The following is the Executive Summary and Introduction from the 156-page report by IEA RETD TCP (2017).
Offshore wind power is on the cusp of exponential growth, with installed capacity set to nearly triple in the period from 2015 to 2020. This growth is being accompanied by marked cost reduction, with recent auction tenders suggesting that costs have fallen by 60% compared to 2010 levels, already surpassing industry cost targets for 2025, eight years ahead of schedule.
The cost reduction is a signal of the industry’s growing maturity, with high levels of competition across a robust industry structure. Furthermore, having been pioneered in a small handful of European countries, offshore wind is set to expand geographically, with considerable market growth forecast both within and outside Europe, particularly in East Asia and North America. There are important lessons that can be learned and transferred between maturing and emerging markets.
This report, commissioned by the IEA-RETD, presents a comparative analysis of approaches to offshore wind development internationally. It has identified a series of key lessons learned across three primary focus areas: government policy & regulation (Section 3); the development of industry structures (Section 4); and the risk management strategies adopted by offshore wind developers (Section 5).
A maturing offshore wind sector
A thriving offshore wind sector requires involvement from a broad range and type of organizations, from developers to various suppliers, contractors, financiers, and regulators. The strength of this industry structure is vital to the successful delivery of offshore wind projects and achieving long-term cost reduction. Supportive policy frameworks in Europe have enabled the development of a robust industry structure which has evolved over the past decade. Following initial periods of market innovation, adaptation, and stabilization, the European offshore wind sector is set to enter a period of maturation, with increasing competition from a large number of established industry players. Indications of market maturation include:
- Steep cost reduction evident in several European countries.
- Several European markets have become commoditised, with financial investors, commonwealth funds and pension funds now investing in operating assets, allowing utilities to recycle capital to new projects.
- Perceived risks from the investor and finance community have been reduced due to growing confidence in the ability of developers and the supply chain.
- Project margins have reduced over the last five years due to increased confidence in the industry and the perceived reduction of residual risk levels.
- Consolidation of industry developers, particularly in the UK where significant exits have left fewer players in the market. However, while the European market may be demonstrating signs of maturity, emerging markets outside Europe are at a much earlier stage, with far more nascent industry structures.Furthermore, while the European market has benefitted from clustering around the North Sea region, which has a rich background in offshore engineering and maritime sector activities, more isolated emerging markets are expected to encounter greater challenges. Lower cumulative market size and a lack of established suppliers are therefore likely to require greater government intervention to reduce investor risk and kick-start the offshore wind industry. Nevertheless, the expansion of several key European players to East Asia and North America is a sign of increased confidence in these markets.
1 The installed capacity of 12.2 GW in 2015 (GWEC, 2016) is set to increase to 36.2 GW by 2020 (Carbon Trust analysis of project pipelines, central scenario). Rewind Offshore: Comparative Analysis of International Offshore Wind Energy Development, March 2017 ii
For the rest of the 156-page report: https://goo.gl/L956rO
Filed Under: Offshore wind