Offshore wind energy installations are expected to achieve a compound annual growth rate of 44% between 2011 and 2016, with 18 GW of installations expected by the end of that period, according to a new analysis from MAKE Consulting. Much of that growth can be attributed to favorable policy in Europe and China, the firm notes.
MAKE Consulting expects that Europe will be the growth powerhouse for offshore wind, with the continent accounting for 62% of total installations in the 2011-2016 period. Of those European installations, 77% will be driven by Germany and the U.K., which are striving toward their ambitious 2020 offshore wind targets of 18 GW and 10 GW, respectively.
Mirroring the upward swing in northern Europe, the Asia Pacific region is expected to install 6.6 GW of offshore wind through 2016, representing 36% of the global offshore wind energy market. Although China will remain the largest offshore wind market in the Asia Pacific, the emergence of South Korea, Vietnam and Taiwan will supplement growth during that period.
In sharp contrast, progress in the U.S. is expected to be lackluster, due to low gas and electricity prices, an ample onshore resource and weak political commitment to renewables, MAKE Consulting says.
Offshore wind asset ownership will remain dominated by European utilities and developers, with Vattenfall and DONG Energy leading the way, according to the firm. Currently, southern European utilities are not represented in the top asset owners, due to a lack of offshore wind activity and challenging economics in their home markets, but they do represent a sizable chunk of the 185 GW pipeline.
In addition to utilities and developers, MAKE expects increasing interest in asset ownership from the financial sector. Pension funds and insurance companies are attracted to the sector due to the return expectations of new developments relative to other asset classes, as well as the improving risk profile of offshore wind, as the industry matures. China Three Gorges, Guodian and Marubeni are the top Asian offshore wind asset owners.
Keys to growth
Lowering the levelized cost of energy (LCOE) will be key to supporting future offshore wind energy growth, the report notes. MAKE estimates that the current LCOE range for offshore wind is 120-180 euros/MWh, with most assets around 140-160 euros/MWh. According to the firm, this will need to improve, as reductions in offshore tariffs are expected in the medium term.
The report estimates that larger turbines with resultant fewer cables and foundations mean that capital costs could drop by nearly 17%, and the LCOE could drop by 20% by the end of the decade, toward 115-120 euros/MWh.
Aside from lowering the LCOE and reducing capital costs, transmission infrastructure build-out is another challenge that the industry faces, especially in Europe. Delays in the supply of HVDC converting platforms abd liability issues surrounding grid connection delays are key challenges for the German offshore wind energy sector. However, grid connection is not a limiting factor for the forecast period in the U.K., and Round 3 projects have already secured grid connection.
The trend toward larger projects in deeper waters further from shore continues to drive technology changes. The increasing water depth of offshore wind projects is driving foundation technology change from monopiles to jacket-type foundations. On the cabling side, line losses will accelerate the shift from HVAC to HVDC technology for cables and substations, especially for deepwater projects far from shore.
Innovations, such as ABB’s new HVDC circuit breakers, are expected to facilitate the construction of offshore grids with HVDC technology, but these developments are unlikely to become widespread until the end of the decade, the report adds.