By the end of 2017, offshore wind had only been deployed commercially across seven markets, with UK and Germany accounting for 68 percent of the grid-connected capacity. However, according to a recent report from Wood Mackenzie Power and Renewables, global offshore wind power demand will increase almost sixfold over the coming 10 years with projects deployed commercially across 18 countries by 2027.
As the pool of offshore markets is expanding beyond a handful markets in Europe, local content policies in different forms are becoming an increasingly important topic for developers and suppliers as governments look to bolster their local industry and create more job opportunities for local labour forces. While the influence of local content policies has been limited thus far, these policies will impact 72 percent of future demand.
Innovations will help offset reductions in subsidies
The deployment of next-generation turbines will double average turbine ratings globally over the next 10 years and in turn subdue growing demand in the balance of plant segments in terms of number of units and material per MW – most notably in the foundation space, where the average monopile weight per MW will decrease by 36% by 2023 in Europe.
Similarly, the average installation time per MW for turbine and foundation campaigns has been halved in Europe since 2010 and is set to continue. The transmission space is also undergoing holistic innovations where capacities are being increased and materials reduced.
Consolidation and globalization characterize the offshore supply chain
The proliferation of demand in new markets globalizes the European supply chain and motivates the entry of new suppliers. This is particularly true when supported by local content policies as the pressures in Europe lead to consolidation across the European supply chain – especially in the installation segments. Furthermore, the report points out that the high growth rates in offshore wind makes it increasingly attractive for oil and gas companies looking to leverage their offshore experience.
Average LCOE in Europe will halve between 2018 and 2027
Average CAPEX for European offshore projects is dropping quickly, mainly driven by the increased competition in wind farm development, increasing turbine size, and economies of scale. CAPEX and OPEX across Europe will drop, on average, by 36 percent and 55 percent respectively by 2027.
Offshore LCOE across Europe is also projected to go down at a fast pace with the average LCOE across Europe for grid-connected projects expected to reach 53.6 €/MWh by 2027, dropping from approximately 107 €/MWh in 2018.
Source: Wood Mackenzie Power and Renewables