Like 2017, 2018 turned out to be an extremely positive year for the offshore wind energy industry, not least because of ongoing cost reduction.
It was a year that saw the industry become a global one with significant export markets opening up, further development of a new generation of the much larger turbines and further examples of low prices for offshore wind being agreed, not just in Europe but also, for the first time, in the US. It was also a year in which floating offshore wind’s potential came to be realised – along with the realisation that there is still a lot to do to make it happen.
There were many positive developments in what will soon be new offshore wind provinces – including Poland and Japan – but as with any fast-growing industry there were a few niggles, not least in France, where the huge potential of the country’s offshore wind industry and floating wind in particular weren’t reflected in the energy plan unveiled by President Macron in December.
Other niggles were Taiwan, where the prospect of retrospective changes to feed-in tariffs has created concern, and Germany, where there is seemingly a long-term commitment to a lot more offshore wind but short-term concern about when it will happen.
Recognising the massive potential of offshore wind energy in the US, where a potential pipeline of 25 GW is developing, industry leader Ørsted entered into an agreement with the DE Shaw Group to acquire a 100% equity interest in Rhode Island-based Deepwater Wind. The merger created what was described as the leading offshore wind platform in the US with the most comprehensive geographic coverage and the largest pipeline of development capacity.
Deepwater Wind has built a geographically diverse portfolio of projects along the US east coast and has a portfolio with a potential capacity of approximately 3.3 GW comprising: Block Island; three offshore wind development projects in Rhode Island, Connecticut, Maryland and New York; and approximately 2.5 GW of offshore wind development potential across three lease areas in Massachusetts and Delaware.
Ørsted’s current US offshore wind portfolio has a total capacity of approximately 5.5 GW comprising development rights for up to 2 GW at the Bay State Wind site off the coast of Massachusetts and; development rights for up to 3.5 GW at the Ocean Wind site off the coast of New Jersey.
With the combined organisation and asset portfolio, the new entity could deliver clean energy to the seven states on the US east coast that have already committed to build more than 10 GW of offshore wind capacity by 2030.
With offshore wind turbines growing in size and edging up to the 8/9 MW and 9.5 GW mark it was only a matter of time before a 10-GW unit was announced. MHI Vestas breasted the tape first and announced a 10-MW offshore turbine at Wind Energy Hamburg in September. It is available for sale now with deliveries from 2021.
The new turbine is based on proven technology and lessons learned from previous installations of the V164 platform, promising a level of certainty and reliability for customers of the V164-10.0 MW.
MHI Vestas chief technology officer Torben Hvid Larsen said the V164-10.0 MW turbine “is the best proof point yet that we do not accept the limitations of conventional thinking.” In fact, the upgrades required to reach 10 MW were relatively small: the V164-10.0 MW incorporates a stronger gearbox, some minor mechanical upgrades, and a small design change to enhance air flow and increase cooling in the converter.
Massachusetts was twice the centre of attention in the offshore wind industry in 2018. In December, the Bureau of Ocean Energy Management announced the results of the auctions for offshore wind leases off Massachusetts, auctions that eclipsed the results of all seven offshore lease sales in the US so far.
Bids totalling US$405M were submitted in the auctions. All three sums bid for the leases far exceeded the highest bids so far in the US offshore wind industry. If fully developed, the lease areas could support approximately 4.1 GW of commercial wind generation. Equinor Wind, Vineyard Wind and Mayflower Wind Energy secured the leases offshore Massachusetts. Surprisingly, leading offshore wind developers including Ørsted, Innogy and Northland Power were unsuccessful.
As leaseholders Equinor Wind, Mayflower Wind Energy and Vineyard Wind are now eligible to participate in the next solicitation for offshore wind power that will be held by the state.
The intense competition for the offshore wind lease auction was completely unprecedented. Until that point, a US$405M offshore wind lease sale in the US was unheard of.
Industry in Europe has become used to the idea of the cost of offshore wind falling sharply and zero-subsidy bids are likely to become a more regular feature of the market, but the second major development in the state this year, in August 2018, was the very low bid for the 800-MW Vineyard Wind project in the US. In fact, the wholesale price the state of Massachusetts will pay for electricity generated from Vineyard Wind has raised a few eyebrows because of just how low it was.Industry in Europe has become used to the idea of the cost of offshore wind falling sharply and zero-subsidy bids are likely to become a more regular feature of the market, but what was really surprising in 2018 was the very low bid for the 800-MW Vineyard Wind project in the US.
