In a recent analysis Tim Buckley*, director of energy finance studies at the IEEFA in Australasia and Kashish Shah, an IEEFA research associate**, said offshore wind has a growing momentum behind it and is likely to grow into a US$20-30Bn annual global market in the coming decade.
“Classic benefits of technological improvements, innovative financing and economies of scale have all come to fruition in the renewable energy sector,” they said.
“The recent technological development of offshore wind turbines has been dramatic. The rotor diameter of offshore turbines has jumped from 80 m to more than 164 m and average capacity has doubled, climbing from 1-2 MW in 2012 to 4-6 MW today and is still rising. Leading players like Ørsted and Siemens are betting on another doubling in size to 10-14 MW by 2024.
“These technological improvements and cross-sector learning from other industrial sectors such as maritime, automotive and shipbuilding have pushed costs down significantly in the past 10 years. Today, offshore wind technology is getting close to matching the cost of energy from its onshore counterpart, due to its near-limitless size potential, proximity to coastal city load centres, exceptional utilisation rates plus subsea grid technology improvements.”
They noted that Bloomberg New Energy Finance (BNEF) projects the offshore wind power market to grow at a compound annual growth rate of 16% to reach a total global capacity of 115 GW by 2030, a six-fold increase from 2017. The IEEFA analysts said they believe this estimate “possibly understates the enormous offshore wind potential of Asian economies.”
“IEEFA believes Asian countries such as China, India, Japan, South Korea, Taiwan and Vietnam are set to capitalise on Europe’s lead in the coming decade. In fact, BNEF suggests China (2.7 GW at the end of 2017) will overtake the UK (currently with 7.5 GW) in installed capacity by 2022,” they said.
China has an aggressive target to install 10 GW of offshore wind by 2020. It remains to be seen if the country can hit that mark, but installations have picked up speed in the past two years. According to GWEC, China’s installed offshore capacity at the end of 2017 totalled 2,788 MW. Going forward, Wood Mackenzie’s MAKE consulting unit expects installations to climb steadily through 2030 when China’s total capacity could top 30 GW, providing clean power to its major economic hubs, most of which are located along the coast.
In August 2018, China’s state-owned utility China Three Gorges won clearance to construct the 400-MW Yangjiang offshore windfarm off the coast of Guangdong province. It is the third offshore windfarm the utility will build in the province.
South Korea is not far behind. The country’s goal is to install 18 GW of offshore capacity by 2030; of this 4 GW is already in the pipeline. As part of this pipeline, in June 2018 the renewable energy investment giant Macquarie Capital was reportedly looking into investing in a 1-GW project planned for offshore Pohang with local developer Gyeongbuk. Similarly, Taiwan and Japan have set targets of 5.5 GW and 10 GW respectively.
India’s ambitious 2027 renewable energy capacity target of 275 GW has put the country in a spotlight. It has set an offshore wind power capacity target of 5 GW by 2022 and accelerating from there to reach 30 GW by 2030. In April 2018 the Indian Ministry of New & Renewable Energy issued a call for expressions of interest to develop a 1-GW offshore wind project on its western coast. It received an overwhelming response from 34 companies including Indian wind power giants such as Sterlite Power Grid, Inox Wind, Suzlon Energy, and Mytrah Energy. Some of the well-known foreign participants included Ørsted, Alfanar, Deep Water Structures, Eon Climate & Renewable, Terraform Global, Macquarie Group, Shell, and Senvion.
Other Asian markets such as the Philippines, Indonesia and Vietnam are yet to formulate offshore wind energy targets, but, as they progress to build onshore wind power capacity, offshore developments likely will follow, the IEEFA said.
|Asia's offshore wind potential by 2030 (source: media reports, government documents, IEEFA estimates).
They noted that Asian economies have a cumulative ambition to build up to 100 GW of offshore wind capacity by 2030 and that successful commercialisation of floating offshore wind will also drive the sector’s development in Asia.
“By 2030, if the Asian countries noted above can install 70% of the 100 GW target, that could replace about 300-350M tonnes of coal annually – 35-40% of the current global seaborne trade,” they said.
“Governments must plan for needed grid connection arrangements to keep pace with the acceleration in offshore wind developments. Offshore wind is a valuable new power source that can help countries move to a more reliable, cheaper and cleaner energy economy".