UK: Douglas-Westwood Discusses World Offshore Wind Market Over 2012-2016 Period

Douglas-Westwood Renewables Manager, Frank Wright discusses the world offshore wind market over the next five year period, 2012-2016 in an article called “The World Offshore Wind Market Forecast 2012-16”. 

Why Offshore Wind?

International concern about the links between rising global average temperatures and increasing man-made Green House Gas (GHG) concentrations has led to ambitious long-term policy action on climate change, including the Kyoto Protocol. Implementation is being driven by policy action at both regional and national levels.

In order to move towards a low carbon energy sector, measures to directly cut or cap GHG emissions, promote energy efficiency and encourage the development of low or zero emission technology including renewable power generation, are being undertaken across the world. Of the various low carbon alternatives, offshore wind is well placed due to a combination of factors including large untapped resources, relatively high energy yields and the potential to develop projects on a large ‘utility’ scale.

Experience to date

Despite the potential, offshore wind installation activity has been slow to take-off. However, the last five years have seen progress with the majority of global installations in this period: more than 3.5 gigawatts (GW) of offshore wind capacity is now online, in excess of 2 GW is under construction and over 100 GW is in various stages of development.

To date, construction activity has centred on the North European region with the UK representing the largest individual market. More than 50 projects – including 16 in the UK and 14 in Denmark – have been installed in Northern Europe representing over 3,300 MW of total capacity, compared to less than 300 MW installed in the rest of the world. Consequently, a dedicated supply chain providing construction and operational services, has started to emerge around the North Sea region.

Supply Chain Development

The UK has struggled to retain investment and profits locally, despite its position as the premier offshore wind market. However, several offshore wind turbine manufacturers have announced UK production facilities. Supply chain movements in the UK have been unlocked in part by public infrastructure funds. Major investments are also being made in Germany with an ‘offshore wind cluster’ of turbine and foundation manufacturers developing in the Bremerhaven area.

Increasing Scale

Offshore wind projects have increased in scale over the last 15 years and projects to be installed over the next three years to 2014 show this trend continuing. With increasing scale, competition for manufacturing capacity and installation resources is becoming increasingly fierce. This has led to a trend towards vertical integration and consolidation in the supply chain with wind turbine manufacturers acquiring manufacturers of major subcomponents such as gearboxes and generators.

This trend is continuing into the area of installation vessels where several project developers have identified a need to secure vessels, either through long-term charters or in extreme cases by funding new-builds.

Market Forecasts

Past 2015, offshore wind projects will continue to increase in scale. In our forecast period, which runs from 2012 to 2016 we predict 15 GW of new offshore wind capacity will be added. The UK, Germany and China will be the largest markets, which together will install over 12 GW or 83% of the new global capacity.

Growth will accelerate in 2013 as UK Round 2 construction continues. Germany starts to see multiple commercial-scale wind farms come online. Annual added capacity will average around 3 GW compared with the 2007 to 2011 average of less than 600 MW. Cumulative global offshore wind installed capacity is expected to pass 18.6 GW by 2016.

Over €51billion of capital expenditure is expected for projects coming online between 2012 and 2016, a level six times greater than in the preceding five-year period (€8.1bn). The UK and Germany will account for €35bn of global offshore wind expenditure, with China representing the third largest offshore wind market (€6bn). Annual expenditure levels rise throughout the forecast period peaking in 2015 at €12.4bn.

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Press release, October 11, 2012; Image: Alpha Ventus