offshore wind - rcg...2016/10/25 · offshore wind capacity - operational 22578 21280 4100 2964...

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Offshore WindFalling costs, global growth

Lee Clarke

Offshore Energy, Amsterdam, 25 Oct 2016

Offshore Wind Market©2016 The Renewables Consulting Group

Introduction

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» Over the last 25 years, offshore wind has grown into a significant

component of the European energy mix.

» Europe has become a leader in the technology – at the forefront of

manufacturing, project development, construction, and operation.

» The industry has innovated and adapted.

• Vindeby, Denmark, was the first offshore wind farm. Commissioned

in 1991. Comprising 11 x 450 kW turbines (5 MW). Now preparing

for decommissioning.

• Burbo Bank Extension is an example of a current project under

construction. Comprising 32 x 8 MW turbines (258 MW).

» Turbine size has increased, foundation technologies have allowed

development in deeper waters, floating turbines are now operational,

asset management has evolved.

» Offshore wind is becoming cost effective compared with alternative

energy sources – which will unlock a global market.

Source: MHI Vestas Offshorewind


Global offshore wind market

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Growth of the global offshore wind market

Europe Asia

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Source: IRENA, GWEC, RCG analysis

» Total worldwide offshore wind

capacity now exceeds 12GW.

» To date the market has been

dominated by northwest Europe

(c.95% of installed capacity).

» Asian markets have made tentative

progress, led by China.

» North America is on the cusp of

rapid expansion.


European offshore wind market

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Offshore wind capacity - operational

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Offshore wind capacity - planned

» European offshore wind capacity currently totals

over 11 GW, with additional projects commissioning.

» The total pipeline of future projects exceeds 60 GW,

with around 14 GW of new capacity by 2020.

Source: WindEurope, RenewableUK, RCG analysis Source: WindEurope, RenewableUK, RCG analysis


Netherlands – offshore wind

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» Netherlands has relatively

shallow waters, good wind

resource, good harbour

facilities, experienced

industry and a robust

support system.

» Development has been

relatively slow, given that the

first project was

commissioned in 1994.

» Three wind farm zones

earmarked for new projects:

Borssele (1,400 MW),

South Holland (1,400 MW)

North Holland (700 MW)

» Recent Round 3 tender

acclaimed as the most

successful offshore wind

regime worldwide to date.


Borssele I & II

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Fast Facts

Capacity 2 x 350MW (Sites I & II)

Distance from shore ~22 km (12nm)

Water depth 14-40m LAT

Price cap (eurocent / kWh) 12.4000

Tender deadline May 2016

Winning bid DONG Energy – €72.70/MWh

» First 700 MW Borssele tender has set new low cost standard for offshore wind

» 700 MW tender was the first phase of a

3500 MW program for Round 3 of offshore

wind projects in the Netherlands.

» DONG Energy won the concessions with

an average bid strike price,

72.70 EUR / MWh.

» Once transmission costs are included, the

levelised cost of electricity for the project is

approximately 85 EUR / MWh during the

15 year subsidy, though the project has a

life of 25 years.


Denmark – offshore wind

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» Denmark has benefited from

being a first mover in the

wind industry.

» Now a world leader in

development and

implementation of offshore

wind technology.

» Currently around 1.3 GW of

operational capacity.

» Construction is underway on

the 407 MW Horns Rev 3

project.

» New concepts are being

tested at the Nissum

Bredning Wind Park – effort

to reduce construction and

operating costs.


Vesterhav Syd and Nord

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Fast Facts

Capacity 350MW (Syd & Nord)

Distance from shore ~4 km (2.1 nm)

Water depth 16-24m LAT

Price cap (eurocent / kWh)

Tender deadline Sep 2016

Winning bid Vattenfall – €63.75/MWh

» 350 MW Vesterhav Syd and Nord projects reinforced the new low benchmark cost

» Danish near-shore concessions: Vesterhav

Syd (180 MW), Vesterhav Nord (170 MW)

» Vattenfall won the concessions with an

average bid strike price of

475.5 DKK / MWh (63.75 EUR / MWh).

» Political uncertainty remains about

subsidies for the projects.

» Even including transmission costs, the

levelised cost of electricity for the projects

will be significantly below 100 EUR / MWh.


United Kingdom – offshore wind

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» The UK has approximately

40% of Europe’s entire wind

resource and has significant

potential for both onshore

and offshore wind energy.

» Government policy is

blocking onshore wind

development. Offshore wind

seen as a key route to

meeting renewables targets.

» The UK has grown to

become the number one

offshore wind market, in

terms of both capacity and

investment opportunity.

» Southern North Sea and

Irish Sea are principle

English development

areas…


United Kingdom - continued

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» … Scottish development is

focused on the Firth of Forth

and the Moray Firth.

» Under UK model the

developer takes early-stage

development risk. Typically

constructions power

transmission assets.

» Government boosted

confidence in the green

economy by approving the

Fifth Carbon Budget in June

2016 – pledging to limit

annual emissions to 57%

below 1990 levels by the

year 2032.

