Offshore wind ready to be key part of energy mix globally
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Key Findings
The offshore wind levelised cost of energy (LCOE)—a common measure to compare costs of different sources of energy—has declined by one-third globally in the last 8 years, demonstrating a significant, ongoing deflationary trend.
Asia reaching 100GW of offshore wind capacity by 2035 replaces 35% of the current global seaborne coal market.
Offshore wind development is gaining critical mass in the U.S. market. In January 2019, the state of New York massively upgraded its offshore wind power target from 2.4GW by 2030 to 9GW by 2035.
Executive Summary
There is massive offshore wind power potential to be harnessed in emerging and developed countries at a cheaper rate than building and maintaining new fossil fuel plants.
While offshore wind has had slower beginnings, renewable energy power sources— onshore wind and solar—have attained grid-parity with thermal power sources— coal, gas and oil—in an increasing number of developed and emerging markets, particularly where thermal fuels are imported.
Today, offshore wind is gradually becoming viable as a third alternative source of sustainable, zero emissions renewable energy.
Offshore wind has seen a dramatic decline in project costs due to its low externalities, improvements in wind turbine technologies, innovative financing models, and healthy international investment. These cost decline benefits are reflected in reduced wholesale electricity tariffs of offshore wind globally.
In 2018, 51.3 gigawatts (GW) of wind power capacity was installed globally, of which 4.5GW was offshore wind. The installation of global offshore wind power, sitting at 12GW in 2015, reached 23.3GW by the end of 2018, a near doubling in just three years.
The installation of offshore wind power capacity is likely to reach 85GW by 2024 with an annual growth rate of 22% over the next five years, according to a recent report from Norwegian Energy Partners (Norwep). The Global Wind Energy Council (GWEC) predicts similar momentum, noting the emergence of new Asian countries likely to contribute 5-7GW of installations annually.
Norwep also highlights that yearly capital expenditure in the offshore wind power sector could reach €50 billion (bn) (US$55bn) by 2024, translating into a total global spend of €190bn over the coming five-year period.
In this note we review developments in offshore wind projects in emerging markets in Asia Pacific, including cost trends and policies, against capacity targets in Asia, the United States and Europe.
For instance, China looks set to become one of the world leaders in the offshore wind sector. China took the global lead in annual offshore wind capacity installations in 2018 with 1.8GW installed compared to 1.3GW and 0.9GW from earlier leaders UK and Germany respectively. China has started to build huge internal capacity in manufacturing and technology while creating jobs.
IEEFA notes offshore wind power development is likely to pick up pace as countries phase out nuclear power fleets while progressively reducing dependence on imported coal for electricity generation.
Offshore wind is the new game-changer in the renewable energy transition occurring globally. Governments need to keep up with the pace of development and investment by domestic and international players as emerging countries strive to meet their necessary and ambitious renewable energy targets.
Press release: Record US$14.5 billion investment in Indian renewable energy sector in last financial year
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