Forecasting The Global Offshore Wind Industry

Middelgruden Offshore Wind Farm in Denmark
The Middelgruden Offshore Wind Farm in Denmark.
(cc) Eskinder Debebe / United Nations Photo Library

Led by European utilities, the offshore wind industry is poised for substantial scaling over the next decade, with the global installed base expected to grow to nearly 45 GW in 2020 according to a new market study from Emerging Energy Research. With large northern European utilities driving the industry forward in the short term, the stage is being set for North America and Asia offshore development as well, according to EER.

“The global offshore wind energy industry’s entry into the next decade will be marked by concrete progress built on the past 10 years of moving along the learning curve,” according to EER Senior Wind Analyst Eduard Sala de Vedruna. While the global offshore market has been slow to take off due to cost and logistical challenges–climbing from 70 MW installed to 1.5 GW over the past eight years–the industry is now scaling thanks to increased focus on offshore by Europe utilities,” says Sala de Vedruna.

Asia and North America are currently looking to Europe for technology and cost benchmarking. Between 2010 and 2020, these two regions will contribute nearly 25% of the total new offshore capacity installed worldwide, according to EER.

In Europe, tapped-out onshore markets and higher capacity factors offshore are driving governments to incentivize the technology, providing key support to drive industrial build-out. “Offshore is still very much a European industry led by the UK and followed by Germany, Sweden, the Netherlands, Belgium, and Denmark. These markets will fuel Europe’s offshore wind eminence as the annual megawatts added scale globally,” says Sala de Vedruna. EER expects Asia to tap its offshore markets in 2014, led by China and Korea. In North America, test projects in the US (Deepwater Wind) and Canada (NaiKun) may come to fruition by 2012, with over 6 GW projected by 2020, according to EER.

Utilities own 90% of the 20 GW of offshore projects in the pipeline in Europe, many of which are now moving to procure turbines and define engineering, procurement, and construction strategies for project execution. Northern Europe players, mainly German utilities, have the most aggressive expansion plans in terms of megawatts and geographic diversity of their pipelines, according to EER. “European utilities such as RWE, E.ON, DONG, Vattenfall, Scottish and Southern Energy, Statkraft, and Iberdrola are well-positioned to rely on their strong balance sheets and industry expertise to overcome the increased costs and risks associated with offshore wind projects,” says Sala de Vedruna.

Europe’s offshore wind industry has rapidly evolved into a consolidated market mainly in the North Sea, with onshore competition moving offshore as utility players build portfolios. “What began as a market in which smaller developers competed to lock up permitted sites for sale to utilities has shifted to utilities working in tandem with other utilities and developers to assemble the technical skills, financing, and power experience needed for project execution. This shift has been crucial to the market’s reaching maturity to handle the sets of technical, construction, and interface risks inherent with EPC on this scale,” says Sala de Vedruna.

European players’ moves along the value chain are setting the tone for longer-term global competition, with each project providing essential expertise for the industry to improve standardization across projects for these installations, which are larger and more costly than onshore wind.

“Offshore projects still present major challenges throughout the process, from permitting to construction and technology available, requiring more skilled players to manage the projects and contingencies,” says Sala de Vedruna. In addition to utilities, independent power producers, pure play developers, EPC contractors, and specialized service and equipment providers are getting active in offshore, according to EER.

To reduce installation costs and maximize power output, utilities are seeking bankable, larger turbines to maximize economies of scale. Europe’s trend toward 5 MW turbines for 200 MW and larger projects moving further offshore will provide key references for near-term projects in Canada, the US, China, and Korea. The recent launch of larger turbines, the increasing size of projects, and the industry’s ability to scale the supply chain with vessel, cabling, and foundation installation capacity are fundamental to project execution, according to EER.

EER’s new study, Global Offshore Wind Energy Markets & Strategies: 2009-2020, comprised of 211 pages and 100 exhibits, analyzes offshore market growth in Europe, North America, and Asia. The full study is now available for purchase from EER.

Emerging Energy Research is the leading provider of analysis on clean and renewable energy markets. With offices in Cambridge, Massachusetts and Barcelona, Spain, EER provides strategic advice to over 1,000 stakeholders across the emerging energy industry, providing market research, support, and analysis to executives and decision-makers at utilities, developers, independent power producers, technology promoters, manufacturers, and investment companies.

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