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Wind turbines

Green energy: offshore wind on spectacular growth trajectory.

Global investment in offshore wind is forecast to soar in the coming decade. LR’s Tristan Chapman discusses some of the market fundamentals.

Although ‘clean energy’ covers a range of sustainable power sources, LR’s Senior Vice President, Clean Energy, Tristan Chapman, currently spends most of his time on offshore wind. He sees the sector poised to begin a new phase of exponential growth which will see sweeping changes to the fundamentals of the market as we know it today.

The UK holds number one slot, measured in installed power capacity from offshore wind. The country’s energy, generated offshore by wind, is forecast to rise from 10.5GW today, to 27.5GW by 2026, according to recent analysis undertaken by Oslo-based Rystad Energy. For the UK, wind generated offshore will exceed shore-based output, also overtaking solar power by a large margin.

In a wider context though, the backdrop will change, China will probably push the UK into second place during this next decade, with the US suddenly appearing from nowhere at number three. The Netherlands will slip to fourth, followed by Germany at five.

US potential

LR is well-placed to assist in the projected growth forecast in the US, spurred partly by the change of Administration, but mostly because the country is almost a newcomer to this sustainable energy source. LR is well-prepared to service the requirements of developers and has been actively assisting in early stage cost benefit analysis and infrastructure design for some time.

Jay Borkland, a senior engineer and offshore wind specialist recruited to join the classification society’s US Renewables Team in 2018, is now Chairman of the prominent Business Network for Offshore Wind. Although broad policy on the sector may be generated at a federal level, Chapman explained that many of the practical issues are decided by individual states, which have responsibility for managing energy at local level and where Borkland is well-connected. Energy from offshore wind farms feeds directly into electricity grids operated by the states themselves.

The slow start in the US is down to several factors. There is lots of space ashore, and wind power generated ashore is already a large energy contributor to the country’s electricity needs. In fact, in April 2019, Chapman revealed that onshore wind contributed more electricity to the grid network than coal.

But the main reason is that the US has plenty of cheap energy already. A few years ago, it was expecting to import large volumes of LNG; now it’s a prominent exporter. And supplies of cheap shale oil and gas should ensure that the country remains a net exporter for years to come.

This explains why only 30MW of power is generated by offshore wind today, at an offshore farm near Rhode Island. However, there are bold plans for large-scale investment off the country’s north east coast, where the sea is relatively shallow, and in the deep waters off its Pacific coast. Fixed and floating technologies are likely to be adopted, respectively.

Maturing markets

Chapman explained that underpinning the sector’s likely expansion more generally is the fact that the renewables business – and offshore wind in particular – is no longer seen as a slightly whacky technology that will never work without huge subsidies. Having reached maturity, the sector now offers an attractive and credible story to funding institutions. Offshore wind developers can talk confidently with investors whose funding plans commit to certain internal-rate-of-return targets, independent of subsidies.

“We needed the maturity, the regulations and the independence to satisfy the money markets that attractive returns are available,” Chapman commented. “Unsubsidised wind can now be delivered competitively and profitably.” He added that LR has been closely involved in the US since the early days “when the first innovative structures found their way into the water”.

LR has also undertaken risk assessments throughout the development of offshore wind power so far. These processes are likely to become much more important, Chapman believes, for two main reasons. The whole point of green energy is to reduce the potential harm to the planet that results from hydrocarbon extraction and related power generation.

Exactly the same argument applies to offshore wind infrastructure – the potential disruption of birds’ migratory habits, for example, and the impact of offshore construction on sea life. That is one of the reasons, Chapman added, why the front-runners in the offshore wind development sector all insist on the very latest climate-friendly features on their heavy-lift transport ships, wind turbine installation vessels, and service craft.

He also made the point that, until recently, it was a challenge to assess the likely impact of offshore developments, and to measure accurately their performance in operation. Digitalisation and smart technology now allow these measurements, both in real time and for predictive analysis.

These factors, together with revised energy policies at a federal level, are likely to kick-start new investment. “I think we’re going to see a lot of projects getting the green light in 2021,” Chapman predicted. “We’re excited by the growth potential.”

Offshore benefits

Although offshore wind power is still more expensive than other energy sources, the delta is narrowing. This process will continue, Chapman explained, for two main reasons: despite the environmental challenges, there are no local planning constraints and no ‘nimbyism’ in offshore locations. What’s more, wind speeds are much greater and, as the size of offshore plants increases, economies of scale will have a substantial impact.

However, Chapman noted that there is no ‘one size fits all’. Offshore plant has to be designed specifically with local conditions in mind. In the US, ports and offshore infrastructure in the Gulf of Mexico are well-developed. Off the coast of Massachusetts, for example, this is not yet the case.

The particular conditions prevailing in a location will also determine the choice of technology – fixed or floating. Here, Chapman pointed out, LR has a substantial book of experience in both, having been closely involved in the first floating production storage and offloading units in the late 1970s, as well as the first tension leg platforms a few years later.

Offshore wind generated from floaters is still about four times more expensive per megawatt hour than from fixed structures. But, he pointed out, the scalability that is now evident at fixed installations is not yet available in floating plant. This is only a matter of time, however. Furthermore, floating infrastructure lends itself to more conventional construction processes and could offer a completely new revenue stream for shipbuilders reeling from a serious downturn in new contracts.

Global sentiment

The delay of COP26, originally scheduled to be held in Glasgow in November but now postponed for a year, probably has a silver lining, Chapman believes. The one-year delay, greeted with disappointment at the time, could prove to have various benefits.

At a practical level, the impact of autonomous systems is transforming the design and operation of wind farms. Autonomous survey vehicles using digital technology can map the underwater terrain far more accurately while the unmanned operation of wind farms is also well-advanced.

In 2019, some facilities recorded just three visits per turbine over the whole year. Datacentric systems now feed lots of data back to central control rooms. These developments have a substantial impact on breakeven energy prices.

Meanwhile, at a macro level, the delay will provide the opportunity for more countries to understand the support the potential that sustainable offshore wind offers. And the fact that the US is likely to be sitting at the table in Glasgow will be hugely beneficial, Chapman declared.

Horizons April 2021

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