We have all followed with great interest the extraordinary breakthrough in European offshore wind over the past few years. After struggling for a number of years with increasing prices as projects moved further offshore and into deeper waters, the first real breakthrough came in early 2015 with the Horns Rev 3 project where Vattenfall’s winning bid of €103/MWh foreshadowed meeting the industry’s target of €100/MWh by 2020. This was followed in 2016 with a number of bids in both Danish and Dutch tenders with prices well below that, and in 2017 and 2018 resulted in a number of bids for which all that was required was the wholesale price of power.
While this is not the norm, it shows that the improvements in technology (especially larger and larger turbines) along with a well-developed supply chain, advances in installation and operation and maintenance strategies and experience (along with very low cost of capital) has made offshore wind a competitive source of power going forward in Europe.
One of the knock-on effects of this, of course, is that now what was a slow development of what was viewed as an expensive technology has attracted a great deal of attention outside Europe, in Asia, the Americas and even Australia.
The main market outside of Europe for the past few years has, of course, been China. The Chinese offshore industry has struggled to build up a head of steam over the last 6-8 years, but now seems to be hitting its stride, installing 1,100 MW of offshore wind in 2017 for a cumulative total of nearly 2.9 GW — about 15 percent of the global market; and it seems to be on its way to hitting its latest 2020 target of 5 MW well ahead of time. Provincial governments, especially Jiangsu, Guangdong and Fujian have now gotten involved and have set their own targets, which add up to a pipeline of about 7.5 GW by 2020. For the long term, there are about 60 GW of projects identified.
Next on the list is Taiwan, with an ambitious program set out by the government to achieve a target of 5.5 GW by 2025. Fuelled by very generous feed-in tariffs, developers and OEMs are crowding into the market, and several small demonstration projects have been awarded. This is to follow by another roughly 3.5 GW under the feed-in tariff scheme, and then the procurement will switch to competitive bidding for the remaining 2 GW. Taiwan is set to become a key player in the region as the industry evolves.
Japan has been flirting with offshore for about 15 years, but post-Fukushima, the number of demonstration projects has increased, both floating and bottom-mounted, testing out both spar buoy and semi-submersible support structures. Japan’s first major commercial development is likely to be in the Akita region in the northwest of the main island of Honshu in the Sea of Japan, where an initial 70 MW is to be followed by 455 MW of bottom mounted installations. Japan currently has 65 MW installed offshore, 51 bottom-mounted and 14 MW floating.
South Korea put on a big push for offshore starting about 10 years ago, but so far there is only 28 MW installed, although there is another 60 MW under construction. The new government’s aggressive renewable energy policy calls for about 12-13 GW of offshore to be installed by 2030.
After Deepwater Wind’s 30 MW Block Island project installed off of Rhode Island in late 2016, great expectations have arisen for the U.S. market. Massachusetts and Rhode Island have set the pace, awarding 1.2 GW of projects on the same day in late May of this year. Between Massachusetts, Rhode Island, New York, New Jersey, Maryland and Delaware between them are now committed to 5.5 GW, and federal waters already leased could support about 15 GW in total.
On the back of the GWEC-led FOWIND project, India has now launched a program aimed at receiving requests for proposals for up to 1,000 MW of offshore wind off the coast of the western state of Gujarat as early as the end of 2017. Vietnam already has 99 MW of (very) nearshore projects in the Mekong Delta. A 2-GW project off the coast of Victoria in SE Australia recently won new financial backing, and there is even talk of development now off the coast of Brazil!
The challenge in these new markets will be to get over the initial hump, where prices will be inevitably high as supply chains, ports, grids, vessels and infrastructure are developed to accommodate efficient offshore deployment.
Next challenge: floating offshore wind. This exciting new technology is still at the early stages, but with the first commercial project installed off Scotland last year, it has many supporters; and would dramatically increase the potential market for offshore wind in places like Japan and the U.S. West Coast, where the continental shelf slopes off steeply into deeper water. It will be another 5-10 years before the technology is widely taken up, but it could even surpass bottom-mounted in the long run. Key advantage: you can put the turbine where the best wind is, not constrained by the suitability of bottom topography and water depth. Watch this space!