Offshore Wind is Breaking Out Of Its Incubator Markets

From the North Sea to New Jersey, offshore wind tenders have
successfully been awarding gigawatts of contracts to bankable,
sizeable and increasingly economical projects.

This year has been dominated by
falling prices
, with offshore wind joining its onshore cousin
and solar PV in beating some conventional power prices.

Now it looks like 2020 could see a host of new markets opening
for the technology.

Europe has set the pace so far with 18.5 gigawatts deployed at
the turn of the year. But just two countries, the U.K. and Germany
were responsible for 85 percent of this.

In its recent quarterly results, Danish energy company and
offshore wind developer Ørsted provided a powerful visual
demonstration of why this is set to change.

In the next two years the Netherlands will tender 2,280
megawatts. Neighbors German and Belgium will add another 900 and
700 megawatts respectively. France will also chip in with 1,000
megawatts. Denmark will make between 800 and 1000 megawatts
available and the next round of the U.K. contracts for difference
(CfD) auction will make up to 4,000 megawatts available.

Beyond Europe Ørsted is also tracking tenders in Taiwan and
Japan, and 4,000 megawatts in the U.S. across four states.

And these are just the competitive tenders already in the diary;
there is potential beyond this.

The new-look renewables focused utility
RWE acquired four projects in Poland
last month. The portfolio
has a total capacity of 1,500 megawatts and construction could be
underway as early as 2023. RWE plans to build, own and operate all
four.

A few days before the RWE announcement
Ørsted revealed it was in talks with Polish utility PGE
to
purchase a 50 percent stake in two projects with a maximum capacity
of 2.5 gigawatts. The completion dates on those are a little later,
2026 and 2030.

In its own quarterly results Swedish energy firm Vattenfall said
its domestic offshore wind market was making some progress. There
had been debate around who should pay for the grid connection, the
developer (as is done in the U.K.) or the network operator. CEO
Magnus Hall said it had been agreed that the state would pay but
there is currently no legislation to support this.

Beyond Europe

Leaving the U.S. aside, there is huge potential outside
Europe.

The World Bank announced in March that it would set up a program
to support developing countries in building the necessary framework
for bankable offshore wind projects. If it’s half as successful as
the Scaling Solar program run by its private sector offshoot, the
IFC, it could prove extremely useful. Scaling Solar created a library
of standardized contracts for industry and government speeding up
the development process and offering investors familiar and
comfortable conditions. It’s now being utilized in six countries
and the IFC claims its Zambian roll-out has yielded the lowest
solar tariffs on the African continent.

A report issued by the Bank last month, harnessing its global
offshore wind atlas, demonstrated the scale of the opportunity for
offshore wind in developing economies.

It estimates just over a terawatt (not a typo) of potential for
fixed offshore wind turbines within 200 kilometers of the coast in
just eight countries used for its case study. Brazil is the runaway
leader with 480 gigawatts while Vietnam has 261 gigawatts of
potential and India a tally of 112 gigawatts. The remaining five,
Morocco, Philippines, South Africa, Sri Lanka and Turkey have a
combined potential of 164 gigawatts.

To harness this, the report recommends each country take a
long-term position on port infrastructure, grid planning and supply
chain development, as well as the usual policy asks. If the
technical and regulatory conditions are right, the reduced risk
will improve the chances of attracting the necessary
investment.

Several developed economies in Asia are also making progress.
Last month Macquarie’s Green Investment Group
closed financing on the 376 megawatt Formosa 2 project
in
Taiwan.

RWE has just announced the opening of its first office in Asia
as it looks to tap into the Japanese offshore wind market.

Wood Mackenzie expects Japan to install 4 gigawatts of offshore
wind by 2028.

Floating turbines

With the world’s largest floating project, Equinor’s 88
megawatt Hywind Tampen, having recently reached financial close,
the technology is edging towards full-scale rollouts.

Tampen will be connected to two offshore oil and gas drilling
operations rather than to shore, but is a great stepping stone
development for a project large enough to cover the cost of a
shoreline grid connection.

Wood
Mackenzie has charted the potential
for 1,000 megawatts and up
by 2027 in Taiwan, mainland China, Japan, South Korea, the U.S. and
the usual suspects in Europe.

The World Bank, operating beyond that 2027 timescale, has
produced some even more eye-opening figures for the potential of
floating offshore wind in its eight case studies.

Brazil is again the big winner with a potential of 748 gigawatts
of floating offshore wind within 200 kilometers of the shore but
South Africa is not far behind on 589 gigawatts.

With the government in Pretoria looking to overhaul the state
utility Eskom, including through competition and a build out of
renewables, South Africa could be a major offshore wind market
currently getting very little attention.

The quality of execution will determine how much of this
potential in Europe and beyond is translates into bankable
projects. The lessons learned in established offshore wind markets
and successful programs from other renewable technologies globally
could be a powerful combination to catalyze that conversion
rate.

Source: FS – GreenTech Media
Offshore Wind is Breaking Out Of Its Incubator Markets