Summer of 2016 sees offshore wind better-placed to weather storms

By David Foxwell, Editor, Offshore Wind Journal/Offshore Support Journal

There have been a number of occasions in the last few years when the offshore wind energy market seemed dogged by uncertainty, mostly political uncertainty, despite its obvious benefits. Costs have been coming down steeply and continue to come down; in fact the latest Dutch tender – for the Borssele I and II offshore windfarms – saw Dong Energy win the contract with a bid that will put the cost of offshore wind on a par with conventional power generation. Costs are coming down so quickly, it is argued, that offshore wind can out-compete new nuclear projects too. Projects that are to be built in the UK, Germany, The Netherlands, France, Denmark and a host of other countries either adopting offshore wind – such as Taiwan, for instance – or are serious about doing so. India is good example, and we shouldn’t forget the US either where, at long last, offshore wind really seems to have reached a ‘tipping point’ with Block Island – the first offshore windfarm in the US – under construction and large scale projects being actively considered – and backed politically – right around the country.

Such has been the amount of uncertainty about the level of political support for the industry in the UK and Germany at times in the last 4-5 years that real questions have been asked about whether investor confidence might take a real – even fatal – knock, but those days are past. Even the UK’s decision to vote to leave the European Union and the questions raised by new UK Prime Minister, Theresa May, to abolish the Department of Energy & Climate Change and roll it up into a new, larger department combining industry and energy will not derail the industry. It might even help advance its cause, if, as has been suggested, the creation of the Department of Business, Energy and Industrial Strategy (BEIS) will actually enable more ‘joined up thinking’ and opportunities to bring climate change and renewable energy further into the mainstream and provide an opportunity for closer links between energy and climate and research and innovation. It’s important not to forget that, in April 2016, the UK recently reached a historic point at which, for the first time wind – including offshore wind – generated more electricity than coal over the course of an entire month, for British homes, businesses and factories.

Like the UK, Germany has seen a lot of uncertainty as it pursues its ambitious ‘energy transition’.  The latest from that market is that the German parliament has just approved a plan to reform the country’s renewable energy law or ‘EEG’ by ending feed-in tariffs in favour of competitive auctions. It is also limiting the rate at which wind energy projects will be built out, so it is a bit of a mixed bag, but the good news is that the government’s commitment to 15 gigawatts (GW) of offshore wind in the next 15 years still stands, it’s just that the route to 15GW has changed a bit. As the VDMA in Germany noted recently, developers commissioned 43 wind turbines in German waters totalling 258MW in the first half of 2016, and a further 54 (equivalent to 324MW of capacity) are installed but not connected to the grid. Overall, said the VDMA, a total of 853 offshore turbines are grid-connected with a combined capacity of 3,552.2MW. A total of 700MW of offshore wind capacity is expected to be installed and connected to the grid in Germany this year and by the end of 2016, Germany will have a total capacity of 4GW of capacity installed.

As ever, whatever the political uncertainty, costs remain the key, and as highlighted above, they are coming down quickly, with the industry’s commitment to further cost reduction best illustrated by the latest phase of a collaborative research, development and demonstration programme led by the Carbon Trust’s Offshore Wind Accelerator (OWA). Nine of the largest offshore wind developers in Europe, including Dong Energy, EnBW, E.ON, Iberdrola, RWE, SSE, Statkraft, Statoil and Vattenfall, have signed up to the programme and, over the next four years, they will collectively invest at least £6.4 million, boosted by a further £1.5 million from the Scottish government, to bring inno-vations to market that will help to ensure that the typical cost of offshore wind is below £100 per megawatt hour (MWh) by 2020. As the CEO at the Carbon Trust, Tom Delay, noted recently, over the last five years the cost of energy from offshore wind has fallen significantly, largely driven by a combination of innovation, risk reduction and increased deployment rates. The latest phase of the programme will ensure that this momentum is maintained.

25 July 2016