Escalating estimated costs have prompted the Danish government to delay the kick-off of a tender for an artificial energy island in the North Sea that eventually is planned to be linked to 10GW of offshore wind.

The Danish Energy Agency now estimates costs for the state of more than DKr50bn ($7.35bn) for the project that is slated to be built by 2033, which means it would be far from being profitable – which had been a condition for previous cross-party political agreements.

“We must use the large offshore wind potential in the North Sea, and the government is sticking to its ambition to realise an energy island in the North Sea,” climate and energy minister Lars Aagaard said.

“When we plan projects of that magnitude, we must of course also ensure that we choose the most responsible solutions. We are now taking a little longer for that, so that we can take a decision later in the year.”

The government had previously planned to publish material on the tendering process for the energy island at about 80km off the coast of the Jutland Peninsula before the summer holidays. Copenhagen now will spend a few extra months investigating how the project can be made cheaper, the Danish Energy Agency said. The tender had already been postponed by a year from an original start date in 2022.

News of the postponement came just as a group led by investor Copenhagen Infrastructure Partners (CIP) and insurance giant Allianz said they had handed in an application to build two energy islands in the German part of the North Sea by 2032, which the consortium said would cost up to €2.5bn ($2.74bn) each. CIP also said it wants to bid for the Danish energy island.

The Danish energy island is slated to be linked to 3GW of offshore wind in its first phase, and eventually to 10GW by 2040. The Danish state is slated to own at least 50.01% of the shares in a consortium building the island.

The island is planned to be linked to energy islands in other countries, and several energy markets via interconnectors.

Denmark is also planning to turn the natural Baltic Sea Island of Bornholm into an energy island linked to 3.2GW of offshore wind, which will be fed into both the Danish and the German power grid.

The government and opposition parties last month had agreed on greatly increasing the country’s offshore wind ambition, and now target to build up to 14GW in the coming 10 years.

Industry group Green Power Denmark said it is absolutely crucial that the government and parliament stick to their previous ambition to build a North Sea energy island.

“An island is needed where we can collect the energy from the many wind turbines that will be erected on the sea,” said Thomas Aarestrup Jepsen, director of renewable energy production at Green Power Denmark.

“The energy island in the North Sea is a very large investment, and it must be invented from scratch. It is therefore completely understandable that the government needs to think about and involve the Danish Parliament in the decisions.

“We expect that the government will quickly initiate a dialogue with companies and investors to find solutions.”