Strong winds in the sails of the offshore wind industry
In 2018 more than 4 GW of offshore wind capacity was added globally to surpass 22 GW of installed capacity with northern Europe and mainland China heading the global market. Large European utilities including Ørsted, E.On, Vattenfall and Innogy dominate the sector with projects in Europe and new developments in Asia and the United States.
The offshore wind industry will continue to witness a healthy growth driven by rapidly falling costs due to economies of scale and new technology developments. Currently, over 61 GW worth of capacity are under different stages of development, mostly concentrated in mainland China and Europe. Emerging markets such as Japan, South Korea, Taiwan, Vietnam, and the United States will appear shortly on the global stage.
Figure 1: Recent strike prices of European offshore wind tenders | 2015-2019
The sharp price drops in different European markets has increased the competitiveness of offshore wind technology against other means of electricity generation. Recent EDF's €44/MWh winning bid for the French Dunkirk project and Vattenfall's "zero-subsidy" bid for the Dutch Hollandse Kust (zuid) Wind Farm Zone Sites III & IV illustrate the significant cost reductions achieved by the industry. Such level of prices has been possible via a combination of technological improvements along the whole value chain and increasing economies of scale. Modern mammoth projects are taking advantage from a "cluster approach", optimizing offshore grid infrastructure, operations and maintenance (O&M) bases, port facilities, and vessels.
Costs will continue to decline owing to technological improvements across the value chain including new generations of turbines, foundations, substations, cables, installation and operations and maintenance (O&M) services, and ports and vessels sustaining the development of offshore wind.
Andrei Utkin is a Senior Global Offshore Wind Analyst for IHS Markit.
2 August 2019
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