TODAY’S STUDY: Ocean Wind In The World Now
Global Wind Report; Annual Market Update 2017: Offshore Wind
April 2018 (Global Wind Energy Council)
2017 was a spectacular year for the offshore wind sector: the cratering prices with fi rst zero bids for offshore in Germany; and a full ‘zero subsidy’ tender in the Netherlands; larger and larger turbines whose size boggles the mind; a plan for building an offshore wind island with more than twice today’s total installed offshore wind power in Europe; and the number of markets expanding rapidly – including newcomers India, Australia, Brazil and Turkey. The rapid maturing of the technology has meant that offshore wind is taking shape as a mainstream energy source.
A historical record of 4,334 MW of new offshore wind power was installed across nine markets globally in 2017. This represents a 95% increase on the 2016 market. Overall, there are now 18,814MW of installed offshore wind capacity in 17 markets around the world.
At the end of 2017, nearly 84% (15,780MW) of all offshore installations were located in the waters off the coast of eleven European countries. The remaining 16% is located largely in China, followed by Vietnam, Japan, South Korea, the United States and Taiwan.
The UK is the world’s largest offshore wind market and accounts for just over 36% of installed capacity, followed by Germany in the second spot with 28.5%. China comes third in the global offshore rankings with just under 15%. Denmark now accounts for 6.8%, the Netherlands 5.9%, Belgium 4.7% and Sweden 1.1%. Other markets including Vietnam, Finland, Japan, South Korea, the US, Ireland, Taiwan, Spain, Norway and France make up the balance of the market.
The spread of the offshore industry beyond its northern European home to North America, East Asia, India and elsewhere has begun. The fi rst US offshore wind farm came online in 2016, China’s offshore wind industry has fi nally taken off, and Taiwan has an ambitious programme lined up. The number of countries planning pilot projects or full-scale development of commercial-scale offshore wind farms is rapidly growing.
Meanwhile, offshore wind had its first ‘subsidy-free’ bids for offshore projects in Germany and an entire subsidy free tender in the Netherlands, with winners of new offshore capacity receiving no more than the wholesale price of electricity. Overall, offshore prices for projects to be completed in the next 5 years or so are half of what they were for the last fi ve years; and this trend is likely to continue.
The reasons for this are many: the maturing of the industry, the improvement and maturation of the technology and management thereof, growing investor confi dence, and the introduction and deployment of a new generation of turbines, with enormous swept area and tremendous output.
Record Year For European Offshore Wind
The European offshore wind industry had an all-time record year adding 3,148 MW in 2017, corresponding to 560 new offshore wind turbines across 17 wind farms. This is double the size of the 2016 market and represents a 13% increase on the previous record set in 2015. During 2017, fourteen projects came online, including Europe’s fi rst fl oating offshore wind farm. 2017 also saw Final Investment Decision (FID) on six new offshore wind projects to be installed in the coming years. The new investments total € 7.5bn and cover 2.5 GW of capacity.
Just over half of all capacity (53%) brought online in 2017 was in the United Kingdom, including the commissioning of the fi rst fl oating offshore wind farm: Hywind, in Scotland. The second largest market was Germany with 40% of overall European capacity, largely realised through the commissioning of the Veja Mate and Wikinger projects.
Belgium represented 5% of the total share and Finland commissioned its fi rst offshore wind farm specifi cally designed for icy conditions at Pori Tahkuoloto 2. Moreover, France’s fi rst offshore wind turbine, the 2 MW Floatgen demonstrator came online. In Denmark, 5 MW were decommissioned at Vindeby. Overall in 2017, work was carried out across 26 wind farms including grid connections, wind turbine erections and foundations installed.
In cumulative terms, Europe now has a total installed offshore wind capacity of 15,780 MW. This corresponds to 4,149 grid-connected wind turbines across eleven countries.
The UK has the largest offshore wind capacity in Europe, with 6,836 MW, followed by Germany (5,355MW) and Denmark (1,271MW). The Netherlands is in fourth place with 1,118MW, and Belgium fi fth with 877MW. Combined, the top fi ve EU countries represent 98% of all grid-connected offshore wind installations in Europe.
Installations in the North Sea account for 71% of all offshore wind capacity in Europe. The Irish Sea has 16% of installed capacity, followed by the Baltic Sea with 12% and the Atlantic Ocean 1.2%.
Siemens Gamesa Renewable Energy is the leading offshore wind turbine supplier in Europe with 64% of the total installed capacity. MHI Vestas Offshore Wind (18%) is second, followed by Senvion (8%) and Adwen (6%). The top 4 represents 96% of the total number of turbines connected.
In terms of ownership, Ørsted is the largest owner of offshore wind power in Europe with 17% of cumulative installations at the end of 2017, a slight increase from last year. E.ON is the second largest owner with 8% of installed capacity, followed by Innogy (7%), Vattenfall (7%), and Northland Power (4%). The top fi ve owners represent 42% of all installed capacity in Europe, a slight decrease compared to the end of 2016.
