Offshore Wind holds the Key for Competitive, Zero Carbon, and Large-Scale Power Generation

Posted by MarketsandMarkets on Jul 1, 2019 6:22:19 PM
MarketsandMarkets

Power generation using wind energy has been on the rise for the past few years, particularly in offshore locations of North America, Europe, and Asia Pacific. The rise of offshore wind energy generation is attributed to the better yields due to the high offshore wind speed. A turbine in 15-mph wind speed can generate double as much energy as a turbine in 12-mph wind speed can. Offshore wind speeds are steadier than on land wind speeds because of the large open spaces at sea.

As the number of offshore wind energy installations is on a rise year on year, the size of offshore wind assets has also been increasing due to the advancement of offshore wind energy equipment and technologies. The current wind turbine hub height has reached to a total of 164 meters.

Figure 1: Top 15 Countries with Deepwater Offshore Wind Resource Potential (GW) in 2018

Slide1-2

Source: MarketsandMarkets™

The offshore wind industry is trying to move towards a whole system approach, where various stakeholders like the governments and consumers of wind energy will work closely together. Even the oil and gas majors are making serious efforts in power generation using renewables, especially wind energy, to reduce carbon footprint and manage energy transition. In 2017, ExxonMobil signed power purchase agreements (PPAs) with Ørsted, a company offering development, construction, and operation of offshore wind farms, for two 250 MW Permian Solar and Sage Draw Wind projects, which are expected to be completed in Q2 2021 and Q1 2020, respectively. The purchased power, a combination of solar and wind power supply, will be designated to maximize round-the-clock supply of power for oil and gas operations in Permian Basin and in Northern Texas, US.

MarketsandMarkets™ View Point:

Ajay Talyan – Analyst : Energy and Power at MarketsandMarkets™, shares his point of view as mentioned below:

Wind energy offers clean and commercially viable energy.

  • Large offshore open space can be effectively utilized
  • New industry for job creation
  • Low cost, reliable power for offshore regions
  • Opportunity for countries to export surplus power to neighboring regions
  • Can be easily integrated with energy storage technologies such as power to gas

In accordance with the rise in offshore wind energy projects, MarketsandMarkets™ has already done deep dive studies dedicated to offshore wind energy ecosystem, such as the global offshore wind market, the global offshore support vessel market, and the submarine cable system market, among others. The global offshore wind market is projected to grow at a CAGR of 15.3%, from 2017 to 2022, to reach a market size of USD 55.1 Billion by 2022. The turbine segment is projected to dominate the market. This is mainly because it contains the most important components such as nacelle, rotor and blades, and tower, which help to generate electricity.

The global offshore support vessel market is expected to grow at a CAGR of 5.0%, from 2018 to 2023, to reach a market size of USD 25.7 Billion by 2023. North America is a fast-growing market for offshore support vessels during the forecast period. The growth in the deployment of offshore wind farms in countries such as China and the US would drive the offshore support vessel market, for installation, maintenance, and the replacement of offshore wind turbines.

The submarine cable system market is expected to grow from USD 11.7 billion in 2018 to USD 20.9 billion by 2023, at a CAGR of 12.3%. New offshore wind capacity additions and high demand for inter-country and island connections are the key factors driving the growth of the submarine power cable market. Europe is expected to lead the global submarine power cable market by 2023. The market size in this region can be attributed to the booming offshore wind industry, of which submarine power cables are one of the critical components.

There have been new capacity additions in offshore wind power generation in 2018. According to the Global Wind Energy Council (GWEC), China, the UK, Germany, Belgium, and Denmark are the top five countries in new offshore installations.

Table 1. Top Countries with New Offshore Wind Power Installations in 2018

Slide2-2

Source: GWEC and MarketsandMarkets™ analysis

These counties have also planned for more capacity additions in the near future.

The Jiangsu province government in China announced plans to invest USD 23.5 Billion in an offshore wind power project with an installed capacity of more than 10 GW. China had a total installed wind capacity of around 208 GW in 2018 and has plans to increase this capacity to 210 GW by the end of 2020. The country is also expected to implement auctions by the end of 2019. Thus, the share of installations originating from the market-based mechanisms is expected to rise after 2020, when the first of the auction-based volumes will be installed in China. The Chinese companies have continued focus on research and development activities. For instance, Goldwind introduced an 8-MW turbine for projects on the southeast coast of China in 2018.

