Energy security is undoubtedly a key issue

Offshore Wind Magazine interviews Brent Wanner, the International Energy Agency’s lead of power generation analysis in the World Energy Outlook team, to find out more about what its global comprehensive analysis, which extends beyond the memberships, is revealing about the future development of offshore wind. Brent Wanner has been with the IEA focused on power sector modelling analysis for eight years and was previously a member of the US Department of Energy’s policy analysis group.

The IEA was originally established during the Seventies oil crisis to help countries coordinate a collective response to major disruptions in the supply of oil. Since then its remit has expanded significantly, with a much broader range of energy issues now addressed including gas and coal supply and demand, renewable energy technologies, electricity markets, energy efficiency, access to energy and demand side management amongst others.

Wanner is quick to point out that the IEA is a platform for analysis using information from its member countries, rather than being a forecaster. “Statistics can be gathered in near real-time to address emerging issues. This information is brought together to provide the broader picture and global context, enabling our members to perform a deeper analysis, which can support them in their policy decisions and ultimately enhance the reliability, affordability and sustainability of energy.” The IEA has 30 Member countries and seven Association countries, including China and India. The IEA family accounts for over 70 per cent of global energy demand.

“Energy security is the primary cornerstone of the IEA, which incorporates issues of economic development, affordability and sustainability. We address the global issues such as climate change, to the more regional specific issues such as air pollution. Part of our job is to identify emerging trends that may seem particular to a region but they are felt to some degree elsewhere.”

Wanner stresses that the key point is that the IEA is an ‘all sources’ agency. “The IEA is a neutral observer - an analyst. We try to bring fact-based analysis, which is well founded on data, modelling and country analysis and this enables the policy makers to make informed decisions.”

Rather than forecasting, the IEA presents a number of scenarios. The New Policies Scenario is based on the proposed and announced policies by country (not membership), which show the direction in which globally the energy sector is heading.

Achieving Paris goals

Separately, the IEA produces a Sustainable Development Scenario which plots where the energy sector would need to go to achieve sustainability goals. The IEA finds that the world is currently not on track to meet the main energy-related components of the Sustainable Development Goals (SDGs) agreed by 193 countries in Paris. The IEA’s Sustainable Development Scenario outlines a major transformation of the global energy system, showing how the world can change course to deliver on the three main energy-related SDGs (climate change, achieve universal access to energy, substantially reduce the severe health impacts of air pollution) simultaneously.

The Sustainable Development Scenario presents a ‘different world and one which is immediately founded on a path that has been agreed by the countries signing up to the Paris Climate Agreement’, says Wanner. The Scenario shows that to meet SDGs the world needs to take rapid action across all sectors. He also points out that the IEA’s Sustainable Development Scenario is ‘on the more aggressive side of scenarios consistent with Paris goals’. “We essentially ask how much faster do renewables, electric vehicles etc. need to be deployed? It is not an easy task - in short there is much to do!”

He adds that the world cannot leave any decarbonisation sources off the table. “It is not just renewables, we need every other low carbonisation source - carbon capture and utilisation, nuclear, electric vehicles, a much greater efficiency of the combustion engine and across all energy uses. A concerted extra effort will be needed and a solid set of actions to achieve these goals.

“In summary targeted, bold action is required and we will need to start very soon. The energy system is extremely complex and very challenging.”He admits that it is quite sobering that since the year 2000 there has been a massive growth in renewables - particularly in wind and solar energy - but this is all offset by an in crease in Nuclear generation, though this has declined in share terms. The fossil fuel share of power generation worldwide 64.5% in 2000 and 64.8% in 2017.

However, Wanner stresses that the door is not closed yet. The Sustainable Development Scenario shows the amount of action that is needed and that it is possible. “But it also highlights that the world cannot wait. Some countries are going faster than others and the 193 countries have agreed this path. They are serious about their commitments but more action is needed.”

Renewables’ investment stabilises

This is highlighted in the IEA’s Offshore Energy Outlook, which outlines developments up until 2040 and analyses the investment needed. Although investments in renewables had been growing in recent years this has stabilised in recent years. Compared to other predictions in the market, the IEA’s New Policies Scenario, which is published each year in November, states that investments in renewables will be increase somewhat compared with the level in 2017, about $300 billion according the IEA’s World Energy Investment 2018 Report. Investment levels certainly won’t be doubling or tripling as suggested in some other industry outlooks.

Wanner says: “There is still development going on but the costs are coming down dramatically. Essentially you get ‘more bang for your buck’ in both the on- and offshore wind sectors.”

