Picking up wind

Rachel Stonehouse

June 1, 2015

About US$336 billion (€300 billion) could be spent in offshore wind capex over the next 10 years, with cumulative capacity surpassing 57GW. Douglas Westwood’s Rachel Stonehouse explains.

Cumulative offshore wind capacity is forecast to reach 57GW by 2024, driven by the continued development of established markets such as the UK, Germany and China and bolstered by emerging markets such as the US and France.

Over 5.3GW of capacity is expected to be installed in 2015, with additions anticipated to remain on an upward trend, peaking at 7.5GW in 2020. Capital expenditure will total $269 billion (€240 billion) between 2015 and 2024.

However, these figures only include projects which have surpassed the conceptual phase of development, resulting in a large potential for upside post-2020 totaling $67 billion (€60 billion). This upside potential assumes that a proportion of conceptual and speculative projects will progress through the stages of development.

Capital costs have reduced recently, predominantly due to the larger sizes of turbines installed, resulting in less infrastructure (such as support structures) being required. This presents new challenges for installation contractors but should result in lower operational expenditures once wind farms go on-line.

The UK will install over 11GW over the next ten years, with most of this expected to occur by 2022, as Round 3 developments take place. Germany will also install over 11GW, with a longer term outlook predicting activity levels will recover in 2018 following a slowdown in capacity installed 2016-17. China is expected to install over 8GW of capacity – this is lower than previously targeted, but still represents a strong growth market.

Emerging markets include countries such as the US and France, who are expected to have their first operational wind farms in 2015 and 2017 respectively. The US is expected to install 1.8GW of offshore capacity over the next decade, and France 3.2GW. Other emerging markets include countries with historically low levels of offshore wind activity, such as Sweden, Denmark and Belgium.

Market forecast: components

Over 10,200 additional turbines will be installed by 2024, with the majority in China, Germany and the UK. The 6MW turbine is the most common size, with <4MW turbine installations reducing dramatically by 2025. Whilst Siemens will maintain the majority market share, the growth of markets such as China and France presents opportunities for smaller, local turbine manufacturers such as Sinovel and Areva.

Monopiles remain the most common type of support structure, however jackets and tripods are increasing in popularity. The emerging trend of utilizing several foundation types within a single wind farm is observed over the forecast period. Furthermore, new technologies such as floating semisubmersible foundations are emerging, with several successful prototypes currently operational.

Over 23,000km of cabling (array and export) is forecast to be installed over the next 10 years. The UK, Germany and China are the largest markets due to the larger number of turbines and a higher than average cable length. HVDC cables are becoming increasingly common, as distances from the shore increase. Over 130 substations will be installed and commissioned over the next decade. Previously, wind farms have been small or close to shore, resulting in low demand for substations. AC substations will continue to grow in line with offshore wind development activity, whilst DC substations are increasing in popularity, particularly offshore Germany.

Operational expenditure (opex) has been increasing in recent years as wind farms are installed farther from shore. Opex will grow from $3.9 billion (€3.5 billion) in 2015 to $16.3 billion (€14.5 billion) by 2024, a CAGR of 15%.

Conclusions

High levels of activity are expected over the next 10 years in the offshore wind market and a record year is anticipated in 2020, facilitated by larger turbines, improved technology and small cost reductions. The UK, Germany and China continue to lead the way, with a host of new countries expected to enter the offshore wind market by 2025.

The EU renewable targets are a key driver of activity, with other countries following suit and introducing their own targets. However, despite this positive outlook, offshore wind costs must reduce further in order to ensure the viability and a consistent pipeline of projects post 2020.


Rachel Stonehouse
is a senior analyst based in Douglas Westwood’s UK office. Since joining the firm, she has led a range of research and advisory projects and conducted analysis spanning the oil, gas and renewables sectors with a focus on the offshore and deepwater markets. Stonehouse graduated from the University of Kent with a first-class degree in economics with econometrics.