Offshore wind energy – an outlook
Late October 2019, the International Energy Agency released a study that suggested offshore wind could become a US$1tln industry. Idha Valeur looks into the projections, limitations and possibilities.
In October this year, the International Energy Agency (IEA) released an in-depth study on offshore wind, called Offshore wind outlook 2019, which stated that the potential of offshore is tremendous, but that government policies will play a large role in the global success or failure of the sector.
According to the predictions in the report, the industry could grow by 15 times over what it is today, turning it into a US$1tln industry. It also stated that this growth estimate is partly due to the decrease in costs and the increase in positive policies from governments that back the industry.
‘The promising outlook for offshore wind is underpinned by policy support in an increasing number of regions. Several European North Seas countries – including the UK, Germany, the Netherlands and Denmark – have policy targets supporting offshore wind,’ the report stated.
It further detailed that despite China being relatively new to the offshore industry, the scale-up process is moving ahead rapidly with the goal to have a ‘project pipeline of 10GW by 2020’. Government support through state targets and federal incentives will also result in the USA developing its offshore wind market. ‘Additionally, policy targets are in place and projects under development in Korea, Japan, Chinese Taipei and Vietnam,’ the report read.
The UK industry, as a leading European country on offshore wind, has agreed a deal with the government to scale-up production. ‘The UK government has set a legally binding target to reduce this country’s greenhouse gas emissions to net-zero by 2050. To achieve this, we will need to maximise our use of a variety of renewable technologies, with offshore wind playing a leading role,’ RenewableUK Chief Executive, Hugh McNeal, told Materials World.
Further, McNeal explained that currently 33% of UK electricity is generated from renewable sources, with 17.1% of that coming from wind energy alone – 9.1% from onshore and 8% from offshore. He added that, agreeing an offshore wind sector deal with the government will result in the UK generating a minimum of one-third of the country’s electricity from offshore wind by 2030. This commitment will increase capacity from 8.5GW to 30GW by the end of the next decade. ‘It is a key technology when it comes to generating at scale, as our offshore wind resource is the best in Europe,’ he said.
The importance of offshore
Recognising that vast changes must be made to reach the 2050 targets set out in the Paris Agreement, offshore is becoming increasingly central to clean energy initiatives.
In the 2019 outlook foreword, IEA Executive Director, Dr Fatih Birol, wrote that with greater pressure to meet the global sustainable energy goals, it is evermore important to expand the range of affordable low-carbon technologies.
‘Based on current and proposed policies, our analysis shows that global offshore wind power capacity is set to increase 15-fold over the next two decades, turning it into a US$1tln business. Its potential is far greater than that, however, as made clear by the IEA Sustainable Development Scenario, which outlines a path to meeting global climate, air quality and universal energy access goals,’ Birol said.
‘In this scenario, offshore wind not only helps to put the global power sector on track for full decarbonisation, it also becomes the leading source of electricity in Europe and enables hydrogen to dramatically cut emissions from sectors such as iron, steel and shipping.’
IEA Lead Power Sector Modelling World Energy Outlook, Brent Wanner, told Materials World that as a maturing technology that can help achieve environmental goals and contribute to a secure and affordable electricity supply, offshore wind complements other clean energy sources well. He said that from 2019–2040 offshore could prevent more than seven gigatonnes of CO2 emissions on a global scale.
McNeal believes that in addition to the environmental aspects, growing the industry is important for local communities. ‘As well as tackling climate change by playing a major role in reducing our emissions to net-zero, this industry will be employing 27,000 people in highly skilled jobs by 2030, many of them in coastal areas which need new economic opportunities, such as Teesside, the Humber and East Anglia, as well as ports in Scotland and Wales,’ he said. ‘It will also allow us to export our offshore wind products and services worldwide – these can increase fivefold in value from £0.6bln a year now to £2.6bln by 2030.’
Supplying electricity globally
Currently, offshore wind is only providing 0.3% of the global electricity supply, yet it plays a vital role in the clean energy transition, Wanner said.
‘Its deployment has been growing by almost 30% per year, second only to solar power, and its potential is nearly limitless. Improved technologies and cost reductions have offshore wind poised to make a significant contribution to meeting climate goals in Europe, China and several more emerging markets,’ he said.
