Clean Power

Published on May 8th, 2013 | by Silvio Marcacci


Offshore Wind Industry Will Become €130 Billion Annual Market By 2020

May 8th, 2013 by  

Offshore wind power may yet not match the overall strength of onshore wind, but the industry is on course to grow rapidly and become an €130 billion global market by 2020.

A new report from industry consultants Roland Berger, Offshore Wind Toward 2020,” concludes a combination of industry trends will soon make offshore wind cost competitive with other generation sources in many markets.

Europe is expected to continue dominating the global offshore wind industry, but the Asia Pacific and North American regions will soon represent significant market shares as technological innovation reduce many bottlenecks that have stymied project development to date.

Europe Continues To Dominate Global Markets

New turbines are expected to sprout from seas across the globe, but Europe will lead the charge, buoyed by ambitious national policy goals in multiple countries. The European Union has set 2020 targets of 35% electricity from renewables, with a 12% carve out for wind and 40 gigawatts (GW) installed offshore capacity.

So far, those targets have helped build 5GW offshore wind capacity, with new installations exceeding more than one offshore turbine per business day in 2012, equivalent to 10% of Europe’s annual wind energy installations. In many cases, actual generation from wind farms has exceeded expectations.

But current offshore output will be swamped by future additions – by 2020 reaching 4.5GW of new annual offshore wind capacity additions, worth more than €14 billion per year. Those estimates would more than triple annual capacity additions and double total investments for 2013, currently at 1.8GW and €7 billion respectively.

Growing Asia-Pacific, North American Markets

Just like a rising tide, the offshore wind market’s growth will raise boats outside of European waters. Asia Pacific is expected to reach 1.5GW of new annual capacity additions worth €4.8 billion by 2020, primarily focused in Japan, China, South Korea, and Taiwan. That exponential growth will dwarf current annual additions of 400 megawatts (MW) and €1.6 billion in investments.

Last but not least, North America is on course to finally join the global offshore market and capitalize upon the tremendous wind potential of its coastal waters. While annual capacity additions and annual investment are both near zero today, the report forecasts Canada, America, and Mexico will be home to 500MW annual capacity additions and €1.6 billion in total investment by 2020.

Industry Innovations Boost Cost Competitiveness

All these forecasts may seem optimistic considering significant bottlenecks in current technology, financing, and costs that have created a typical 7-10 year project development timeline, but Roland Berger predicts industry trends and market innovations will speed construction and boost cost competitiveness.

As more turbines are built, offshore wind farms will seek locations further from shore, solving the development challenges of limited space near coastlines and constrictive environmental laws. Projects further out to sea will then allow bigger farms to be built and encourage increased efficiencies in turbine manufacturing.

In this scenario turbines will get bigger and more powerful, boosting overall project output. The report predicts the average offshore wind farm size will jump from 200MW today to 340MW in 2020, with average turbine capacity rising from 2-3MW today to 4-7MW.

Big Is Beautiful

Larger turbines embody the “big is beautiful” mantra, and their efficiencies of scale will drive industry cost-competitiveness with other forms of generation. Offshore wind capital expenditures are forecast to drop 6%, while operation and maintenance costs fall 14% and capacity factors rise 12%.

Add it all up, and the levelized cost of energy (LCoE) from European offshore wind generation could fall 17% from current figures. This equals Europe’s current offshore wind LCoE of €13 cents per kilowatt-hour (kWh) dropping to €11ct/kWh by 2016 and €9ct/kWh by 2020 – making offshore wind competitive with all other forms of non-hydro renewable electricity.

Risks Remain, But Potential Is Clear

Siting new offshore wind projects in ever-deeper waters does, however, raise logistical problems for turbine installation and risks future growth. The report notes new vessels are now being specifically designed to install offshore turbines more efficiently, and the types of turbine foundations used will shift from gravity-based or monopile construction to jacket-style or floating foundations – all reducing installation times and project costs.

Overall, the challenges to offshore wind remain significant, but the potential is enormous and the imperative to build out this renewable energy resource is clear.  “The offshore wind industry will become increasingly important in the years ahead,” said Marcus Weber of Roland Berger. “Transforming the energy system without this one central pillar would be difficult to imagine.“

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About the Author

Silvio is Principal at Marcacci Communications, a full-service clean energy and climate policy public relations company based in Oakland, CA.

  • Dave2020

    “The report predicted that much of the investment will remain concentrated on the UK, which currently holds the title as the world’s largest offshore wind market.”

    If the UK manufactured all this stuff, that “title” might be something to crow about. We don’t – most of it is imported and the power industry is largely run by foreign companies that ‘offshore’ their profits!

    I sometimes wonder – do these speculative figures mean anything?! e.g. Is 3-4ct/kWh a realistic price for nuclear? The Rheinisch-Westfälischen Institute for Economic Research begs to differ! They figured it would be 10.7 €ct – 12.4 €ct. for 2010. (close to offshore wind, and rising)

    The ‘economics’ have been spinning around in circles for years!

    “Even academics are having a tricky time crunching the numbers and coming up with a flat rate of comparison that would allow nuclear power to be judged solely on its economic merits.”

    The fact of the matter is – trying to design a market, where market principles can’t possibly work, is a fool’s errand, an insane hypothesis. Economic theory is the antithesis of science.

  • Dave2020

    The Hywind floater has been 12 years in development, hoping to grow from a 2.3MW turbine up to 4MW. Higher substructure costs cancel out economies of scale achieved with longer blades. It’s the same taking sea-bed foundations into deeper water.

    That dilemma, plus the inherent compromises entailed in mounting a large turbine above the level affected by wind gradient, were recognised by some engineers on the original team as an insurmountable problem for HAWT floaters.

    They felt a radical change would be better and developed this instead:-

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  • James Wimberley

    It’s encouraging that Berger see a improvement in capacity factor from 43% to 48%. Their report doesn’t indicate where they think this is coming from. Aren’t hubs already high enough to overcome most of the wind gradient? Is it better controls, rotor designs and drive trains?

    • arne-nl

      The simplest way of increasing capacity factor is fitting a smaller generator relative to the rotor. In times of high wind, the turbine will produce less than would be possible with a larger generator. You can see it as a form of auto-curtailment.

      Wind power penetration in Europe is such that at times of strong winds, electricity prices are lower thanks to the glut of windpower ‘swamping’ the grid. By fitting a smaller generator you lose kWh, but not much $ € ₤. The smaller generator reduces the cost of the turbine. There is an optimal generator size that maximizes profit. Having explained that, it will likely not be a factor, since most wind farms receive a fixed feed-in tariff.

      The factors you mention are most likely the main reason.

      • Bob_Wallace

        Seems to me that increasing the swept area/rotor to turbine size ratio one would also be increasing the hours per year that wind can supply power to the grid.

        Turbines with long blades can feather their blades when winds pick up. Turbines with relatively shorter blades can’t stretch in order to harvest more energy in light winds.

        Since wind generation is cheap and storage expensive, seems like it would make sense to maximize the number of output hours at the loss of some peak output.

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