.
c) Ports and vessels dedicated to offshore wind energy
One of the main challenges there is to be faced by the development of offshore wind energy development in Poland is the lack of installation and service ports, which, apart from investments in hydrotechnical and in-port infrastructure, require admittance to access infrastructure. The problem of Gdynia as a destination installation port is a distant time perspective of the completion of the expansion of the External Port, indicated for 2028. The concept of using the areas of the Inner Port, developed in the form of a bridge solution planned for completion by the end of 2024, may turn out to be an expensive solution for potential investors, compared to cheaper locations in neighboring countries. When analyzing the plans to start building the first urbines justifies why PGE fears that the Danish port of Ronne (Bornholm) or the German port of Mukran (Rugen) may take over the role of the installation port (at least at the beginning of this investment). The solution itself may also be unprofitable for the Port of Gdynia due to higher costs of handling other goods, such as containers, for which there will not be enough space. The cost of preparing the service quays by weight, the huge turbines, shovels and support structures is much higher than for a quay dedicated solely to container traffic (which is regularly increasing in the ports of Gdynia and Gdansk). Hence it is reasonable to work out such long-term strategies that the investment cost returns in a 30-year time horizon. After this time, assuming constant technological development of the turbines, the so-called repowering of the farms will be carried out, which definitely justifies the necessity of having such a technical background and capabilities. Having an installation port in the perspective of providing services to the countries, that for economic reasons will not decide to build such, may prove to be highly profitable business-wise, and generate great profits from providing highly specialized services. Łeba and Ustka are to serve as service ports. Importantly, the investments will enable the use of these ports for maintenance works throughout the entire 30-year life cycle of the farms in the Baltic Sea. Władysławowo, which is looking for a way to reduce the negative effects of the economic transformation on marine fishery industry, may also become a participant. The positive aspect here is that Equinor has indicated Łeba as an exploitation port, which has been followed by a concrete decision to purchase a plot of land for the purpose of locating a service base.
Rapid progress in the development of offshore wind turbine technology resolves in shortage of installation infrastructure with adequate capacity. This problem is directly related to both availability of shore-based infrastructure and the installation fleet. The stabilization of technology in terms of size and power of individual turbines as well as standardization of vessel technical capabilities and liberalization of the approach of classification societies proves to be an indispensable element for the revival of orders for installation ships, thus meeting investment schedules. The anticipated limited availability of fleet on the market, which should be surely expected, will be influenced by high market dynamics related to the increasing volume of orders will be influenced by high market dynamics related to the increasing volume of orders in Europe (expected 30-fold increase of energy generation from wind farms in energy from wind farms in the European Union by 2050) or North America, as well as the current structure of the fleet, two-thirds of which consists of Chinese vessels on the growing Asian market. In contrast to the recent studies showing high profitability and fairly quick return of costs incurred from the construction of specialized vessels dedicated to offshore wind energy, the information about the increase of costs of acquiring new vessels even by 100%. This is caused, among others, by rising prices of main raw materials. The strength of Polish shipyards in such conditions should be, first of all, quality and punctuality of realized contracts. Taking into account PRS calculations, the Polish national offshore wind fleet should consist of several vessels designed for installation of foundations (TP-HLV), a similar number of jack-up turbine installation (HLJV), several cable-laying vessels (CLV), and several dozen service vessels (SOV/WTW, CTV) (table).
Table. Estimated (PRS) composition of the national offshore wind fleet with the order execution period for particular classes of units
|Unit type||Anticipated number of units
construction [million Euro]
of contract execution for
|TP – HLV||2 – 3||280 – 310||approx. 29|
|HLJV||2 – 3||340 – 365||approx.40|
|CLV||4 – 6||400-600||approx. 30|
|OSV/WTW, CTV||20 – 40||42 – 47||approx. 18 (CTV)
|Together||28 – 52||1 062-1 322|
Source: Based on: (Installation Fleet Operator for Offshore Wind Farms.Potential of the Polish Shipbuilding Industry. PRS Report. Gdansk. 2021., Press materials of Remontowa Shipbuilding and Crist Shipyards).