The average installed offshore wind turbine grid-connected in 2017 was 5.9 MW, a 23% increase over 2016. The average size of a grid-connected offshore wind farm in 2017 was 493 MW, 34% larger than the previous year. The average water depth of offshore ind farms where work was carried out in 2017 was 27.5 m, slightly less than in 2016 (29.2 m). The average distance to shore for those projects was 41 km, a small decrease on the previous year (43.5 km). Hywind Scotland, the fi rst fl oating offshore wind farm in the world, has an average water depth more than twice (95-120m) that of the bottom-fi xed offshore wind farms where work was carried out in 2017.
Outlook for 2018 and beyond
Looking ahead, projects expected to achieve FID in 2018 are estimated to have a combined capacity of 3.9 GW. This includes a number of projects in the UK, Denmark and the Netherlands, as well as fl oating offshore wind projects in Portugal and France. Financing needs could top € 9bn based on disclosed transaction costs.
In 2019 Europe expects to see another record year for offshore wind power. This is mainly due to the delay of consenting Round 3 projects in the UK in 2016. There are 400 MW currently under construction, which are expected to be connected to the grid throughout 2018. Germany will connect turbines from Merkur and Borkum Riffgrund projects in 2018 and Belgium will connect turbines in the Rentel and Norther wind farms. Winning projects of recent tenders in Denmark and the Netherlands are expected to start to connect capacity towards the end of 2018.
However, the number of grid-connected projects are expected to fall towards 2020 as EU member states will reach the end of their National Renewable Energy Action Plans (NREAPs) under the current Renewable Energy Directive, which covers the period up to 2020. However, signifi cant construction activity will continue. By 2020 WindEurope expects a total European offshore wind capacity of 25 GW. The offshore market will concentrate mainly in the UK, with 3.3 GW of new grid-connected capacity in the period between 2018 and 2020, followed by Germany with 2.3 GW, Belgium with 1.3 GW, the Netherlands with 1.3 GW and Denmark with 1.0 GW.
China Offshore Finally Taking Off…Japan Installs Another Floater In 2017…Taiwan’s Ambitious Target Set At 5.5 Gw By 2025…South Korea Readies For Offshore Wind Expansion…Us Offshore Development Led By New York…Projections For Offshore Wind Development Globally Out To 2030
Offshore wind has reached maturity in Europe, both technically and commercially. It is now seen as an attractive investment opportunity for pension funds, investment houses and banks. Costs have fallen decisively, with committed projects scheduled to start generating in the early 2020s likely to produce at a levelised cost of energy (LCOE) below € 70/MWh (at 2017 prices), including the cost of offshore to onshore grid connection.
This has lead to increased confi dence in the deployment offshore wind around the world. We now forecast 120GW total installed capacity by 2030, with an installation rate of over 10GW per year being achieved before then.
Much of this growth will come in Europe, building on the establish capability and proven low cost. We will also see signifi cant capacity in China and US, with smaller but signifi cant volumes in Japan, Taiwan and S Korea.
By 2030, LCOEs below € 60/MWh will be achieved by many newly installed offshore wind farms, which could be well below the average wholesale power price in many electricity networks, driving higher levels of deployment and the spread to currently uncharted waters.
Floating offshore wind has seen the fi rst multi-turbine demonstration project (Statoil’s Hywind in 2017), but fl oating is likely to remain a niche sector throughout the 2020s. It will become cost-competitive (or nearly so) by the end of the decade, giving it strong potential in the 2030s, especially through enabling new markets.
Early deployment of fl oating offshore wind projects needs support mechanisms in multiple markets specifi cally targeted at enabling commercial-scale fl oating deployment. France and Japan are the most likely candidates, assuming governments are able to see clear long-term benefi ts.
On this basis, we expect fl oating deployment to exceed 500MW a year by 2026, increasing to over 1GW a year by 2030 to give a total installed capacity of over 5GW by 2030, 5% of the offshore market. In addition to France and Japan, commercial fl oating projects are also likely in Korea, Taiwan, the UK and the US by 2030.
Floating offshore wind projects will tend to use the same turbine suppliers as bottom-fi xed, with balance of plant provided by a mix those involved in bottom-fi xed operations and others. The majority of installations will be in locations not suitable for fi xed-bottom technology.
If cost reductions are achieved quicker than currently expected and fl oating becomes cost effective much faster, the market could really ‘take off’ with up to 12GW installed by the end of 2030, setting the 2030’s up for substantial further global offshore wind deployment.
In New Jersey, the state government has an ambitious offshore wind target, led by Governor Phil Murphy who signed an executive order for a 3.5 GW by 2030 state-wide offshore wind target. This order aims at fi lling in the gaps of the renewable energy certifi cate (OREC) programme which was delayed and shook investor confi dence in the past years in New Jersey.
However, offshore wind development is not only limited to the North East. In March, Avangrid won North Carolina’s offshore lease auction, and there is great industry enthusiasm under the new federal administration which has promised a lighter regulatory process and faster project timelines to boost the offshore wind sector…