Offshore wind power is on the cusp of exponential growth, with installed capacity set to nearly triple between 2015 to 2020.
This growth is being accompanied by marked cost reduction, with recent auction tenders suggesting that costs have fallen by 60 percent compared to 2010 levels. As a result, a new International Energy Agency’s Renewable Energy Technology Deployment report REWind Offshore highlights that industry cost targets for 2025 have been surpasses eight years ahead of schedule.
Following a year of record breaking auction prices in the Netherlands and Denmark, the study identifies the key success factors that have supported a burgeoning industry in Europe, drawing lessons learned for both policy makers and industry players.
The report, delivered through a collaboration between the Carbon Trust, Mott MacDonald and Green Giraffe, identifies several examples of best practice, underpinned by the need for political stability and visibility of market scale and support mechanisms. Notable recent policy trends include the introduction of competitive auctions and centralized development models, in which government bodies take on a greater role in the development process.
These trends are seen to be having a considerable impact on the risk profile for developers, with increased allocation and price risk countered by reduced development and technical risk. This is resulting in lower perceived risks from the finance community due to growing confidence in the ability of developers and the supply chain, with offshore wind increasingly considered an attractive investment opportunity for a more diverse range of actors.
Having been pioneered in a small handful of European countries, offshore wind is set to expand geographically, with considerable market growth forecast both within and outside Europe, particularly in East Asia and North America.