As part of our Green Transition work, this month’s Analysis reviews a rapidly growing market with huge potential: Offshore Renewables. 2020 was a record year for start ups (22 farms, 6.7 GW) and, for the first time, CAPEX committed overtook offshore oil and gas ($55bn vs $46bn). Investments into the “wind” fleet are also gathering pace, with pressures to limit emissions and be “green” across the supply chain.
Long term projections suggest offshore renewables will play an important role in global efforts to de-carbonise. Scenarios from our own Energy Transition model suggest offshore wind will grow to between 4% and 7% of energy supply by the middle of the century (it is 0.2% today) and that there will be a 7 to 11 fold increase in output by 2030 (to over 544 TWh). That’s massive potential.
For the moment, this potential is being backed up by strong investment, with 18 farms of 5.6 GW starting up in 2020 and future CAPEX committed to a further 48 of 16.4 GW (although 50% of this is Chinese projects, rushing to beat a subsidy deadline at the end of 2021). Our medium term projections, modelled on the “pipeline” of new projects expected to start up, suggest further record investment in 2021 and that by the middle of this decade there may be over 350 farms with 15,000 turbines and capacity approaching 90 GW (today we have 160 farms, capacity of 31 GW and 7,200 active turbines).
In recent years, the wind industry has also developed regionally: ten years ago there were 11 countries with producing windfarms, increasing to 17 today and by 2030 we project there will be 30 countries with active production. Today, the UK is the largest producer (39 active farms of 10.4 GW today, with the round 4 subsidy round imminent) followed by Germany (7.6 GW) and a rapidly expanding China (7.1 GW with forecasts of 30 GW by 2024). And there is exciting potential in the US (particularly with the new Biden administration), Vietnam and Japan besides a growing trend of traditional oil company investment (inc. part shares).
Green Supply Chain
Having initially “borrowed” or converted many assets from offshore oil and gas, the offshore “wind” fleet is moving towards specialisation with dedicated WTIV, CTV and Walk to Work fleets. Including other support and construction vessels, we have identified around 875 units that are active across the wind market with a further 125 newbuildings. Investment and technology decisions can be tricky, given the nature of a quickly growing market. The trends towards larger turbines (in the past twenty years the average rotor diameter has doubled from 80m to 160m), floating technology (0.2% of existing capacity is “floating” vs 7% of potential) and increasing geographical spread (producing local requirements e.g. Jones Act) all need to be considered. We have identified a relatively small number of alternative fuelled or battery hybrid vessels (the Fuelling Transition seems in its infancy) and limited EST take up. Shoreside investment is also needed (we have identified ~150 ports supporting farms). So an excitingly “hot” market and an important part of the Green Transition.
See Renewables Intelligence Network for more details.
The author of this feature article is Stephen Gordon. Any views or opinions presented are solely those of the author and do not necessarily represent those of the Clarksons group.