Helping de-risk offshore wind investments, the Pact – known as the ‘Hamburg Declaration’ – will potentially create 91,000 additional jobs and generate €1tn of economic activity in Europe, claims energy association WindEurope.

Milliband says the deal will drive forward an ‘unprecedented fleet of joint offshore wind projects’ following the recent domestic offshore wind auction.

The deal means that several North Sea countries have agreed ‘for the first time’ to deliver 100 GW of offshore wind power through joint clean-energy projects. These include a new generation of ‘offshore wind hybrid assets’ featuring offshore wind farms that are directly connected to more than one country through interconnectors.

The joint commitment at the Future of the North Seas Summit in Germany earlier this week, agreed plans to make the North Sea ‘the world’s largest clean energy reservoir’.

Interconnectors are widely considered to be crucial to Europe’s energy security, enabling countries located around the North Sea to send clean power to where it’s needed most – ‘ending Europe’s reliance on volatile fossil fuel markets controlled by petrostates and dictators’, says the UK government.

Supporters of the Pact suggest that the interconnectors could potentially lower prices across the region. However, it could prove challenging as countries will be able to shop around to sell power to the highest bidder, potentially driving up prices when supply is tight.

Although there is already a network of subsea cables connecting electricity grids of European countries – the UK has 10 interconnectors – the concept of connecting wind farms directly to multiple countries will be a first. And most energy economists are convinced that creating more connections between the UK and other European grids should reduce costs and improve the security of supply.

Under the new Pact, there is a commitment to provide two-sided Contracts for Difference (CfDs) as the standard for offshore wind auction design. Two-sided CfDs will help unlock investments and reduce finance costs by giving visibility on revenue. The Pact also commits governments to remove any regulatory obstacles to power purchase agreements (PPAs) between electricity producers and corporate end-consumers.

A recent UK National Grid paper suggested that new arrangements could cut ‘constraint payments’ – where wind farms are paid for halting power generation when the electricity network is too congested. Indeed, the National Grid says that interconnectors can help smooth spikes in prices thanks to time zone differences, with surplus energy generated off-peak elsewhere sold cheaply to the UK.

Energy Secretary Milliband claims that new initiatives like offshore hybrid assets ‘could put UK firms at the forefront of grid technology, unlocking export opportunities and boosting growth’. Furthermore, under the new statement of intent, cross-border offshore electricity projects will be unlocked with a focus on joint planning, cost-sharing and market arrangements that could speed up delivery.

‘Today is a step towards a more integrated energy system in the North Seas,’ said Ben Wilson, President of National Grid Ventures. He highlighted projects like LionLink – the proposed interconnector between the UK (from Suffolk) and the Netherlands – ‘which can maximise the efficient use of resources, reducing costs, and minimise the impact on coastal communities’. He insisted that: ‘Collaboration on projects like these are key to delivering on a more secure, affordable energy for British and European consumers.’

Dhara Vyas, Chief Executive of Energy UK, also expressed enthusiasm for the Pact, as ‘a landmark effort’ to transform the North Sea into a truly regional clean power hub. ‘This deeper cooperation on supply chains, standardisation and shared infrastructure is not just a strategic necessity, it is the most effective way to bring down energy costs for households and businesses, while fuelling sustainable economic growth and high value jobs for years to come,’ she remarked.

Jane Cooper, Deputy CEO of RenewableUK, said the deal would ‘drive down costs for bill payers… as well as increasing the energy security of the UK and the whole of the North Sea region significantly’.

‘The Joint Investment Pact is a giant leap towards powering Europe with renewable, reliable and cost-competitive electricity,’ said Rasmus Errboe, President and CEO of Ørsted. ‘With a coordinated build-out plan of up to 15 GW per year in Europe, the offshore wind industry is committed to bringing down the cost of electricity from offshore wind by 30% towards 2040.’ He noted that 58% of the EU’s energy today is imported. ‘By turning targets into turbines, the pact will help Europe secure 300 GW of offshore wind in the North Sea, helping save Europe €70bn on fossil fuel imports,’ he claimed.  

However, Claire Coutinho, Shadow Energy Secretary, warned that ‘the rush to build wind farms at breakneck speed is pushing up everybody’s energy bills’.  

Enrique Cornejo, Energy Policy Director of Offshore Energies UK was more upbeat, and said: ‘In an increasingly volatile world, this deal sets ambitious targets for UK and European offshore wind collaboration.’