European Offshore Wind
The strong, cold (and windy) North
By Ania Swiatoniowski
The European Environmental Agency (EEA) has estimated that off-shore wind energy has the potential to meet the European Union’s energy demands seven times over. The EEA’s targets for growth in the off-shore wind energy industry are a total 40 GW installed capacity by 2020 and 150 GW by 2030. That’s 4% and 14% of the EU’s electricity demand, respectively. Not seven times over, but not bad either.
As of July 2014 there were a total of 2,304 off-shore wind turbines installed across 73 wind farms in 11 EU countries, including demonstration sites, with a further 310 turbines awaiting connection to the grid. That’s almost 8.5 GW total installed capacity to start off 2015 (awaiting final figures for 2014). A further 4.9 GW worth of installed capacity on 16 wind farms is currently under construction, and the numbers are rising. Quickly.
Off-Shore Update and Upcoming
This past year was a good one for off-shore wind energy in the EU. In 2014, 224 turbines were connected to the grid (781 MW total capacity), 233 foundations were installed on 13 wind farms, and 282 turbines were erected on 8 wind farms. Also, preparatory work began on the 600 MW Gemini wind farm off the coast of the Netherlands. The countries involved in the above 2014 activity are the United Kingdom and Germany (currently Europe’s top off-shore wind players), Belgium, and the Netherlands.
A 2014 publication by Freshfields Bruckhaus Deringer (international law firm) reported a positive environment towards financing new and projected off-shore wind projects in Europe. The UK and German are projected to continue dominating off-shore wind energy production. France, which has in the past invested heavily in on-shore wind energy, is now tendering for off-shore wind farm projects. Both France and Germany have indicated that they want to reduce their reliance on nuclear energy and the Freshfields Bruckhaus Deringer report indicates that many French believe that off-shore wind will be the replacement.
A highlight (if not the highlight) of 2014 was the closing of the Gemini wind farm transactions, which included both equity and debt funding. The €2.8 billion (US$3.2 billion) transactions closed in May. Northland Power, a Canadian independent power producer and developer, acquired 60% of the Gemini project. Other contractors were wind turbine manufacturer Siemens (20%), maritime contractor Van Oord (10%), and Dutch renewable energy and waste processing company HVC, the initial investor, maintaining its original 10%. To illustrate the complexity (and scale) of off-shore funding, the Gemini transactions also included nine commercial banks, the Canadian Export Development Agency, three European credit insurers, the European Investment Bank, and the Danish PKA pension fund. The Gemini wind farm will have a capacity of 600 MW (comparable to a traditional land-based electrical power station) and is scheduled to be fully operational in 2017.
The United Kingdom is top EU player in the off-shore wind energy industry and is showing a promising off-shore wind industry near future. Current analyses indicate that the UK will continue to lead the global market in off-shore wind power capacity. UK installations are expected to reach 11 GW by 2020 (a projected 36.4% of the total global off-shore capacity). The UK government has set a 2020 target of 15% of all energy coming from renewables. Currently, off-shore wind energy contributes to approximately 3% of the country’s total energy consumption. Behind their strength in off-shore wind energy are strong renewable initiatives, strong public support, and a strong investment climate. The United Kingdom is home to two of the world’s largest off-shore wind farms: the London Array (630 MW) and the Greater Gabbard wind farm (504 MW).
Long Term Projections
In 2008 the EEA called for the development of off-shore wind to become a major contributor to the EU’s energy supply. In 2014, the EWEA published wind energy scenarios for 2020. In this report, total European off-shore wind installations is predicted to be between 19.5 GW (low) and 28.0 GW (high) with a central scenario of 23.5 GW by 2020. So what need to happen in order for those numbers to be realized?
In the Wind Energy Technology Platform’s (TPWind) most recent Strategic Research Agenda and Market Deployment Strategy report on European wind power (March 2014) has indicated that off-shore wind energy can become the most competitive energy source by 2030 –on-shore wind by 2020. TPWind, which works with the EC, research facilities, and industry to produce priorities and targets for research funding into off-shore wind technology and business development.
In keeping with the TPWind report, a recent GlobalData report (“Offshore Vessels and Cables Market – Market Size, Competitive Landscape and Key Country Analysis to 2020“, November, 2014) has predicted technological advances will push the off-shore wind power industry over the coming decade. The report predicts that the global market value for off-shore wind turbine and foundation installation vessels will reach $2.93 billion by 2020. This would be a fivefold increase from the 2014 value of $0.56 billion. The report states that advances in vessel design will lead to increased installations, which will be the primary driver of market growth in the industry. R&D in vessel design is hoped to lead to shortened installation times as well as increased capacity on vessels.
While R&D (and time) are reducing the costs of building off-shore wind farms, factors such as increased ocean depths used for farm sites and the construction of larger, more powerful turbines are keeping costs from dropping as quickly.
Installed capacity in the EU is projected to reach 150 GW by 2030
The significant capital needed for off-shore wind energy projects makes them the territory of larger corporations unlike the many small business and co-op run on-shore wind farms located on the continent. Financing by multinational consortia of banks, companies, and governments of that magnitude also require time. As a result, the growth of the off-shore wind industry cannot be expected to follow the same patterns as many other renewables.
The feasibility of off-shore wind energy must come back to the issue of investment and capital needed. Scotland has been primed to begin off-shore wind operations for some time (a topic which became a campaign issue during their independence referendum in 2014). But while this would provide significant amounts of energy and income to the country, could Scotland have afforded to even start the undertaking without the collective UK purse? Will EU Member States be able to fund off-shore wind projects as national industries or will the cost put the ownership and operation of future off-shore wind facilities primarily in the hands of large corporations?
Co-operation between EU Member States on joint project will likely be necessary. In EWEA’s Seanergy 2020 final report, the organization points out that maritime spatial planning (MSP) is sorely wanting in Europe’s maritime countries. EWEA suggests that co-operation between the maritime Member States could greatly facilitate advancement in off-shore wind projects and be beneficial to all. The report suggests that “the European Commission could provide MSP through a European Directive.”
Technology is a driver in the energy (and other) industries. TPWind recommends (in the above named March 2014 report) R&D into wind turbine design (approximately 50% of off-shore wind farm expenses) and grid integration and optimization to push off-shore wind energy into being competitive with conventional energy sources. The organization also names enabling market deployment and policy development as critical because “the current design of electricity markets does not enable optimal integration of large shares of renewables into the power grid”.
The off-shore shore wind industry should not be daunted by the challenges however. Record growth in the industry and considerable investor interest (again) is pushing the industry along. And with the lessons learned from all the other renewable industries that have come before it, the off-shore wind energy industry has a clear sight of where it wants to go and how to get there.
Without a doubt European off-shore wind has shown exceptional growth especially from 2007 and since its humble beginnings in 1991 when the first off-shore wind farms were built: Nogersund, Sweden, with one 0.22 MW turbine and Vindeby, Denmark, with 11 turbines totalling 4.95 MW capacity.
The European Wind Energy Association, EWEA, will be having their Offshore 2015 conference and exhibition in Copenhagen 10-12 March, 2015.
LINKS and RESOURCES
This article originally appears in the Winter 2014-2015 edition of Resources Quarterly.
Click here or on the cover to view the entire issue.