Green Transition: Winds Of Change

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.

Huge Potential

Long term projections suggest offshore wind 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 6% and 8% of energy supply by the middle of the century (it is 0.2% today) and that there will be a 9 to 11 fold increase in output by 2030 (to over 831 TWh). That’s massive growth potential.

Record Investment

For the moment, this potential is being backed up by strong investment, with 22 farms of 6.7 GW starting up in 2020 (out of a total of 41 GW post-FID) and 12.5 GW expected to come online this year. Our medium term projections, modelled on the “pipeline” of new projects expected to start up, suggest further substantial CAPEX commitments this year and that by the middle of this decade there may be over 390 farms with 16,000 turbines and capacity approaching 90 GW (today we have 171 farms, capacity of 33 GW and 7,600 active turbines). 

Going International

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) followed by China (8.1 GW, overtaking the UK this year) and Germany (7.6 GW). And there is exciting potential in the US (particularly with the positive moves made by Biden administration. Vietnam & Japan besides growing investment from traditional oil companies (inc. part shares, analysis soon).

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 975 units that are active across the wind market with over 100 firm 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 tripled from 40m to 120m), floating technology (0.2% of existing capacity is “floating” vs 12% 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 ~100 ports supporting farms and ~50 turbine assembly and marshalling facilities). 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.