The company’s own shipowner is a chance to rebuild the national flag with stable financing from state-owned companies and the possibility of delegating specialized vessels (earnings) for the needs of the announced development of wind power in Lithuania, Latvia, Estonia, Sweden and Finland. The construction of the OWF fleet may involve a sizeable, long-term order for domestic shipyards which will translate into industry revival, construction and capacity development. The issue of the installation and maintenance fleet should also be considered from the point of view of implementation of intelligent management systems for offshore wind farm, thanks to which it is possible to extend their service time and increase in efficiency (even above 30%).
When combining the projects with the achievements of Polish engineers (universities and research centres) and meeting the directives on reduction of the fleet’s emissions, it would seem appropriate to equip at least some of the units with low- and zero-emission drives (hydrogen, methanol, biomethanol, ammonia). Such a solution would be the best advertisement for national capabilities.
The Polish offshore fleet, by virtue of providing services of strategic purpose for national energy security and meeting the definition of critical infrastructure, should be subject to the full jurisdiction of the state and carry its flag. Directly related to the above mentioned is the registration of Polish sea vessels (perhaps by creating a second register), and the creation of regulations enabling the employment of Polish officers and seafarers on favourable conditions. At this point, it should be pointed out that although we have a significant potential (30-35 thousand Polish seafarers and officers), the vast majority of them work on board of foreign flagged vessels. Only the introduction of incentive tax solutions (such as proposed by the industry linear or lump-sum taxation for Polish seafarers sailing under the Polish flag), seems to be a step forward to attracting these highly qualified, as indicated by the employment statistics of Poles at sea, workers (as well as transfer of knowledge and experience).
An important issue connected with classifying offshore wind farms as objects of critical infrastructure, resulting from their significant role in ensuring energy security, is the need to protect this infrastructure. The conviction, common in the public debate, that we have the forces and resources to carry out such tasks unfortunately seems to be false. It is often pointed out that the lack of a formation in Poland, which would perform the function of marine law enforcement authorities. Institutions designed to protect Polish maritime areas do not seem to be prepared to carry out the increasingly broad list of tasks in relation to large objects located tens of kilometers from the shore. High resilience of the offshore wind energy sector, e.g. to pandemic threats, resulting directly from reduced maintenance and automation of operational processes delegation of high authority to computer systems. However, this inevitable trend requires the application of effective protection against cyber domain threats.
(e) Local content
Reversing the proportions of reports on local content, it should be assumed critically that 75 to even 80% of the funds allocated for the development of offshore wind energy will be transferred out of Poland. At the same time experienced players on the market do not allow themselves for such a situation, and the level of local companies reaches a much higher level (Great Britain about 50%, Denmark about 70%, China almost 100%). These issues are key to building a new national smart specialization and a vibrant industry that is of value in the world. According to the reports of the Jagiellonian Institute, PSEW and PTEW, the current Polish potential of enterprises capable of participating in the development of offshore wind energy includes about 400 entities. It is assumed that a good contribution to ensuring both local content as well as the issue of monitoring and protection of offshore critical infrastructure objects may be a security and defense area for facilities under Polish jurisdiction and national requirements in these areas.
When considering the issues of creating national competences purely in business terms, we should strive for a situation in which, in the perspective of a decade, Polish entities will gain a market position which, supported by their experience in the execution of offshore wind projects, will enable them to act as leaders in relation to foreign companies interested in the execution of national programs of offshore wind energy development. Thus, it is necessary to adopt strategic assumptions about building a position allowing for expansion in terms of know-how and technology, supply chain, specialized ports or fleet, as a kind of national start-up package. The success in the aforementioned areas will result from achieving a high level of offered structures and knowledge. In order to become a manufacturer of modern solutions rather than a purchaser of them, it is necessary to invest in research and development in fields related to the offshore industry. Meanwhile, the level of outlays on research and development in relation to PKB in our country
(1.3%) is far below the average European level (2.2%). Development of offshore wind energy is a chance to revive research on technologies of the future, including the use of autonomous systems. The market for technical maintenance (inspection) of offshore wind farms alone is estimated to be worth about 800 million Euros annually. These costs can be significantly reduced through using unmanned platforms, whose main advantage is supposed to be the increase of safety of operators and effectiveness (efficiency) of the conducted works. The market for robotics is in a way distinguished by the potential of cross-applications technologies that offer solutions adaptable to many industries.
