Despite the Covid-19 pandemic, the offshore wind industry had a spectacularly good 2020
So good that it is hard to expect 2021 to be as good, but good it will be as more and more countries recognise its benefits and make plans to build offshore windfarms.
In 2021, offshore wind will continue to demonstrate that it is an industry that can handle a pandemic. The industry did very well in 2020, with most projects completed on time, despite the considerable changes needed to working practices. In the face of further waves of Covid-19 in the northern hemisphere winter of 2020/21 and spring of 2021 – and the possible emergence of new, more transmissible strains of coronavirus – the offshore wind industry will continue working.
Installation contractors responded quickly to new challenges and organisations such as the G+ Global Offshore Wind Health and Safety Organisation, Workboat Association and others are addressing the challenges of transporting windfarm technicians on small craft.
At the heart of the Green Recovery
In 2020, the EU put offshore wind at the heart of its post-Covid-19 recovery plan. In 2021, Joe Biden will do likewise.
President-elect Biden will enter the White House with a goal of setting the US on course for net-zero greenhouse gas emissions by 2050 and will take the US back into the Paris Climate Agreement.
As highlighted here, the Trump administration slowed the process of approving offshore wind and proposed to close off a section of the US Atlantic coast from Florida to Virginia, but the Biden administration will act faster to support states and companies seeking to develop offshore wind industries.
A bipartisan deal that contains important relief measures for the renewable energy industry in the US, including a new 30% investment tax credit for offshore wind projects that start construction through 2025, will help things along.
From Azerbaijan to Australia, from the Black Sea to Brazil and from Poland to South Korea, offshore wind’s global growth will continue apace in 2021. It will grow most quickly in the Asia Pacific, particularly in China, followed closely by Europe and the US, but expect countries bordering the Baltic and Black Sea to come to the fore too.
Compared to the North Sea, offshore wind is only just getting going in central Europe but it has significant potential in the Baltic, southern European waters and the Black Sea.
As a recent CEPS Policy Insight noted, “Black Sea offshore wind is a major economic opportunity for EU and non-EU countries in the region.” From an energy perspective, it provides a way to substitute increasingly uneconomic coal, without increasing dependence on imported Russian gas. And, as EU Commissioner for Energy Kadri Simson noted recently, the best way for central European countries to take advantage of the benefits of offshore wind is to co-operate.
Addressing a Central European Energy Partners conference , the Commissioner said countries in central Europe, in the Baltic and Black Sea, are ideally placed to take advantage of offshore wind as a source of clean energy and job creation. She urged them to recognise the advantages of a joint approach to project development and think not of where their borders are but of sea basins, which they can exploit by working together. “We need to make sure we are not planning in isolation. Think basins, not borders,” she said, and in 2021, central European countries will do so, as they began to do in 2020.
Even diminutive countries such as the Bahamas have plans for offshore wind: in December 2020, the island state’s Minister for Home Affairs Walter Roban said he believes its exclusive economic zone “offers great potential for renewable energy development,” with “the most feasible technology being offshore wind.”
Offshore wind and green hydrogen
Green hydrogen is so important because of its potential in hard-to-abate sectors of the economy such as heavy industry, transport and heating. Offshore wind’s scale and capacity factor make it ideal as a source of energy for the production of green hydrogen. It will play a central role in the production of green hydrogen and in the decarbonisation of heavy industry if industry leaders along the value chain work together. They are already doing so in a number of projects, and more will be announced in 2021.
In early 2021, Siemens Gamesa Renewable Energy will begin a pilot project to field test the world’s first turbine that will produce green hydrogen directly from wind. Operating in ‘island mode,’ the turbine could also be connected to the grid, if required. Expect other turbine manufacturers to announce similar projects in 2021.
Next year will also see industry leaders announce plans to test electrolysers in the marine environment, whether ‘in the turbine’ or on dedicated offshore platforms and focus further on using offshore infrastructure to bring green H2 produced offshore ashore.
Oil majors drive further into renewables
As highlighted above, offshore wind proved resilient to Covid-19 in 2020, but the oil and gas industry did not. In 2021, as Everoze partner Graeme Wilson put it recently, the pressure on oil and gas majors to secure a stake in the offshore wind industry will grow significantly.
But as he noted, developer premium and transaction costs required to buy into projects will eat into their profits, and the lack of control that comes when holding a minority or 50:50 stake in a project is a price the oil and gas majors will only pay for so long. They must eventually decide to assert themselves and go it alone. And, to achieve anything close to the double-digit profit margins they are used to, Mr Wilson suggests, the long-term strategy of many of oil and gas majors will be to vertically integrate themselves into the market.
If they do so, they could achieve competition-beating low prices by managing and carrying out construction activity themselves, before bringing O&M inhouse utilising their considerable engineering and logistics capabilities.
Mr Wilson suggests that the acquisition of 20% of Dogger Bank A and B by Eni – which also owns Saipem, an established oil and gas EPCI contractor and the project’s offshore substation transport and installation contractor – may be the start of a trend where we see other projects owned and constructed by oil and gas majors. That trend could well begin to become more evident in 2021.