Documents from the Executive Office of Energy and Environmental Affairs, Department of Energy Resources released by the state show that Vineyard Wind will provide the Commonwealth with energy and renewable energy certificates at a total levelised price of US$0.065/kWh over the term of the contracts. Stunningly, the department said that, on average, the contracts are expected to reduce customer’s monthly electricity bills by 0.1% to 1.5%.
The 800-MW offshore wind project also provides indirect benefits including energy market price reductions and lower renewable energy portfolio standard compliance costs through increased REC supply and the benefit of price certainty through a fixed-cost contract. Overall, the total direct and indirect benefits to Massachusetts ratepayers from the long-term contracts with Vineyard Wind are expected to be US$0.035/kWh, or US$35.29/MWh on average over the term of the contract, with total net benefits of approximately US$1.4Bn.
Poland has long been one of Europe’s worst emitters of greenhouse gases, mainly as a result of its dependence on coal-fired power stations. That isn’t going to change overnight, but the government there did confirm in 2018 that it has set an ambitious goal of developing 8 GW of offshore wind by 2035.
Polish State Secretary for Energy Grzegorz Tobiszowski (shown here) said the government will soon pass a law to enable the offshore wind plan and will spell out annual volumes up to this date. Back in July 2018, Poland amended its Renewable Energy Sources Act to make it easier to invest in offshore wind energy and other forms of clean energy.
The 8-GW plan is particularly encouraging and could encourage other Baltic states to advance plans for offshore wind. It has already encouraged state-controlled Polish energy company PGE to seek a strategic partner to develop offshore windfarms in the Baltic with a capacity of up to 2.5 GW.
As highlighted at the top of this review, 2018 has also seen a few concerns, despite what is an extremely optimistic global outlook.
France is to phase out more than a dozen nuclear reactors, close coal-fired plant and invest heavily in solar power and onshore but the amount of offshore wind it plans to build under its newly-announced energy plan is disappointing in the extreme.
In a major policy statement on energy at the end of November, President Macron said 14 nuclear reactors will be closed by 2035, a process that will begin in the mid-2020s with the shutdown of two reactors at Fessenheim. The president went on to say that by 2030 France’s onshore wind capacity will triple, the amount of energy produced from solar power will increase fivefold and four tenders for offshore wind projects will be held.
Although welcome, the quartet of tenders will add only modestly to France’s offshore wind ambitions and will do little to advance the cause of the floating wind sector in the country, which seemed well-placed to take advantage of growing global interest in floaters.
Industry bodies active in the sector have gone so far as to call the announcement by President Macron a “worst case scenario” for the industry and for regions of the country active in it. With early bottom-fixed offshore wind projects endlessly delayed by permitting issues and a decision to reduce subsidies awarded to them, the industry had hoped to see significant investment in floating wind. In July 2018 a group of more than 70 companies and organisations called for France to commit to 3 GW of floating offshore wind energy in the Mediterranean alone by 2030. The massive potential of floating wind energy and its role in France was highlighted at a recent event in the south of France, at which delegates heard it could be on the cusp of commercial-scale development.
In November 2018, the German Government unexpectedly stepped back from a recently announced commitment to hold another special auction for offshore wind. Earlier in the year, the government signalled it would hold an extra auction for offshore wind and could launch a special tender by the end of October. That did not happen, despite parties in Germany’s coalition government agreeing to launch special tenders for offshore wind, onshore and solar power. The commitment to more onshore wind and solar was pushed through.
After that disappointment, the government gave new hope to the offshore wind industry in the country with talk of a 20 GW target by 2030. The expansion of the target to 20 GW has long been a core requirement of the BWO, the offshore wind industry and north German federal states, but what the industry really now needs is the certainty in the form of a formal commitment by the government.
After a ‘crushing defeat’ of her party in local elections in Taiwan, the country’s president Tsai Ing-wen has resigned as head of the Democratic Progressive Party, which could affect support for offshore wind projects in the country.
Of greater concern in the short-term is a proposal to amend the feed-in tariff for offshore wind projects. In response, the Global Wind Energy Council has advised the government in the country to ‘seek consensus’ to ensure that direct investment and job creation aren’t jeopardised.
Taiwan has been widely recognised for quickly establishing its offshore industry and attracting promises of investment from a number of world-class companies in the sector. “The government must now avoid introducing damaging and unhelpful changes to contracts to ensure that these promises materialise into long-term investments that will create tens of thousands of skilled jobs and provide clean, competitive power for Taiwan’s economy,” GWEC said.