Offshore wind to become a US$1-trillion industry

October 25th, 2019, Published in Articles: EE Publishers, Articles: Energize, Featured: EE Publishers, Featured: Energize

The International Energy Agency (IEA) reports that offshore wind power will expand impressively over the next two decades, boosting efforts to decarbonise energy systems and reduce air pollution as it becomes a growing part of electricity supply. Europe is set to be the engine of growth for this flourishing renewable energy technology, followed closely by China and others.

The IEA’s Offshore Wind Outlook 2019 is the most comprehensive global study on the subject to date, combining the latest technology and market developments with a specially commissioned new geospatial analysis that maps out wind speed and quality along hundreds of thousands of kilometres of coastline around the world. The report is an excerpt from the organisation’s flagship World Energy Outlook 2019, which will be published in full on 13 November.

Click here to access the report

The IEA finds that global offshore wind capacity may increase 15-fold and attract around US$1-trillion of cumulative investment by 2040. This is driven by falling costs, supportive government policies and some remarkable technological progress, such as larger turbines and floating foundations.

That’s just the start – the IEA report finds that offshore wind technology has the potential to grow far more strongly with stepped-up support from policy makers.

Europe has pioneered offshore wind technology, and the region is positioned to be the powerhouse of its future development. Today, offshore wind capacity in the EU stands at almost 20 GW. Under current policy settings, that is set to rise to nearly 130 GW by 2040. However, if the EU reaches its carbon-neutrality aims, offshore wind capacity would jump to around 180 GW by 2040 and become the region’s largest single source of electricity.

An even more ambitious vision – in which policies drive a big increase in demand for clean hydrogen produced by offshore wind – could push European offshore wind capacity dramatically higher.

The only variable baseload power generation technology

Offshore wind is in a category of its own, as the only variable baseload power generation technology. New offshore wind projects have capacity factors of 40 to 50%, as larger turbines and other technology improvements are helping to make the most of available wind resources.

At these levels, offshore wind matches the capacity factors of efficient gas-fired power plants, coal-fired power plants in some regions, exceeds those of onshore wind and is about double those of solar PV.

Offshore wind output varies according to the strength of the wind, but its hourly variability is lower than that of solar PV. Offshore wind typically fluctuates within a narrower band, up to 20% from hour-to-hour, than is the case for solar PV, up to 40% from hour-to-hour.

Offshore wind’s remarkable potential

The global offshore wind market grew nearly 30% per year between 2010 and 2018, benefitting from rapid technology improvements and about 150 new offshore wind projects are in active development around the world. Europe in particular has fostered the technology’s development, led by the UK, Germany and Denmark, but China added more capacity than any other country in 2018.

Fig. 1: Annual offshore capacity additions by region, 2010-2018.

Yet today’s offshore wind market doesn’t even come close to tapping the full potential – with high-quality resources available in most major markets, offshore wind has the potential to generate more than 420 000 TWh per year worldwide. This is more than 18 times global electricity demand today.

Europe is a leader in offshore wind technology

The growth of the offshore wind industry has been fostered in European countries bordering the North Seas, where high quality wind resources and relatively shallow water have provided exceptionally good conditions in which to develop offshore wind technologies and bring them to market.

Policy support has helped the European Union reach nearly 20 GW of offshore wind capacity by the end of 2018. Offshore wind is set for robust growth in the EU, with current policies aiming to multiply offshore wind capacity by a factor of four over the next decade.

Capacity is set to grow around the world

Alongside Europe, China has taken strides forward on offshore wind and now stands among the market leaders. In 2018, China added 1,6 GW of offshore wind capacity, the most of any country.

The global offshore wind market is set to expand significantly over the next two decades, growing by 13% per year in the Stated Policies Scenario. Bolstered by policy targets and falling technology costs, global offshore wind capacity is projected to increase fifteen-fold to 2040, becoming a $1-trillion industry over the next two decades – matching capital spending on gas- and coal-fired capacity over the same period. This level of investment means that offshore wind accounts for 10% of investment in renewables-based power plants globally.

Europe remains the technology leader to 2040, but China closes the gap spurred by recent efforts to expand their construction capacities for offshore wind. In the US, state-level targets set the course for rapid growth over the next decade. India, Korea and Chinese Taipei also have ambitious targets, while other countries, including Japan and Canada, are laying the groundwork for future offshore wind development.

China is also set to play a major role in offshore wind’s long-term growth, driven by efforts to reduce air pollution. The technology is particularly attractive in China because offshore wind farms can be built near the major population centres spread around the east and south of the country. By around 2025, China is likely to have the largest offshore wind fleet of any country, overtaking the UK. China’s offshore wind capacity is set to rise from 4 GW today to 110 GW by 2040. Policies designed to meet global sustainable energy goals could push that even higher to above 170 GW.

The US has good offshore wind resources in the northeast of the country and near demand centres along the densely populated east coast, offering a way to help diversify the country’s power mix. Floating foundations would expand the possibilities for harnessing wind resources off the west coast.

“In the past decade, two major areas of technological innovation have been game-changers in the energy system by substantially driving down costs: the shale revolution and the rise of solar PV,” said Dr Fatih Birol, the IEA’s executive director. “And offshore wind has the potential to join their ranks in terms of steep cost reduction.”

The huge promise of offshore wind is underscored by the development of floating turbines which could be deployed further out at sea. In theory, they could enable offshore wind to meet the entire electricity demand of several key electricity markets several times over, including Europe, the US and Japan.

“Offshore wind currently provides just 0,3% of global power generation, but its potential is vast,” Dr Birol said. “More and more of that potential is coming within reach, but much work remains to be done by governments and industry for it to become a mainstay of clean energy transitions.”

Fig. 2: Offshore wind indicative shares of capital costs by component and levelised cost of electricity for projects completed in 2018.

Governments and regulators can clear the path ahead for offshore wind’s development by providing the long-term vision that will encourage industry and investors to undertake the major investments required to develop offshore wind projects and link them to power grids on land. That includes careful market design, ensuring low-cost financing and regulations that recognise that the development of onshore grid infrastructure is essential to the efficient integration of power production from offshore wind.

Industry needs to continue the rapid development of the technology so that wind turbines keep growing in size and power capacity, which in turn delivers the major performance and cost reductions that enables offshore wind to become more competitive with gas-fired power and onshore wind.

What’s more, huge business opportunities exist for oil and gas sector companies to draw on their offshore expertise. An estimated 40% of the lifetime costs of an offshore wind project, including construction and maintenance, have significant synergies with the offshore oil and gas sector. That translates into a market opportunity of US$400-billion, or more in Europe and China over the next two decades.

Click here to access the report

Contact International Energy Agency, info@iea.org

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