As I travel to All-Energy this year, my expectations are high. I expect there to be a real buzz around the event, especially the sessions in relation to offshore wind. This is a sector which is on the cusp of material growth.
The renewables and offshore wind market has been around for some time now. While many of us recognise that’s it a material market, many still view it as somewhat vulnerable given the array of incentives and subsidies that are required to maintain investor interest.
Not anymore. The most recent licencing round in Germany saw for the first time the release of project sites which will have no subsidy…and provide an economic return. While this isn’t a universal trait right now, its expected that the cost per MW hour will continue to drop.
We expect that by 2025 the €/mwh will be comparable with CCGT, or gas-powered generation. This is remarkable given it wasn’t so long ago the costs were more in line with nuclear generation at twice the price.
How has this happened?
Well, its mainly down to turbines becoming bigger and more efficient. Back in 1985 the sector produced turbines that generated 0.05 MW, this increased to 1.3MW in 1995 and 5MW in 2005. Today its 7-8MW on average and it won’t be long until they are 12 or 13MW. This makes a huge difference to the economics.
It’s a good example of how a market evolves. When it starts it needs help, in this case with subsidy. As it matures people and businesses get better at it, make innovations and improve. Right now, we are about to enter a material growth phase in the sector.
Material it will be.
Over €290 billion will be spend on offshore wind through to 2025.
Over 70% of this will be in Europe, with a third being spent in the UK. Global capacity will increase by 466% over the same period.
What is also exciting is that as the market becomes more competitive relative to other electricity generation sources, it will attract more finance and possibly growth further, likely taking share of the investment Euro from onshore wind.
There’s no better time for the oil boys to get on the train to Glasgow and seek out the large scale opportunities in offshore wind.
Andrew Reid is the President, Consulting, of the Westwood Energy Group and will be speaking at the All Energy Conference on offshore wind.