High costs plague Danish North Sea energy island project

Denmark will delay by at least three years the construction of an energy island in the North Sea that is set to supply renewable energy to three million European households, a government minister said on Wednesday, citing rising costs and high interest rates.

The expected investment exceeds 200 billion Danish crowns ($29.81 billion) and would require about 50 billion crowns in state support, Energy Minister Lars Aagaard told Reuters. He declined to say how much the costs had increased compared to initial projections.

Less than a year ago, Denmark announced a delay, citing cost concerns, in the construction of an artificial island that is to serve as a hub for collecting and distributing electricity generated by offshore wind turbines surrounding it.

It was initially planned as a Danish-Belgian project.

Aagaard said this was no longer feasible due to rising commodity prices and interest rates, but the project could be redesigned to include power cables to Germany, adding that the earliest completion date would be 2036, rather than the previously estimated 2033.

“The precondition was that this could be established without subsidies and that it would benefit both Belgium and Denmark, and the reality has developed in such a way that we can no longer see this being the case,” Aagaard said.

Aaagaard said attempts to get Belgium to pay a larger share had failed. He added that he hoped Germany would take part in the financing.

The German Economic Ministry did not immediately respond to a request for comment.

Denmark, long a leader in renewable energy, is home to industry leaders Vestas, the turbine manufacturer, and Orsted, the turbine operator.

The sector has come under pressure from rising costs and supply chain disruptions.

(1 dollar = 6.7102 Danish kroner)

(Reuters – reporting by Stine Jacobsen; editing by Barbara Lewis)