Offshore wind currently provides less than 850 MW capacity, but the European Wind Energy Association estimates that this could rise to 5 GW in 2010. If that is to happen, a huge amount of development is needed and a number of structural obstacles must be overcome. Rolf de Vos speculates on the future of offshore wind.Offshore wind, currently in its infancy, is poised for a major growth spurt, with plans for more than 50,000 MW of installed capacity in the North Sea alone in the pipeline. At present, there are just 13 wind farms in European waters, with an overall capacity of some 850 MW. Apart from Blyth Offshore, most of these installations stand in a depth of no more than a few metres, so can hardly be called ‘offshore’, but they are the modest forerunners of an expected boom in offshore wind development over the next decade or so. Offshore wind is seen as a vital element in achieving the European Commission’s target for renewable energy sources to account for 20% of all energy supplied in the EU by 2020 (see Figure 1).
Figure 1. Achieved (in 2004) and additional mid-term potential (by 2020) for electricity from renewable energy sources by category. Source: EU Renewable Energy Roadmap
In the short to medium term, the future of offshore wind energy is characterized by large numbers. Industry figures suggest around 4000 MW offshore wind capacity by 2010, with at least 1000 large turbines in operation. Kaj Lindvig, board member of the Danish Wind Industry Association, anticipates annual investments of €10-15 billion by 2020.
In common with most investments in the renewable energy sector, there are no iron-clad guarantees, and, as with any infant, offshore wind energy is experiencing some early growing pains. Technical obstacles to further development include problems with gearboxes, other components and the turbines themselves. Meanwhile, high steel prices are having a negative impact on turbine manufacture, and there remains a lack of national and international policies to ease financing, spatial planning, grid connection and – in addition – transport system operation.Europe in the lead
While Europe is leading the way offshore with projects located – and due to be located – in the North Sea and the Baltic Sea, other continents lag some distance behind. In Asia, activity remains very modest. Japan has just one 1.2 MW offshore wind turbine in Hokkaido with no concrete plans for more yet. However, Chinese companies have plans for some seven offshore wind farms, and South Korea and India are starting to consider some minor installations. Nevertheless, except for a few offshore turbines at Nan-Ao Island in China, nothing significant can be expected before 2012. But recent experience with other renewable energy technologies, such as onshore wind, PV and solar thermal collectors, have demonstrated that Asian markets do have the potential for rapid growth.
Currently, North America is slightly ahead of Asia, with 10 planned offshore wind farms. Plans for four of these, with a combined capacity of some 1000 MW, have been finalized. One will be off the coast of British Columbia in Canada and the other three located off the US eastern seaboard. Activities are expected to start with the erection of a 1.5 MW demonstration installation at Galveston Island, Texas, but larger projects are unlikely before 2011 or 2012.
A significant barrier to further development is the lack of special tariffs for offshore wind in North America and Asia, although this is expected to change. According to the recent Fourth Assessment report from the Intergovernmental Panel on Climate Change (IPCC), wind power is considered one of the most important technologies in the battle against climate change, with the capacity to provide as much as 7% of all global electricity demand by 2030. Although the IPCC report does not differentiate between onshore and offshore wind energy, offshore installations are bound to make a considerable contribution. Even if offshore accounts for just 10% of wind power’s predicted overall contribution, this would require some 30,000 MW of installed capacity by 2030. It is unlikely that such a significant market would be entirely European.Shift to offshore on the horizon
At present, the development of offshore wind energy is not as buoyant as its potential suggests because of problems in the availability of turbines. On the other hand, there is no lack of project developers waiting in the wings, and investors are practically falling over themselves to provide financial input.
Prices of steel, the main building material, have substantially increased in the last few years. Meanwhile, wind turbine manufacturers are reluctant to adapt their production lines to the larger-scale requirements of offshore structures. They see such a move as too risky at present because the market for offshore wind energy is not yet sufficiently mature. This is understandable. Some major manufacturers have recently been through hard times, facing deficits and low liquidity. In addition, as the market for onshore wind energy is still steadily growing in countries such as the US, India, China and Brazil, and will probably remain dominant for the next decade or so, why take the risk with offshore?
But according to the experts, a shift to offshore is looming. In its recent Global Wind 2006 report, the Global Wind Energy Council states: ‘Delays in the offshore market have pushed large-scale offshore development towards the end of the decade. However, offshore development will give a new momentum to the European market during the next decade.’ Christian Kjaer, CEO of the European Wind Energy Association, adds: ‘According to the European Commission, the target of 20% renewable energy in 2020 will only be met if offshore wind energy will grow at the same rate as onshore wind energy has in the last 14 years. That means a growth rate of almost 35% a year. That can be done, but it will require clear political frameworks, both international and national, to get the main obstacles out of the way.’Obstacles to offshore development
Squeezing out a space
It may seem paradoxical, given the size of the world’s oceans, but at present there is not enough houseroom for the newcomer on the block, offshore wind. Traditional interests such as fishing, freight, sand and gravel extraction, oil and gas, and the military have a higher priority when offshore space is allocated. However, there are signs that this situation might be about to improve. Within the 12 miles zone (the 19.2 km limit of national jurisdiction), national policies and strategies need to be established to give room to offshore wind. Some EU member states, such as the UK, Belgium and Germany, are willing to consider this and are either in the process of developing, or have developed, strategic offshore plans. Off the Belgian coast, for example, one dedicated zone, around the Bligh Bank, Thornton Bank and Bank Zonder Naam (Bank Without a Name) has been designated for wind power generation, providing opportunities for some 2000 MW of offshore wind energy.