Moray Firth

Firth of Forth


United Kingdom - offshore wind market

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Operational Construction Pre-construction Consented Planned Total

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Offshore wind capacity - pipeline

22.6 GW

» Central to offshore wind development

is the Contracts for Difference (CfD)

scheme to support investment in new

low carbon generation.

» Many UK projects in the pipeline are

permitted, but only a proportion have

secured CfD contracts in two rounds

of Government allocation – these are

now in “pre-construction” phase.

» Further auction rounds have been

promised – competition will be

intense.

» UK Government expected to plan

announce plans to meet post-2020

emissions reduction targets by

February 2017 – next auction

expected to coincide.

» Benchmarking cost of energy implied

by Netherlands auction process.

Source: BEIS, RenewableUK, RCG analysis


Cost reduction

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0

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2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Levelised Cost of Energy, USD/MWh

Levelised cost of energy

Levelised cost of energy (forecast)

Bars indicate range of LCoE in each year

Source: IEA, IREDA, RCG analysis

LCoE for Borssele, NL (USD 92 / MWh) and

Vesterhav, DK (USD 85/MWh) represent

step-change in cost reduction

» Experience gained from

pioneering early projects has

resulted in a rapid reduction

in costs.

» More recent projects are

larger, but typically further

from shore in deeper water.

» Massive governmental

pressure to reduce subsidy

levels.

» Typical production costs per

kWh have reduced

considerably over the last

decade - trend expected to

continue resulting in a fully

competitive technology within

10 years.

» All jurisdictions looking at

recent benchmark tender

outcomes.


US wind power

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» The U.S. now has an installed wind capacity of ~75GW with an additional 9GW under construction

US wind power capacity installations (by state) 8,598MWof new capacity

installed in 2015

increase above 2014

77%

52,000operating wind turbines

4,000MWof total PPAs signed

during 2015

Sources: AWEA, U.S. Windpower Fourth Quarter Market Report


US wind power – growth potential

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» In support of the President’s strategy to diversify the nation’s clean energy mix, US DOE released a new

Wind Vision report in 2015.

» The Study Scenario applies a trajectory of 10% of the nation’s end use demand served by wind by 2020,

20% by 2030, and 35% by 2050

0.0%

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2010 2020 2030 2050

Offshore Wind

Land-based Wind

10% by 2020

20% by 2030

35% by 2050

Note: Wind capacities reported here are modelled outcomes based on the Study Scenario

percentage wind trajectory. Results assume central technology performance characteristics.

Better wind plant performance would result in fewer megawatts required to achieve the specified

wind percentage, while lower plant performance would require more megawatts.

Source: Wind Vision: A New Era for Wind Power in the United States, U.S. Department of Energy

The Wind Vision Study Scenario and Baseline Scenario

Cumulative wind

power capacity (GW)2013 2020 2030 2050

Baseline

ScenarioOnshore 61

Central

Study

Scenario

Onshore 61 110 202 318

Offshore 0 3 22 86

Total 61 113 224 404


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Major permits submitted Financial close

Approved Under construction

Operating

US offshore wind

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» Currently there are over 20 offshore wind projects in various stages of development across 13 states

30MW Block Island Wind Farm

– currently under construction

Hawaii

US states with offshore wind projects

under development

Sources: NREL / DOE and RCG analysis

US offshore wind project pipeline by

state and development status (MW)


Block Island Wind Farm (BIWF)

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Project

• Five 6 MW turbines (30 MW total)

• Enough energy for 17,000 homes

• In RI CRMC Renewable Energy Zone

Benefits

• Over 300 construction jobs

• New transmission cable to mainland

• National leadership position

Status

• Permitting – Complete

• Engineering – Complete

• Financing – Complete

• Construction – Complete

• Commissioning – In progress

• Commercial operations – end-2016


US offshore wind – key East Coast states

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New Jersey

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Massachusetts

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Summary

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» The energy system is transforming rapidly – fossil fuels are being

replaced by renewables.

» Technology continues to advance and the cost of wind power is falling

fast.

» Offshore wind is at the forefront of innovation – larger turbines,

improved efficiency, higher capacity factors, lower capital costs.

» European markets maturing, but a substantial pipeline of projects

remains.

» Global markets developing, building on European experience, but

looking to take advantage of lower costs and incorporate local

capabilities.

» Operational experience growing – efficient asset management will be

key to long term profitability.Source: Deepwater Wind


Contact information

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About the Renewables Consulting Group

» We are a firm of practical consultants known for our

technical expertise, industry foresight, and sleeves-

rolled-up approach to projects.

» From strategy to implementation, we serve businesses,

governments, and non-profits around the world with

technical, commercial and management consulting

services for both mainstream and emerging energy

technologies.

» We are powered by exceptional people united in a

relentless pursuit to elevate advisory services, and

deliver new levels of value for our clients.

» We develop new ideas and challenge conventional

thinking to deliver tangible results.

» Headquartered in London in the United Kingdom, and

has offices in New York in the United States.

Authors

Lee Clarke

Director - London

+44 7738 948275

[email protected]

Karen Thyssen Raaberg

Associate – New York

+1 917 478 2455

[email protected]

@renewablescg

offshore wind - rcg...2016/10/25 · offshore wind capacity - operational 22578 21280 4100 2964...

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