Joining solar and onshore wind, offshore wind is gaining pace as the third go-to investment in the race to replace emissions-heavy fossil fuel imports with cheap sustainable domestic renewables, a report says.
Entitled ‘Offshore Wind Ready to Be Key Part of Energy Mix Globally – Top European Developers to Drive Down Costs in Asia Pacific,’ the note published by the Institute for Energy Economics and Financial Analysis (IEEFA) highlights the fact that offshore wind shares the same advantages that solar and onshore wind have.
It describes offshore wind as the ‘new game-changer’ in the renewable energy transition, which is occurring globally.
“Similar to solar and onshore wind, there have been dramatic cost declines in the execution of offshore wind projects over the past decade,” said co-author of the report Tim Buckley, director of energy finance studies at IEEFA.
“This is due to improvements in turbine technology, recognition of the low externalities, the innovative financing models, scale and appetite for international investment, in addition to the learning gained from other industries such as maritime services.
“Global offshore wind power capacity has nearly doubled in last three years from 12 GW in December 2015 reaching 23 GW by the end of 2018.”
Mr Buckley and his colleagues highlighted the fact that recent offshore wind energy auctions in Europe resulted in tariffs that approach parity with onshore wind, with tariffs below €60/MWh, while the UK set a record low of €44/MWh in September 2019.
The note finds China took the global lead in annual offshore wind capacity installations in 2018, with 1.8 GW installed compared to 1.3 GW and 0.9 GW from earlier leaders UK and Germany, respectively. Further, China has started to build huge internal capacity in manufacturing and technology.
“The rapid ongoing development of offshore wind in China will mean the country will become an offshore wind powerhouse in the coming decade,” said Mr Buckley.
The note also finds that offshore wind power development is likely to pick up pace in the emerging markets of Asia as these countries phase out nuclear power fleets while progressively reducing dependence on imported coal for electricity generation.
The emerging economies of South Asia and Southeast Asia such as India, Vietnam and the Philippines should move progressively, IEEFA said, planning for new investment while the advanced economies of Europe and North Asia take the lead in the offshore wind learning curve and supply chain establishment.
“Costs will continue to decline, and tariffs will become competitive in domestic markets, which will be fortuitous for a more aggressive scaling up of activity in Asia,” the note said. The note concludes that offshore wind is becoming a viable renewable energy source in Asia.
“Although governments in Asia are subsidising the first movers in the offshore wind industry to help it find its feet, we’ve seen auctions with prices dropping in just one year,” Mr Buckley said. “We expect this trend to continue, and the need for offshore wind subsidies to quickly subside.”
IEEFA previously detailed a cumulative offshore wind power capacity targets of 100 GW by 2030 amongst the greater Asian countries of China, Japan, Taiwan, India, South Korea, Vietnam, the Philippines and Indonesia. Assuming this target is achieved by 2035, it would be replacing the equivalent of 300-350 million tonnes of thermal coal annually.