The Key Offshore Wind Trends Summarised

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Offshore wind used to be a topic which was largely of interest to Northern Europeans and policymakers (whose subsidies enabled it to be built). However these days it’s an exciting sector which is expanding in many ways (not least the sizes of the turbines and the geographical spread of the market) and shrinking dramatically in a key one: the cost of its energy.

I post snippets about offshore wind fairly regularly. However, to save you searching back, here’s a handy summary of what I regard as some of the key highlights in the sector.

Getting Bigger

Turbine sizes have been growing for a number of years. According to Wind Europe, “The average rated capacity of newly-installed turbines in 2017 was 5.9 MW, 23% larger than 2016.”

Soon though, that size of turbine will look mouse-like.

Since April this year, MHI Vestas have an 8.8MW turbine installed at Vattenfall’s European Offshore Wind Deployment Centre in North East Scotland and have announced plans to start installing 9.5 MW wind turbines at Belgium’s Northwester 2 offshore wind farm from 2019.

A variety of vendors have announced plans to breach the 10MW barrier, with GE recently trumping them all with it’s aim to unveil a 12MW model by 2019 (aiming at delivery by 2021).

In other sectors of the power industry, distributed generation, microgrids, aggregated virtual power plants and other small-scale infrastructure is very much in vogue. But in offshore wind, the economics generally dictate that bigger is better.

Going Global

While the UK and Germany alone constituted over 60% of global capacity installed by the end of 2017 (GWEC – pdf), this domination is set to change. China already ranks third (at 15%) – and we’ve all seen what happens once China gets started in a sector…

Beyond other Northern European markets, Vietnam, Japan, South Korea, the US and Taiwan were already in the market by the end of 2017. Taiwan in particular has aggressive targets going forwards and is something of a hotspot for what will surely be a significant expansion in Asia. Not on the list yet, but likely soon to help drive that expansion, is India.

The expansion of offshore wind into new market opportunities will be driven by a couple of key factors. One will be continued reductions in cost (see next point), but another is likely to be the ability to tap resources which were once out of reach – those in deeper waters (see the point-after-next).

Ditching Subsidy

The cost of energy from offshore wind has been falling dramatically in recent years – making it much cheaper than new nuclear in the UK, for example (and potentially on the way to becoming cheaper than new gas). Many headlines have been written regarding recent “subsidy-free” offshore wind auctions in the Netherlands and Germany recently.

Various factors have combined to produce these lowering costs. They include economies of (larger) scale, increasing capacity factors, installation efficiencies and cheaper financing (through increased investor confidence).

It’s worth being careful though, when throwing around terms like “subsidy free”. Those Dutch projects for example, benefit from considerable government support on the grid side (and by support, I mean “paying for it”…). So when is a “support” not a “subsidy”? Discuss…

Even with continued cost reductions, it’s fair to say that offshore wind is still some way off existing as a completely subsidy & support-free industry. To quote the Chief Executive of Scottish Power recently: “If you think we are going build a £2.5bn offshore wind farm in UK at market risk, you’re bonkers.” (For my non-UK readers, “bonkers” = “crazy”)

Foundations? Meh!

Thus far, offshore wind projects have been built in relatively shallow waters (usually 40m or less), using monopiles or other fixed foundations to secure them to the seabed. That’s fine if you are a country with a nice area of continental shelf. It’s less helpful if you are somewhere with great wind resource, but where the seabed rapidly falls away to large depths (Japan, Norway or the Pacific coast of the US, for example).

I rarely use the term “game changing”, as I feel it’s vastly over-used. However in the case of floating wind turbines, I make an exception – they really will create offshore wind markets that are simply impossible using fixed foundations.

Most well-known is Hywind, the world’s first commercial scale floating wind farm, built by the-artist-formerly-known-as Statoil (now “Equinor”). In offshore wind terms it’s tiny, at 30MW, but has been performing well. But there are other players out there too, for example Principle Power, selected for 100MW+ of floating wind off California.

It’s worth noting that while deepwater offshore wind is impossible without floating turbines, I have spoken to industry colleagues who suggest they may eventually prove attractive elsewhere too – proving easier and quicker to install and maintain than their fixed cousins, even in shallower waters.

Looking to Flexibility

If there’s one word that is everywhere in power systems at present, it’s “flexibility”. That means a key consideration for developers going forwards is the extent to which policymakers will continue to readily support “non-dispatchable” generators. Thus offshore wind, like its onshore counterpart and the solar PV industry will do well to consider enhancements to its flexibility – such as storage.

Perhaps the best-named renewable power project I’ve come across is “Batwind”. Unrelated to Bruce Wayne, it’s instead a partnership between Equinor and Masdar to equip (this year) the Hywind floating wind farm with a 1MW/1.3 MWh battery. (The battery won’t be floating, it’ll sit at the project’s onshore substation).

It isn’t the only example – the Bay State Wind project of the US east coast plans battery storage too. Others are looking at non-battery solutions to offshore storage: compressed airfor example.

Summary: Opportunities & Uncertainties

I’ve been tracking (and training in) offshore wind for several years, but there are now levels of confidence around growth and excitement around innovation that are as big as ever. As costs fall and projects operate effectively, there’s increasing interest from a wider range of both investors and policymakers.

Yet these are also big, capitally intensive and lengthy-to-plan projects – so very much exposed to business risks in what can be fast-changing electricity markets and policy environments.

& Finally…

If you’re interested in the opportunity that offshore wind markets promise, but need a solid foundation in offshore project and market risks, then note that I’ve teamed up with my friend and wind practitioner Charley Rattan to deliver just that. To find out more, drop me a message – or find out more about the 2-day briefing we’ve developed, by clicking HERE.


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