The UK, with the second highest number of offshore wind installations in 2018, has further plans to achieve a target of 30 GW of installed wind capacity in its waters by 2030, from under 8 GW in 2018. The Department for Business, Energy and Industrial Strategy (BEIS) envisages that offshore wind would be supplying around a third of British electricity by 2030. The wind power sector is expected to contribute to low carbon power generation sources producing 70% of the demand by the end of the next decade. For the first time, renewables would be supplying more electricity than fossil fuels in the country. The UK government has plans for biennial tenders from 2021 to award further offshore wind farms.

Auctions in Germany continue to fetch ultra-competitive prices. The second tender for the offshore wind farms in Germany once again included a project bidding for 0.0 EUR/MWh support, which is a repeat of zero priced bids of the first auction round carried out in 2017. It is also stated that the project will receive only the wholesale price of electricity with no further support/payment. This proves that the offshore costs have come down. In Germany, offshore wind targets are expected to increase to 20 GW by 2030 from the current installed base of less than 6.4 GW. In 2019, RWE announced its plans to add 2−3 GW of new clean energy capacity each year as it launched its new renewables division. The company owns active wind power projects in the UK, Germany, the Netherlands, Belgium, Austria, the Czech Republic, and Spain in Europe.

In early 2019, a new legislation was introduced in Belgium for offshore wind energy auctions. According to the law, a competitive bidding procedure would be adopted to award domain concessions for new offshore wind farms. The new law further reduces subsidies granted to offshore wind electricity production while recognizing that the new wind farms are essential to achieving Belgium’s renewable energy targets under its EU and international commitments. The key objective of the law is to organize tenders by 2022, so new offshore wind installations can become operational by 2025. The concessions awarded under the law can last for a maximum duration of 30 years, including construction, exploitation, and decommissioning phase. Any support granted to wind energy producers is limited to a 15-year duration. The proposed offshore wind zone in the North Sea is expected to have a capacity of about 1,750 MW.

The Danish Energy Agency introduced the country's first technology neutral renewable energy tenders in 2018. The agency has plans to increase the total share of renewables (RES) to 43.6% by 2021 from 40.0% in 2018. The target is expected to be fulfilled by the deployment of onshore and offshore wind and biomass energy. The development in the consumption of wind power reflects the projected net offshore and onshore wind power deployments of 1950 MW by 2021−22. Of this, offshore wind farms will account for 1366 MW (Kriegers Flak, Horns Rev 3, Vesterhav Nord/Syd), while onshore wind farms will account for 584 MW (net). To fulfill the (RES) outlook in 2018, wind developer Ørsted lifted its 2025 target for offshore wind capacity from 11−12 GW to 15 GW as part of a DKK 200 billion (€26.8 billion) investment in renewable projects. The Danish energy ministry also launched an investigation into the potential areas for the next three offshore wind projects by 2030. In 2019, the Centre for Electric Power and Energy at the Technical University of Denmark (DTU) is leading a research project to determine the technology needed for an artificial island to connect North Sea wind farms in Denmark to the surrounding countries.

The major utilities will play a key role in the development of these wind energy projects.

Table 2. Key Utilities in Offshore Wind Farm Operations

Slide3-1

Source: MarketsandMarkets™ analysis

Conclusion

The cost of offshore wind energy has come down a lot in the recent past because of the advancements in technology, the incentives provided by the national governments during wind auctions, and the creation of new favorable laws. In South East Asia, South Korea, Taiwan, and Japan are the key countries for the growth of offshore wind power because of the huge investments in wind projects and the development of progressing supply chain. In Vietnam, a lower FIT of 98 USD/MWh is expected to boost the development of the offshore wind market. The Japanese government passed a new offshore wind law in 2018, according to which there is a mandate to define several areas for offshore wind development. The World Bank has also taken up the initiative of creating a financing stream to de-risk wind power projects in developing countries. OEMs, such as GE and Vestas, have developed turbines of higher capacity for offshore power generation. GE’s Haliade-X 12 MW offshore turbine is expected to be launched for commercial operations in 2024 – 25, and Vestas upgraded its wind turbine to 10 MW in 2018. Hence, the combined efforts of OEMs, Utilities, and governments will play a key role in the strong development of offshore wind energy in the future.

Topics: Energy and Power, submarine cable system market, offshore support vessel market, offshore wind market

Recent Posts

Subscribe Here!

Posts by Tag

See all