McNeal also agreed that the potential is, theoretically, limitless and that it is imperative that the UK increases its capacity. He said that, according to National Grid, there is no limit as to how much electricity from wind it can accommodate. ‘The government’s advisory body, the Committee on Climate Change, has said the UK will need to have 75GW of offshore wind capacity installed by 2050 to reach our net-zero target, which would be one of the biggest contributions across the entire economy in meeting net-zero,’ he said.
Looking at growth, Wanner explained that the technical potential of offshore wind is enough to meet current global electricity demand – which is at 23,000TWh – 18 times over. ‘Offshore wind could meet 11 times the electricity demand in the European Union, nine times demand in Japan, five times demand in India, 2.5 times demand in the USA, and more than the demand in China. Even tapping just the most attractive potential in the nearshore shallow waters could provide close to 36,000TWh globally per year.’
A look at the limitations
While projections of limitless energy potential sound promising, there are certain aspects that could hinder the desired growth.
‘We need to see improvements to the planning system to ensure projects can progress through it as swiftly as possible. This means, for example, ensuring that the statutory nature conservation bodies which we closely work with are properly resourced,’ McNeal said.
According to Wanner, it is important that developers establish efficient supply chains, address environmental concerns, as well as showing that the reduction in costs promised by auction bids made recently can be replicated in other markets, plus under several marine conditions. ‘Offshore wind developers must also deal successfully with a unique set of technical and regulatory challenges, in particular in terms of marine planning and the development of supporting grid infrastructure on land to deliver electricity produced offshore to consumers,’ he said. ‘Policy-makers have an important role to play in creating the necessary conditions for this to happen, in particular reducing risk where appropriate to enable lower-cost financing.’
Despite the current government policies, incentives and common ambitions for a greener future with both Labour and Conservatives promising net-zero carbon emissions by 2050 sounding promising – there are still aspects that the industry has to tackle.
A few days after the IEA report, Danish energy generator, Ørsted, released an update on its financial targets stating it had underestimated how factors such as the wake and blockage effect could negatively impact their long-term projections. The wake effect relates to the impact of wake inside and between farms, while the blockage effect is when the wind slows down as it approaches the turbine. This will affect each individual turbine and the entire farm. ‘Our new wind simulation models show that we have historically underestimated these blockage effects. This finding is also supported by industry consultant DNV GL’s recent report on blockage, which indicates that this effect is more broadly underestimated,’ the statement read.
According to McNeal, these factors are already being taken into account by the industry and they have several solutions to this issue. ‘The offshore wind industry has done a huge amount of analysis of blockage and wake effects, and that’s led to developments in the layout of wind farms to minimise these effects and maximise production,’ he said. ‘Developers understand that load factors vary at different sites and at different times. As we learn more, we will see further innovation and the industry is already using larger, more productive turbines which will drive growth over the next ten years.’
Measures to take
Knowing that the potential of offshore is vast and its importance for the future of energy security on a global scale is considerable, the industry is clear on what it believes is important to ensure the growth needed for a successful scale-up.
The government will play a key role, according to McNeal. He explained that it will need to continue to provide a framework that is supporting offshore wind. ‘That means continuing to hold regular auctions for government-backed contracts to generate power – Contracts for Difference – as the certainty that these contracts bring drives down the cost of capital for developers seeking to build new projects,’ he said.
Supporting McNeal’s statement on the importance of government support, Wanner said the financial attractiveness of offshore wind, in the eyes of investors, depends on several factors. These include the cost of projects and technology, ongoing market conditions, to what extent the government’s support continues and what other power generation technologies will be developed in the future.
‘Market conditions will play a critical role in the long-term future for offshore wind. Market reforms that promote such investment would improve the opportunities for market-based deployment of offshore wind,’ he said. ‘The economics of offshore wind would also be enhanced if transmissions network costs can be further reduced through innovation, economies of scale and supportive action on the part of electricity transmission grid operators.’
On the outlook of offshore wind energy becoming a US$1tln industry, McNeal said there is every reason to presume that this is achievable. ‘The only question is how soon. Public support for offshore wind is very high – the UK government’s own opinion poll released 7 November 2019 shows it now stands at over 80%, so politicians need to listen to what voters are telling them – they want to see clean energy developed as quickly as possible, and offshore wind is one of the most powerful sources we have to achieve this.’
The full IEA 2019 outlook can be read here: bit.ly/2CECJNN