Positive Impact on Society from integrated Open-Door Offshore Wind Farm and Power-to-X

The Danish open-door procedure for offshore wind farms is currently subject to debate. And the debate has only intensified in the wake of the Danish Energy Agency's announcement on pausing the case handling of the open-door offshore wind projects.

The analysis can further inform the debate by analysing the impact from a generic project enabled by the open-door procedure. 

The objective of the analysis is to estimate the societal footprint from a generic (fictive) project with 1 GW offshore wind directly connected to a PtX facility with 1 GW electrolyzer capacity. The offshore wind is enabled through the open-door procedure, and the PtX plant is assumed to produce hydrogen based on an Alkaline electrolyser (AEC). The estimated effects found in the analysis are:

• Gross-value added (GVA) in project lifetime: 4.1bn Euro
• Jobs (FTEs) per year in each phase:
  • 440 from 2023-2025
  • 3,800 from 2026-2028
  • 590 from 2029-2059
• Taxes in project lifetime: 1.5bn Euro
• Up to 47-80 thousand tons CO2-emission reduction per year depending on the fossil fuel that is replaced by hydrogen.

Further the project will:

• Contribute to the security of supply and eased balancing of the Danish electricity market
• Contribute financially to the future Danish hydrogen pipeline infrastructure 

The analysis has been undertaken by KPMG on request from a partnership formed by Ørsted and Copenhagen Infrastructure Partners (CIP). 

Approach and methods

Effects on gross value added (GVA), employment and taxes are estimated in an input-output model using tables from the Danish national accounts. In addition, official assumptions from the Danish Energy Agency are used to estimate the investments associated with the project (i.e. ‘Teknologikataloger’).

The ‘real life’ effects will naturally depend on how actual projects are executed, including whether supplies are sourced nationally or from abroad. In general, conservative assumptions have been applied. It is assumed that offshore wind foundations are solely sourced from abroad and do not generate activity in the Danish economy. For other components, the split of domestic vs. foreign production is based on the input-output tables in the Danish national accounts.

Likewise, estimated GVA, jobs and taxes do not include the effects from increased household consumption. Further, cluster and learning effects are deemed too uncertain to be included in the quantified effects. 

Results and considerations

The results on GVA, jobs and taxes include direct effects and indirect effects, i.e. spill-over effects in industries that are sub-suppliers. The effects are not to be considered as structural effects, as the input-output model is based on short-to-medium run effects and does not take crowding-out effects into account.

Rather, the analysis outlines the economic activity that can be attributed to the energy project. Whether this activity is additional to the general economy will depend inter alia on the productive capacity of the economy and the business cycle at the given point in time. It is noted that a modelling in a general equilibrium model can be expected to show significantly lower effects as the activity will likely not be regarded as additional, but rather as replacing other economic activity.

The effects estimated in this report can to a reasonable degree be extrapolated to equivalent projects of smaller or larger size. Uncertainty in the estimate will increase with the degree of extrapolation, e.g. due to limits in the production capacity of the relevant industries.

If you like to know more, contact Morten Thorball or Jørgen Stenbæk, Energy & Green Transition