In focus: Out with the oil, in with the new! Or is it?

The keyword in energy transition is transition, a process that often involves constant tweaking and going back and forth between the gains and benefits of the old, and the betterment that will come with the new. In the energy sector, this is reflected in the moves of governments, and developments and insights from within energy and energy-related sectors, no less over the past week than any other in the last couple of years.

As the maturing renewable energy industries such as offshore wind grow and become established, the governments are now not only slowly taking them off subsidies but are looking to earn treasury money on new offshore wind farms – while also cashing in on the oil and gas industry.

Germany, which is preparing to award its next offshore wind development rights, is thinking about introducing the so-called “negative bidding”, whereby developers, instead of placing the lowest or zero subsidy bid, will be awarded for bidding to pay the government. European wind energy association, WindEurope, warned that that this approach will lead to these costs being passed onto electricity consumers and the supply chain.

Besides Germany and Denmark, for whose last tender WindEurope says inspired Germany to consider negative bidding, the association also noted that the Netherlands has included a similar approach in its ongoing offshore wind auction.

While governments may be tempted to make money in these ways, they need to remember that this imposes additional costs on those developing wind farms that need to be passed on to someone, WindEurope emphasized.

Germany this week also inaugurated its largest subsidy-free floating solar project, the 3MWp power plant on the Silbersee III lake.

The solar plant was built by BayWa r.e. for the family-owned company Quarzwerke. The developer said that, with this one plant, it had demonstrated that a floating solar project can be operated economically even without subsidies from the EEG if sufficient electricity is used for own consumption.

Across the windy waters of the North Sea, the UK this week announced it would introduce a windfall tax on oil and gas operators, a one-off tax imposed by a government on a company, targeting those who benefit from something they were not responsible for.

In this case, the tax comes as oil and gas companies gained huge profits due to a sharp increase in oil and gas prices following Russia’s invasion of Ukraine.

The purpose of the oil and gas windfall tax is to distribute these excess profits in one area for the greater social good, which now means footing the bills of the country’s households amid a cost-of-living crisis brought in by high inflation – the highest rate seen in the UK in 40 years.

It will be a while until government across the globe stop earning on oil and gas projects, as we continue with transition.

According to the latest insight from Westwood, energy transition acceleration did not derail oil and gas exploration in 2021. High-impact oil and gas exploration drilling in 2021 maintained its momentum, in spite of challenges due to COVID-19 and the energy transition, the analyst firm said.

As for the UK government, it also made headlines this week with a move concerning green transition, as it unleashed a multi-million investment that aims to kickstart innovation in the maritime sector and tackle shipping emissions.

On 24 May, Maritime Minister Robert Courts confirmed the £12 million funding to accelerate the research and development of zero-emission maritime technologies through a new competition which is expected to create cleaner and greener routes on key domestic and international travel, fulfilling the country’s COP26 commitment, as well as green ferry sailings.

Now in its second round, the Clean Maritime Demonstration Competition (CMDC) was born out of the Prime Minister’s 10-point plan to tackle carbon emissions and is one of the first initiatives from UK SHORE, a new unit launched to make the maritime sector greener.

Through research and development (R&D) investments, it will include the provision of domestic zero-emission ferries, helping to tackle the approximately 1 million tonnes of carbon dioxide emissions that roll-on/roll-off (RoRo) vessels and passenger-only ferries contribute to the UK’s domestic shipping emissions.

When it comes to new clean fuels and one of the most pushed for globally, hydrogen has marked this week on Offshore Energy, primarily with big company announcement and some of the biggest being the British oil and gas major BP teaming up with Abu Dhabi companies on two (green) hydrogen projects in the UK.

Namely, UAE energy companies Abu Dhabi National Oil Company (ADNOC) and Masdar will join BP’s H2Teesside and HyGreen Teesside hydrogen projects, respectively.

ADNOC will take a 25 per cent stake in the design stage of BP’s blue hydrogen project, H2Teesside. This will be ADNOC’s first investment in the UK. BP and ADNOC will now advance the project, initially to the next stage of design, the pre-FEED stage. H2Teesside is to kickstart the UK’s hydrogen economy at scale with the development of two 500 megawatt hydrogen production units by 2030. The project is to start operations in 2027.

Masdar has also signed a memorandum of understanding to buy e a stake in BP’s proposed green hydrogen project, HyGreen Teesside. This project is to produce 60-megawatt electrical input (MWe) of hydrogen at start-up in 2025, increasing to up to 500 MWe by 2030.

Together, these two projects could deliver 15 per cent of the UK government’s recently expanded ten-gigawatt target for hydrogen production in 2030.