$530 billion of offshore wind investment needed
In the Offshore Energy Outlook report the IEA states that cumulatively, $530 billion of capital investment in offshore wind is required from 2017 through to 2040 to meet the projections in the New Policies Scenario, averaging $22 billion per year. The cumulative figure almost doubles to just below one trillion dollars in the Sustainable Development Scenario.

Europe remains the biggest market for offshore wind investment with a total $330 billion investment in both scenarios. China is the next biggest market, with $110 billion in investment in the New Policies Scenario, but this figure skyrockets to $260 billion in the Sustainable Development Scenario as offshore wind deployment in China grows rapidly to meet decarbonisation and air quality goals.
Other countries that see a significant increase in offshore wind investment in the Sustainable Development Scenario include the United States, with investment rising from almost $15 billion in the New Policies Scenario to $135 billion, and India, which jumps from $20 million to $53 billion. Korea, the third-largest market for investment in the New Policies Scenario with $29 billion, sees a more modest increase to $34 billion.

Generally, the report shows the strong growth in Europe. And while the United States has been limited until now, the report shows how the US is taking real steps forward in the next 10 years. US growth in offshore wind will be supported by European players coming in, he adds. China has specific targets of 5GW by 2020 and efforts in Japan and Taiwan are both growing.

Ten-fold increase in offshore wind production

Offshore wind is still only a fraction of total energy generation worldwide today, at 2.0 per cent. As published in the Offshore Energy Outlook”: in the NPS of 2017, offshore wind reached close to 2% in 2040. In Europe, offshore wind was projected to surpass 15% by 2040. In the forthcoming World Energy Outlook to be published in November 2018, offshore wind plays a larger role due to recent policy announcements.

But again, a sobering statistic is presented in the Sustainable Development Scenario, which states that 60 per cent of the overall primary energy mix will come from fossil fuels rather than the 80 per cent today. The New Policies Scenario sees this fall from 80 per cent to about 75 per cent.

“It is clear that we will need to go much further. Industry particularly is very difficult to push towards decarbonisation and of course, it is responsible for a large portion of carbon emissions.” There are some very real challenges, he stresses with some production such as high temperature applications not able to be substituted with renewables. “It requires a change in the way we think.”

“A key driver could be implicitly or explicitly charging via carbon emission pricing, alongside the implementation of other measures.” The New Policies Scenario outlines a mechanism for carbon emission pricing. Europe is the best example but there is interest from countries such as China, he adds.

Offshore wind on the brink of significant cost reductions
When looking at the shorter term, Wanner says that offshore wind particularly is ‘standing at the edge of rapid improvement’. “We have seen the auction prices, there might be very significant cost reductions coming down the line and this is not only for offshore wind farms close to shore and in the best conditions.

“Floating turbines are also an important step forward. As projects come online and fulfil the performance expectations there should be a concrete realisation, which would give offshore wind a huge boost outside of Europe for those countries looking to develop this technology.

“The US is picking it up again with several states taking action. California for example, has released its 100 per cent low carbon 2045 plan. China has a temporary slowdown but is expected to grow. Momentum is building.”

“For the foreseeable future, without significant upgrades in policy action, energy generation will still be dominated by fossil fuel however.”

Energy security is key

Energy production is one of the most complex systems that has ever been developed and it is a rapidly changing sector, he says. And energy security is undoubtedly a key issue.

“We take it for granted that we can switch the lights on every day. We have important challenges, for example soon more renewables have to be fed into the electricity grid, making the system more variable. Much more flexibility is needed in the system. Many governments have made a move in the last 10 years to address the energy system and its flexibility. They want to make sure the system is reliable and secure and are looking at what investment is needed in the market designs.”

But for the clean energy transition, it is difficult to change the market design, he adds. “In the last few years a number of governments are taking it seriously and want to ensure security and flexibility. It is very promising and our members are looking at best practices and sharing experiences.” The Agency’s own renewables unit is looking at this on a technical level.

Acceleration of efforts

Furthermore, energy storage costs are coming down rapidly, which is mainly due to electrical vehicle developments and improving battery technology. “This is a key driver and offshore wind can be a benefactor of the developments here.”
Digital technology, sensors and automisation and the development of smarter grids also enables producers to tap all sources, he adds.

“The ambitions the world has set are clear. The policies that are in place need to be accelerated to meet these overall ambitions. If they are to be achieved the world needs to ratchet up its efforts for sure.”

This article was first published in Offshore WIND Magazine edition 4/2018.

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