Offshore Wind Energy Market Analysis And Forecast 2014 – 2022
The global installed capacity in the offshore wind energy market stood at 7,045.4 MW in 2013 and is expected to reach 52,120.9 MW by 2022 at a CAGR of 25.0% from 2014 to 2022. Annual installations stood at 1,629.4 MW in 2013 and are expected to reach 7,228 MW by 2022, at a CAGR of 19.6% from 2014 to 2022. In the 2013 to 2022 period, total capacity additions of 46,704.9 MW are expected. In terms of investment, USD 7,875.5 million of new investments were required for capacity additions in 2013. This number is expected to increase to USD 27,387.5 million in 2022, at a CAGR of 16.4% from 2014 to 2022. Total investments in the 2013−2022 period for capacity additions are expected to reach USD 194,708.9 million.
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Europe currently is the only region which has invested significantly in developing its offshore wind energy sector. Europe is followed by Asia Pacific, wherein China is the only country that has separate targets for offshore wind energy installations. North America and Rest of the World (RoW) are yet to construct and commission utility-scale offshore wind energy projects. Development of the offshore wind energy sector in the U.S. has not yet taken off, despite numerous projects being at various stages of the planning phase. Technology for drawing grid connections from offshore wind farms is currently present in the U.S. However, absence of regional transmission operators (RTOs), especially in the south-east region of the country, makes it extremely difficult for offshore wind farms to justify their costs as compared to benefits. Similarly, restricted funding channels and negative public sentiment surrounding the technology has also taken a toll on the offshore wind energy sector in the U.S. The Cape Wind Project is among the offshore wind energy projects that have been involved in controversies. The Cape Wind Project, which if commissioned, would have connected 468 MW of offshore wind energy capacity to the grid. Although not yet shelved, the project’s future is uncertain, post the cancellation of power purchase contracts by two utilities. Similarly, in Canada, Ontario has put a moratorium on offshore wind development activities. Amidst the low electricity prices prevalent in Canada, it is extremely difficult to support the development of the offshore wind sector by weighing costs against benefits.
However, in Europe, the investment climate is positive and is expected to remain so throughout the forecast period. Europe witnessed nearly 1,567 MW of new capacity additions in the offshore wind sector in 2013, which was 34% higher than the previous year. The U.K. currently is the largest market for offshore wind energy in Europe. With the implementation of the new Energy Act in the country in December 2013 along with the implementation of the Electricity Market Reform Package, significant capacity additions can be expected in the future. Involvement of market players such as Siemens who have made investments, in collaboration with Associated British Ports, for the construction of wind turbine manufacturing facilities would go a long way in resolving supply chain bottlenecks as well as create employment (~1,000 jobs) for locals. Despite numerous advantages, the offshore wind energy sector in the U.K. suffers from a funding gap with a distinct mismatch between capacity additions planned and subsidies available under the CfD scheme. With projects of 5 GW of capacity expected to enter the planning phase in 2015, resolution of the funding gap issue remains to be seen. Germany’s prospects for offshore wind are even brighter with 9 GW of new capacity in the pipeline. Currently, Germany has a share of almost 30% amongst all consented European offshore wind farms, which are scheduled to go online within the forecast horizon. Stronger port infrastructure and an inherent locational advantage render offshore wind energy companies operating in the country well positioned to cater to the growing demand from both Germany as well as other European countries.
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Interactions with grid operators, however, vary significantly in different European countries. New amendments to the German Renewable Energy Act dictate that transmission systems operators (TSOs) pay compensation packages to offshore wind farm developers if they fail to draw grid connections on time. On the contrary, the regulatory framework in Denmark dictates that project developers pay the costs for drawing connections from the wind farm to the national grid. The manner in which the regulatory framework in various countries shape the interactions between TSOs and offshore wind developers would determine investor confidence and investments in the sector. The Netherlands, with its aggressive capacity addition targets, has brought in several reforms directed towards the offshore wind energy sector. Apart from an annual tendering of 700 MW, the government has also pre-designated offshore wind farm development zones and has plans to have TSOs construct five standardized grid connection platforms, exclusively for the ease of project developers.
The offshore wind energy sector in Asia Pacific is expected to be mostly driven by China and partly by Japan. With recent revisions in its offshore wind energy target, China is set to add 10 GW of generating capacity by 2020. With only 39 MW of new capacity additions in 2013, the offshore wind energy sector in China has recently been the subject of much controversy and skepticism. Irrespective of the criticism, China has treaded carefully when it comes to the offshore wind energy sector primarily owing to the higher costs and operating risks involved. With 10 GW of capacity additions targeted within 2020, nearly 1 GW of capacity additions are required annually in China post 2015. Justifying and achieving such an aggressive capacity addition target would stretch the country’s offshore wind supply chain to its limits. Japan is also investing in offshore wind energy post the Fukushima disaster, as a replacement to nuclear energy. However, conflicts with the fishing industry, significantly higher water depths, and hostile operating conditions have emerged as major hurdles. In the future, both fixed base as well as floating foundations are anticipated to play an instrumental role in the wind energy sector in Japan. As for the Rest of the World region, capacity additions are not expected to be realized, barring certain pilot and demonstration projects, especially those in the offshore areas of Brazil.
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Offshore Wind Energy Market: Regional Analysis
- Rest of North America
- Rest of Europe
- Rest of Asia Pacific
Rest of the World
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