Bousso: The offshore wind pact between Europe and the US is a hedge to US gas dependence.

The European Union has agreed to develop a massive offshore wind network. This is a major step forward in the region's efforts to reduce its dependency on U.S. gas imports while also tackling rising costs for renewable energy. On Monday, at the North Sea Summit, ministers from Britain and other countries signed an agreement for the development of 100 gigawatts (GW), or offshore wind power, in shared economic waters. This is enough energy to power more than 50,000,000 households.

The agreement builds on the 2023 pledge of building 300 GW offshore wind by 2050. It was conceived after the energy price shock caused by Russia's invasion of Ukraine in 2022 and the disruption of gas supplies to Europe. This announcement, which has been in the works for years, comes at a sensitive time for Europe and the U.S. given the recent transatlantic spat about Greenland. U.S. President Donald Trump’s transactional diplomacy, and his pursuit to "energy dominate" has heightened European concerns over their heavy dependence on U.S. LNG. LNG replaced the majority of volumes previously supplied by Russia.

In 2025, U.S. Gas accounted for around 25% of the total gas imported into the EU/Britain and a fifth of the LNG imports.

Wind power is the cornerstone for Northern Europe to reduce its dependence on fossil fuels. According to WindEurope, by 2025, both onshore and offshore wind will generate 19% of EU's electricity. The region has only 37 GW of off-shore wind in 13 countries. This means that the planned 100 GW expansion will fundamentally change Europe's energy market. In recent years, investor enthusiasm for clean energy has declined due to rising costs and supply-chain restrictions. There is also concern about China's dominance in renewables manufacturing. Trump's hostility towards green energy, especially wind power, further weakened sentiments as the U.S. Government scrapped many projects in this past year.

The cost of living crisis in Europe, exacerbated by high energy costs, has made climate policies political flashpoints and fueled resistance to net zero plans.

ECONOMIES AT SCALE

The European Offshore Wind Pact was driven by concerns about cost as well as concerns over an over-reliance on the U.S.

The new plan contains several elements which?could lower development costs and, ultimately, consumer electricity prices.

This can reduce costs, as it gives the offshore wind supply chains more certainty about demand. This should, in turn, encourage investment in domestic manufacturing.

WindEurope claims that industry players have pledged to reduce costs by 30% from 2025-2040. The plan is expected to create 91,000 new jobs and generate a total of 1 trillion euros (1.19 trillion dollars) in economic activity.

The agreement's blueprint is a key element. It outlines a system of interconnectors and bidirectional cables to connect wind farms with multiple countries. The agreement should enable power to be delivered where it is most needed, improving efficiency and allowing operators to adapt to changes in supply and demand patterns across multiple markets.

This cross-border "arbitrage", should also reduce "negative pricing", i.e., periods where excess wind energy forces operators to curtail their output and compensates them.

"When there is a lot of wind in Germany, you may not have wind in the UK. So, if Germany cannot use the entire amount of power, then the UK could take some of it instead of wasting the energy," said Jordan May.

The'multi-nation plan' will also cover different time zones. This means that countries will have their peaks at different times. It should be easier to match the supply and demand. This could reduce the need for gas powered power.

Finaly, Europe could benefit from Trump's dislike of wind. Under this administration, the U.S. wind industry has seen a dramatic decline. Last year, the International Energy Agency cut its forecast for offshore wind in the U.S. by more than half. The reduced demand from the United States for components, vessels and engineering services may ultimately result in lower prices for European operators.

To unlock these gains in efficiency, European governments will need to create complex new regulations that align the different national subsidy regimes with power market rules. This process could take many years, and there may be political opposition in some countries.

Unpredictable Costs

In Europe, the cost of switching from fossil fuels to renewable energy has been a source of controversy. These costs are uncertain because forecasting is not a science in this field, regardless of whether you're looking at green energy or fossil fuels.

Offshore wind requires a large upfront investment, but has lower operating costs in the long run. Gas-fired power plants are less expensive to build, but are subject to fluctuating global gas prices.

The cost of not doing anything is often overlooked in discussions about renewable energy. This cost can be enormous. Europe's electricity demand will double by the mid-century mark, which means that it is necessary to upgrade its old transmission and distribution grids. The longer European leaders delay, the higher costs will be.

The joint offshore wind plan of Europe offers a way to build more domestic power and industrial capability while reducing dependence on foreign fossil fuels. It's not just about that. The ultimate success of the plan will be determined by whether or not it reduces electricity prices for European consumers.

These are the opinions of the columnist, an author for.

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(source: Reuters)