MAKE: European Offshore Wind Heading toward 2016 Cliff
As the offshore wind industry is making important progress to reduce cost of energy in support of an outlook for global average annual growth of 22% to 2023, the European near term outlook shows a sharp decline of more than 60% in grid connected offshore wind capacity in 2016 compared to 2015, as the UK nears transition in subsidy schemes and German project installations peak at close to 2GW in 2015, says MAKE Consulting.
Supply chain impact expected to be softened by strong 2017 demand.
The global offshore wind market has grown in average more than 30% annually in the last 5 years bringing expected global grid-connected capacity to more than 9GW at the end of 2014 - equivalent to 2.7% of global wind power capacity. In 2014, 2.3GW offshore wind capacity will be grid-connected, with Europe accounting for close to 80% of total market size.
Despite declining activity in the UK in 2015, next year is set to be yet another record year for the offshore wind industry based on peaking German project installations and the Chinese offshore wind development gaining momentum. Globally, MAKE expects 51% growth in 2015.
Sustained growth in Asia Pacific however is not able to balance the sharp decline in new grid-connected capacity expected in the UK and Germany in 2016. Depending on market exposure and position in the value chain impact will vary across the supply chain. Impact will also be softened by strong 2017 capacity additions driving demand for equipment and components in previous years.
The global offshore wind market is expected to show strong long-term growth rates from 2017, and MAKE expects the market to grow at a 22% CAGR from 2014 to 2023. By 2023, total offshore wind capacity is expected to reach a staggering 82GW equivalent to 9.3% of global wind power capacity. By then, APAC will account for 40.4GW of this capacity and will have caught up with Europe, which will account for 39.4GW. China will be the main driver for offshore wind growth in APAC, but Japan, South Korea and Taiwan will also make contributions.
Annual installed capacity in Europe will vary between 3GW to 5GW from 2017 to 2023 supported by national and EU polices. Clarity on post-2020 regulatory framework is needed for the offshore wind industry to sustain momentum on cost reductions and growth. Smaller scale growth is expected in the Americas with the US accounting for only 2.2GW of the global expected grid-connected base in 2023.
MAKE expects Levelised-Cost-of-Electricity from offshore wind (LCOE) to be reduced from the current level of €150/MWh to €110/MWh in 2020, slightly above the €100/MWh target set by several major industry players. By 2025, MAKE forecasts LCOE to be reduced to €84/MWh. As such offshore wind will be making important progress to approaching grid parity.
Key levers for offshore wind cost reductions include scaling and industrialization of the offshore wind supply chain, technology improvements related to larger turbines and wind plants, lower-cost substructures, higher technical availability and reduced cabling cost combined with expected reduced cost of capital, lead time and O&M cost.
MAKE’s Global Offshore Wind Power 2014 is an 90-page report containing over 150 charts, tables and graphs providing in-depth analysis of the global offshore wind power market. Key topics covered include global, regional, and country-specific market assessments, supply-demand trends for turbine assembly, balance of plant and installation, asset ownership trends and project finance trends.
Press release; Image: Siemens (Illustration)