Estimates of wind power projects with 11 GW of capacity to be completed by 2040 speak not only of the need for 700 towers and foundations or 27 transformer stations, but also the need to fill at least 9,000 jobs directly at the construction and operation of wind farms (and 43 thousand in total in adjacent sectors) with qualified personnel, which requires decisive actions to ensure training and education of engineers as well as technical and production workers. The report of the Pomeranian Competence Centre for Offshore Wind Energy shows that a part of professions and competences necessary in particular stages of such a complex process, i.e. investment preparation, installation and turbine operation, execution of foundation works and electrical installations and finally maintenance of offshore wind farms, is not yet realized by either vocational schools or universities. Grassroots initiatives are welcome, however, without systemic solutions at play it may turn out that building a competitive advantage without appropriate personnel is simply impossible, and the beneficiaries of the huge pool of money (estimated at PLN 130-150 billion) for the development of offshore wind will be foreign companies.
g) Offshore wind energy and the growing importance of hydrogen
Another domain directly related to offshore wind energy is the vision of building a hydrogen economy based on production of emission-free, so-called “green hydrogen” coming from, what is important, surplus of electricity produced entirely with renewable energy sources. The strategic projects should be correlated with the planned capacity to be generated in order to, firstly, enable the assumed level of decarbonization of carbon-intensive industries and, secondly, create conditions for trading in the raw material of the future. In order to create stable conditions for the development of offshore wind in Poland, what seems necessary is the cooperation of the Baltic countries on transmission grid construction and implementation of hybrid solutions for energy stabilization and energy storage with the use of hydrogen technologies.
h) “Lagging pension”
In Western Europe (12 countries currently have 116 farms) we already have over 25 GW of installed capacity in Offshore Wind Farms (it’s aimed to acquire 111 GW for all European projects by 2030), whereas Poland has just started implementing these ambitious projects. It is commonly perceived that the so-called “lagging pension” (resulting from the fact that offshore industry has been developing in Europe since the early 1990s, since the first offshore wind farm Vindeby on the coast of Denmark) as an opportunity for Poland to take advantage of already proven and state-of-the-art technologies. Such a perception of the facts, however, may create a misleading belief that it is enough to passively wait until 25% of electric energy flows into the Polish grid from the sea.
In conclusion, it can be pointed out that the development of offshore wind energy in our country may become an important element of decarbonisation and economic growth. Poland has great development potential and planned capacity to be obtained from offshore wind farms. It is worth making an effort to fully and multidimensionally use up the opportunity to develop a new industry, transform the energy system, and at the same time build up our own national competences, the aim of which should be to join the world players on the offshore market. On one hand, delays in work on one’s own projects may be used to reduce outlays as a result of not making the mistakes of western investors. On the other hand, it may result in the loss of multi-billion profits to the benefit of foreign entities and lowering of the image in the international arena. A kind of fashion for offshore is undoubtedly a great opportunity for the general public to become interested in ecological issues, modern technologies or, finally, an element of shaping the awareness of the maritime character of the Republic of Poland. A chance connected to multi-billion investments, which must not be wasted also in relation to future generations, for whom offshore wind may become Poland’s calling card.
Rafał Miętkiewicz, PhD, assistant professor at the Faculty of Command and Maritime Operations, Polish Naval Academy of the Heroes of Westerplatte in Gdynia, expert of the Ignacy Łukasiewicz Institute for Energy Policy
M.Sc. Tomasz Chyła, Capt. Lt. MSc Eng. Tomasz Chyła, Senior lecturer at the Faculty of Command and Maritime Operations, Polish Naval Academy of the Heroes of Westerplatte in Gdynia, expert of the Ignacy Łukasiewicz Institute for Energy Policy