Offshore wind turbines are expanding – vertically and horizontally. A turbine being built in Rotterdam this year will be the tallest construction in the Netherlands but soon structures could be as tall as the Eiffel Tower. Meanwhile this source of power is moving beyond its European birthplace, across the Atlantic and into Asia. By 2027, China will overtake the UK to have the greatest offshore-wind capacity.
In its most established market, the UK, the 8.2GW of offshore-wind capacity last year supplied 7.6 per cent of the nation’s electricity and we estimate this will exceed 10 per cent by 2020. Germany’s 6.6GW generated 2.9 per cent of its power. But China installed the most capacity last year, 1.9GW and should be world leader by 2027.
More European countries, including Poland and Ireland, could embrace offshore wind energy but adoption by the US, China and Taiwan may inspire other new entrants, including India, Turkey, Japan and Korea. We expect more installations outside Europe than inside over the next decade.
This global growth is encouraging manufacturers to develop bigger turbines. The first 10MW turbine was launched in 2018 but most of last year’s new installations were just 6 to 8MW. By 2025 they could be 13 to 15MW.
The key to more powerful turbines is longer blades. The scale of these new goliaths cannot be underemphasised. The tallest current structures are under 200 metres with 80m blades; within five years they could be 300m with 110m blades.
The progression to bigger, more powerful turbines and larger wind farms that allow economies of scale are driving offshore-wind energy costs below 50 euro per MW hour, reducing the reliance on subsidies.
Bid prices at offshore wind auctions have fallen markedly since 2015. Germany and the Netherlands have held subsidy-free auctions, with winning bidders happy to sell at the wholesale power price.
Investment in offshore wind projects grew 14 per cent to $25.7bn last year – 44 per cent in China – even though overall global clean-energy investment fell 8 per cent to $332bn.
Offshore wind is a highly attractive growth sector within renewable energy. The 23.8GW of capacity operating at the start of 2019 was just 4 per cent of global wind-generation but 10 per cent of last year’s new installations were offshore and we expect that to double by 2025. As installing offshore turbines costs much more than onshore, that means the bulk of wind investment will be offshore.
Some oil-field services companies are now engaged in offshore wind installation, offering their experience with heavy-lift vessels, seabed foundations and other engineering expertise, including floating structures.
Anchoring floating turbines at sea would open up huge swathes of ocean otherwise unsuitable or uneconomical using bottom-fixed foundations. Turbines are very top heavy, however, but data from initial projects suggests that floating structures could be scaled up and prove cost-competitive from 2025.
We expect the UK to remain the largest global offshore wind market outside China, driven by a record number of installations in 2017/18 and supportive government policies. Capacity could reach 30GW by 2030 with the lower subsidy burden allowing more capacity to be added within budgets.
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Sean McLoughlin
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