Abstract
The European Wind Energy Association (EWEA) expects around 1 GW of new offshore wind capacity to be installed in European waters during the course of 2011. This will bring total offshore wind capacity to almost 4 GW confirming Europe as the world leader in offshore wind power. Currently, almost 6 GW of offshore wind capacity is under construction in Europe, 17 GW have been consented by EU Member States and there are future plans for a further 114 GW. Therefore, it is expected that during this decade, offshore wind power capacity in Europe will grow tenfold.
EWEA estimates that by 2020, 40 GW of offshore wind power will produce 148 TWh annually, meeting over 4% of the EU’s total electricity demand and avoiding 87 million tonnes of CO2 emissions.
Between 2020 and 2030 a further 110 GW of offshore wind capacity is expected to be added in European waters. 150 GW of wind power would produce 562 TWh annually, enough to cover 14% of the EU’s 2030 electricity demand and avoid 315 million tonnes of CO2 emissions.
The projected growth of offshore wind energy resembles the growth witnessed in the onshore wind sector at a similar time in the industry’s development. Onshore wind energy deployment picked up speed in the mid- 1990s. With a 15 year difference, offshore wind seems, today, to be following a similar growth path.
The foreseen growth of the sector will push offshore wind power to the forefront of the EU’s climate and energy strategy.
The development of a new industrial sector in Europe provides significant opportunities, particularly in the current economic climate, for growth and job creation.
Offshore wind power will play a key role in Europe’s future renewable energy economy. However, a prerequisite for this is the provision by governments and the European Union of stable legislative frameworks for offshore wind, and access to and availability of, sufficient levels of financing. In order to reap the benefits the offshore wind power sector offers, governments need to play their role.
Offshore wind, creating high-skilled jobs
The offshore industry is forecast to see a steep rise in employment numbers over the course of the next decade. It is estimated that the wind energy sector will employ 462,000 people in 2020. Of these 169,500, almost 40% will be in offshore. By 2030, jobs in offshore are expected to count for 62% of total employment in the wind energy sector: around 300,000 jobs out of a total of 480,000.
Moreover, following in the wake of substantial success in the onshore wind industry, Europe as a first-mover could exploit future export opportunities to other emerging markets.
The renewable industry generally has a higher proportion of jobs classified as “high-skilled” than the economy at large. Companies are finding these positions difficult to fill, highlighting the importance of a focus on training and education measures to prevent future shortage in this often neglected yet essential element of the supply chain.
A rapidly maturing and increasingly competitive market
Over the coming two decades, offshore wind will move rapidly from an emerging, immature technology to a key component of the EU’s energy mix. Consequently, competition across the supply chain for offshore wind is increasing with an influx of significant new entrants.
The contracting format turned away from, but then moved back towards, Engineer-Procure-Construct- Install (EPCI) turnkey contracts – which mean one company is in charge of all the different stages – as developers and suppliers become more knowledgeable concerning the risks involved and can allocate them in a more cost effective way.
The emergence of major contractors from the offshore oil and gas (O&G) and traditional maritime sectors may prove to be a significant shift in the dynamics of the supply chain.
Increasing reliability driving down costs
An impressive and growing list of manufacturers are developing new wind turbines dedicated to the offshore wind sector. It is estimated that the supply of offshore wind turbines will meet and exceed demand for the next decade, leading to healthy levels of competition within Europe with the potential for export to emerging offshore markets.
Sites for new projects are moving further from shore and into deeper waters. To offset the costs involved in developing such challenging projects, there is a clear trend towards reducing the cost of energy through lessons learnt, improved reliability and structural efficiency. Design trends are driving the supply chain towards specialisation – partially decoupling it from the onshore wind industry and developing specific offshore solutions.
High elasticity of supply enables domestic manufacturing of substructures
Substructures present an opportunity for domestic manufacturing due to lower technical barriers for entry via, for example, the diversification of shipyards or tower manufacturers. Substructure manufacturing brings a significant amount of supply chain value as substructures represent a large part of the capital expenditure in an offshore wind farm. This shows that it is not necessary for there to be a wind turbine manufacturer in a country for that country to have a significant wind energy industry and job creation.
Substructures have a relatively high elasticity of supply, potentially reducing the risk of bottlenecks. They present an attractive diversification opportunity for substantial existing marine and oil and gas (O&G) manufacturing capacity in Europe.
The move into deeper waters will see “space-frame structures” – that is, wind turbine substructures which use several “piles” to keep the turbine stable – having an increased market share, and new fixed and floating structures in the longer term. Nevertheless improved fabrication and installation procedures could also enhance the depths at which monopiles are used.
Subsea cables - a critical bottleneck?
There is a limited range of suppliers for high voltage (HV) subsea cables due to high investment costs and long lead times for new capacity. Significant advances are being made in the use of high voltage direct current (HVDC) cables with a wider range of suppliers and there is potential for multi-terminal capability.
Without increased capacity in manufacturing, a shortage of high voltage (HV) subsea cables is likely. Other equipment is generally drawn from much larger transmission and distribution (T&D) industries which are relatively unconstrained, with the exception of HV transformers, where delivery times are set by general world demand.
Jack-up vessels remain industry workhorse as vessel specialisation increases
The industry is seeing increased specialisation of vessels for offshore wind generally and for the specific tasks performed on an offshore wind site. Nevertheless jack-up designs are expected to continue to dominate vital installation procedures and particularly turbine installation.
Developers are looking at strategic investments to secure vessels. However, in the near term, supply constraints are decreasing, which may stem this trend. The vessel supply chain outlook is strong through to 2015 with several new builds, increased levels of competition and supply likely to meet demand. Through the latter half of the decade increasing pressure may return if further investments are not made.
Ports - a key stepping stone for the offshore wind industry
There is a general move away from the use of mobilisation ports and instead components are exported directly from the manufacturing facilities to offshore wind farms to save on logistical costs. However potential future production in Eastern Europe to take advantage of lower labour costs may reverse or slow this trend.
There is a drive in certain regions towards cluster-building for offshore wind manufacturing in closely located ports. These initiatives are being pursued via co-operation between the public and private sectors.