February 17, 2020

New Study suggests a significant rise in offshore wind capacity

A new study by Wood Mackenzie has predicted that the next decade will be a new era for the wind industry and will see the offshore wind market’s share of the annual global wind industry reach 25% by 2028. The report suggests that the onshore wind industry will continue to mature and compete further with solar as suppliers seek for further collaboration. In contrast, Wood Mackenzie believes installed offshore wind capacity will expand significantly during this period, expecting the market to grow seven times by 2028. Over 80% of the expected installed capacity in the next five years has already been granted.

Reduction in LCOE

According to representatives at Wood Mackenzie, the levelized cost of energy (LCOE) for the onshore industry will continue to decrease in years to come but technological advances in materials will unlikely have any significant impact on market performance. Wood Mackenzie emphasise that progressive and innovative technology now tend to be connected with the offshore market, rather than the onshore industry. 

LCOE has declined considerably for offshore wind in the last few years as businesses have focused their investment into designing specific equipment for offshore wind projects. Wood Mackenzie believes this trend will continue, particularly with technology costs likely to decline further, predicting LCOE for offshore wind to decrease by nearly 50% between 2019 and 2028.

Offshore Leaders

In the last few years, the major players in the offshore wind market have become even bigger, as European developers have expanded their reach and Chinese-owned businesses have focused on domestic development.

European’s offshore wind businesses have focused predominantly on emerging markets, supporting a significant rise in asset transactions in offshore wind to 100GW by the end of 2019. Looking further ahead, the global offshore wind capacity is expected to reach 160GW by 2028, a major increase from 22GW at the end of 2018.

Floating Wind Development

A large portion of offshore wind development in the coming decade is expected to be in locations suitable for fixed-bottom offshore wind development. The floating wind industry is only expected to contribute a small part of the offshore wind capacity over the next decade. However, floating offshore wind development is accelerating, with the potential for 10GW of floating wind being deployed by 2030 if new markets do enter the offshore industry and nations introduce supportive policies and frameworks. A large number of wind designs already exist and many developers are positioning themselves within the floating industry, forming partnerships and focusing on developing potential floating wind projects. At present, the main challenge for the floating wind industry relates to the capacity needed to reduce the cost of floating wind. Governments expect further declines in pricing before allocating additional capacity to floating wind. In order for the market to continue expanding commercially policymakers need to collaborate with the offshore industry to create a clear and effective route to market. 

Uncertainties regarding policies is a wider challenge for the wind industry. The number of offshore wind projects is increasing rapidly but there are very few existing regulatory frameworks. Without clear support or commitment from Governments, there is a level of uncertainty regarding how quickly new offshore wind projects will be deployed. In order for offshore wind to become a dominant source of electricity worldwide we will need a clear and effective route to market to be provided by governments.