Offshore Wind Could Be A $1 Trillion Energy Giant

 

Some technologies insinuate their way into our lives, slowly and almost unnoticed. Others arrive with a bang. Offshore wind is one of those and is set to become a $1 trillion behemoth capable of generating several times more electricity than needed in some of the world’s biggest economies, including the US, Europe and Japan.

Just a couple of years ago, industry experts believed that the technology would not start to make inroads into power markets until about 2030 and not really take off until a decade later. In 2015, the UK government, home to the world’s leading offshore wind sector, thought the industry might reach a cost of £100 ($128)/MWh by 2020 and £80 ($103)/MWh by 2030, in 2012 terms, with costs slowly declining over time.

Instead, the price has dropped incredibly quickly. According to the latest figures from industry analysts BloombergNEF, the cost of offshore wind fell by 12% in the first six months of 2019, and prices are a third lower than this time last year, with a global benchmark estimate of $78/MWh and a number of projects coming in considerably cheaper than that.

Now, the International Energy Agency (IEA) has predicted that offshore will become a $1 trillion industry. In what it says is the most comprehensive global study on the subject to date, the IEA finds that global offshore wind capacity may increase 15-fold and attract around $1 trillion of investment by 2040.

This massive expansion will be driven by falling costs, supportive government policies and some remarkable technological progress, such as larger turbines and floating foundations – and if policy makers make the right moves, it could grow even more.

Europe was the pioneer and is currently the undisputed leader in offshore wind technology, thanks to the geography of the North Sea, which has a combination of strong, reliable winds, shallow seabeds that allow turbines to be anchored to the ocean floor and proximity to large centres of demand in the UK, the Netherlands, Germany and others.

Current capacity in the European Union is almost 20GW, which the IEA says will rise to almost 130GW by 2040 under current policy settings. “However, if the European Union reaches its carbon-neutrality aims, offshore wind capacity would jump to around 180 gigawatts by 2040 and become the region’s largest single source of electricity,” it adds. “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.”

But while Europe has nurtured the still-nascent industry, it is now ready to spread its wings. Both China and the US are set to see an explosion in capacity in the next few decades. For China, the key driver is the ability to site turbines near the large population centres of the east and south of the country as part of its aim to tackle the country’s significant air pollution problem. By 2025, China will overtake the UK as the world’s biggest market, with capacity set to rise from just 4GW today to 110GW by 2040 – or 170GW with a stronger policy push.

The US also has strong offshore wind resources in the northeast of the country, close to the big cities of the densely populated east coast, but it has been constrained from deploying offshore wind capacity by its deepwater coastlines. However, floating platforms are being developed that will open up the market not just on eastern seaboard but off the west coast as well.

“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 Fatih Birol, the IEA’s Executive Director. “And offshore wind has the potential to join their ranks in terms of steep cost reduction.”

Floating turbines can be deployed further out at sea, where larger turbines can take advantage of stronger and steadier winds. In theory, they could enable offshore wind to meet the entire electricity demand of several key electricity markets several times over, including Europe, the United States and Japan.

“Offshore wind currently provides just 0.3% of global power generation, but its potential is vast,” 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.”

Authorities need to provide a long-term vision for the industry and the right market design to encourage investors to fund projects and the associated infrastructure such as onshore grid connections.

Another prerequisite for offshore wind to fulfil its potential is for the industry’s technological development to continue its rapid development so that wind turbines keep growing in size and power capacity, which is the main driver of increasing performance and cutting costs to bring the sector closer to being able to compete with gas-fired power and onshore wind.