Will there be more than 50,000 MW of offshore wind in the North Sea by 2010? shell wind
The lack of an international framework to address competition between wind and other offshore activities is also responsible for delays in realising the potential of offshore wind. Furthermore, the lack of a framework hinders co-operation within the offshore wind industry itself. For example, in the Kriegers Flak area of the Baltic Sea between Sweden, Germany and Denmark, Swedish and German developers are in the process of installing two wind farms a mere stone’s throw from each other – Kriegers Flak I on the German side and Kriegers Flak II on the Swedish side. Meanwhile, an application has been filed for the erection of a 455 MW wind farm in the Danish part of Kriegers Flak. Despite their proximity, agreement on a joint interconnector, which would be the most cost-effective option, is still far from being realized because of a lack of collaboration between governments and national transmission system operators (TSOs) (see below).
Connecting to the grid
Offshore wind projects are currently blighted by the excessive cost of connecting to the central grid. With new-build fossil fuel power plants, grid operators often strengthened the local grid and divided the costs of doing so between end-users. In contrast, offshore wind project developers have to include grid connection costs, such as cabling, in their business plans, so adding substantially to average kilowatt-hour prices.
This has forced some operators to consider cable sharing. For example, Evelop, Airtricity and Nuon/Shell, which all operate wind farms off the Dutch coast, have reached an agreement on constructing one common power transport cable in order to get their power ashore. In other countries, similar initiatives have been developed, sometimes obstructed by the lack of collaboration between governments and TSOs, as in the Kriegers Flak case. EWEA’s Christian Kjaer comments: ‘From the point of view of an internal energy market, the Kriegers Flak case is insane. It shows that we have to overcome historical interests. In this case, it may not be in everybody’s interests to decrease kilowatt-hour prices. But, of course, it is in the interest of consumers and other parties. That’s one important reason why we advocate full ownership unbundling of transport systems and the supply. This unbundling is essential for the further functioning of the internal market.’ Ownership unbundling (of generation and supply) is a very important issue for the European Commission.
Evelop, Airtricity and Nuon/Shell, which all operate wind farms off the Dutch coast, have agreed to share a power transport cable to get their power ashore shell wind
In a further positive development, Germany has recently legislated for the costs of offshore wind grid connection to be paid by the local TSO, so removing one of the major obstacles to offshore wind development in one fell swoop and creating, at last, a ‘level playing field’ between offshore wind and onshore power generation sources. The UK is in the process of moving in a similar direction.
The offshore wind market faces other structural problems, notably issues associated with grid design. The grid and, even more importantly, the economic system of calculating spot market kWh prices, is still based on the conventional power system paradigm: large power stations, some base load, some peak load. Although many stakeholders are reasoning that the intermittency of wind energy is causing trouble for the grid, some wind supporters argue that it is the other way around: inflexibility of orthodox grid design causes a lot of trouble to wind energy. Current grid economics throw up bizarre anomalies. For example, in the winter of 2006-2007 a peak wind energy load in the German grid caused the spot market price of power to fall to zero. But instead of saying the actual value of wind energy dropped to zero, some proponents of wind argued that the actual value of base load power was annihilated. It often seems to be a matter of perspective.
Installation almost complete at Kentish Flats offshore wind farm, UK, in July 2005 alasdair cameron
Obviously the mismatch between grid design and wind energy needs to be resolved if wind energy is to achieve its potential in the global energy supply mix and contribute towards mitigating climate change.
Making the market work
Even allowing for the grid connection cost issue referred to above, offshore wind power generation is still more expensive than onshore wind in terms of price per kWh. In its latest (fourth) assessment report on climate change mitigation measures, the IPCC estimates that wind energy now costs some $40-$90/MWh, decreasing to $30-$80/MWh in 2030. Offshore wind will be at the higher end of these margins. But others foresee prices of some €60/MWh in 10-15 years, and that means full competition. In the meantime, however, offshore wind needs financial support.
Fortunately, investors are searching for interesting projects and, in fact, are queuing up to invest their money. But they also need to see a positive track record on the part of developers in order to judge the return on their investments. An industry commentator observes: ‘What we see now is a large number of relatively small project developers. But for investors, a track record is very important. And, of course, nobody has a track record yet because the market is so young. That is why parties like GE and Siemens are so important. These are large firms, with a large track record in other businesses. They are trustworthy. I predict that a consolidation of these parties will happen in next few years. That is one way to attain a track record.’Connecting to the future
If the pressure for change is high enough, governments and other stakeholders will make things happen. For unless the problems outlined here over costs, grid access and spatial planning can be resolved in the foreseeable future, offshore wind energy will never grow at the rate necessary to meet climate change targets. In the future, tens of thousands of offshore wind turbines will need to be built, in conjunction with specialized offshore wind harbours. Already, several cities around the North Sea and the Baltic, such as Edinburgh and Bremen, are competing to be the leading offshore wind harbour. A position like that will bring thousands of jobs and prosperity, as oil and gas has done to cities such as Aberdeen.
The future will also see high voltage grid connections at sea, followed by the establishment of a network of interconnectors between countries and offshore power plants providing the foundation for an offshore high voltage grid. Several companies in the renewable energy market, such as Airtricity (proposing the Supergrid for wind energy) and Econcern (proposing Poseidon, which also covers clean fossil fuels and other renewable sources), are developing future scenarios that incorporate heavy offshore grids and lighter two-way onshore distribution systems. As the EWEA’s Christian Kjaer comments, ‘Let us at least start planning interconnectors with offshore wind energy in mind.’
Rolf de Vos is from GreenPrices Newsdesk
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