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Long Story Short: Offshore Wind is Becoming a Serious Renewable Energy Contender
Offshore Wind Power Blows into the Energy Market
Offshore wind power is one of the most exciting and fastest-growing industries in renewable energy. Without any landmasses in the way, wind offshore blows strongly and consistently without interruption. Furthermore, offshore provides ample space and fewer restrictions for installing massive turbines, making offshore wind an attractive energy alternative to support the electric power needs of our populous coastal communities. Offshore wind turbines may achieve a higher output, but their remote ocean locations present costly challenges to installation. Additionally, a salty and humid environment at sea means much more maintenance than their land counterparts. However, improved efficiencies from advances in technology as well as government support have encouraged rapid growth of offshore wind energy installations in the past few years.
During 2018, the global capacity of offshore wind energy grew by 24% for a total of 23 gigawatts (GW) of annual energy production capacity, according to the Global Wind Energy Council (GWEC), an international trade association for the wind power industry. This explosive growth was partially fueled by the opening of the world’s biggest offshore wind farm off the coast of the United Kingdom. This wind farm can produce 659 megawatts (MW) annually, which is enough to power 590,000 homes. With this substantial addition, offshore wind power now provides nearly a tenth of the UK’s electricity. Indeed, the rapid acceleration of offshore wind energy installations inspires an optimistic outlook for this abundant renewable energy source.
Countries Looking Offshore for Renewable Power. In the coming years, the GWEC projects the addition of offshore wind installations at the rate of 3-4 GW per year in Europe and 5-7 GW per year in Asia. With the first large-scale projects undergoing installation off the coast of Massachusetts and New York, the US is expected to bring the total capacity of offshore wind installations to 2 GW by 2025. Additionally, the World Bank Group has announced that it will be creating a financing stream that will encourage countries in the developing world to enter into the offshore wind markets. At the high end of the GWEC’s estimates, the global offshore wind market could potentially reach an install capacity of 200 GW by 2030.
Could Offshore Wind Outpace Onshore Wind? While growth in offshore wind energy installations accelerated in 2018, the growth in onshore wind installations actually exhibited some deceleration in 2018, having decreased in annual capacity growth by 4.3% relative to 2017. As of the end of 2018, the offshore wind market still only represents 4% of the cumulative wind energy market. However, according to the most recent GWEC annual report, the market share of offshore wind is expected to exceed 10% of total wind energy as advances in offshore wind technology allow for increased efficiency and lower costs.
A High Price Tag. Offshore wind power is still among the more expensive energy sources, according to the US Energy Information Administration’s levelized cost of electricity (LCOE) estimates. The LCOE indicates the average revenue per unit of generation needed for a generating plant to be economically viable, and it is weighted by the new capacity entering service by 2023. For the sake of comparison, the EIA estimates that before adjusting for tax credits the LCOE (measured in 2018 dollars per megawatt hour) are $42.8/MWh for convention natural gas, $48.8/MWh for solar, $39.1/MWh for hydroelectric, $42.8/MWh for onshore wind, and $117.9/MWh for offshore wind. Since the offshore wind industry is still in its infancy and has many more efficiencies yet to be realized, it has a long way to go to catch up with the other energy sources.
It's Just a Push from Renewable Energy Bureaucrats. Growth in the offshore wind industry relies on government support, not only for permitting and approval but also for subsidies. China, the UK, Germany, and the US—the four largest contributors to offshore wind energy growth in 2018—all benefited from substantial direct or indirect financial support from their governments. Typically, offshore wind industries receive government support via market-based mechanisms, such as auctions, tenders, and Green Certificates. Continued growth rates in the offshore wind industry would likely not be possible without getting some kind of break from the government, at least not yet.
Don Quixote’s Worst Nightmare. Offshore wind farms are typically located on the continental shelf, with wind turbines on fixed foundations that can reach depths of up to 250 feet. However, as offshore wind becomes a more and more practical energy source, companies have begun to explore the potential for floating wind farms. Wind farms in deeper waters further offshore could reach even stronger and more consistent winds, while reducing their visual pollution and accommodating for shipping and fishing activity. In October 2017, Hywind Scotland opened the first operational floating wind farm, with a capacity of 30 MW. Other kinds of floating turbines have been deployed, and more projects are planned. Imagine what the mythical Don Quixote would think if we one day had herds of massive windmills autonomously roaming the world’s oceans. Given the abundance of unharnessed wind energy that races across our oceans every day, it is reasonable to expect continued growth for the offshore wind industry.
Annual Energy Outlook 2019 with projections to 2050, U.S. Energy Information Administration, January 2019
Levelized Cost and Levelized Avoided Cost of New Generation Resources, U.S. Energy Information Administration, February 2019
Global Wind Report 2018, Global Wind Energy Council (GWEC), April 2019
Global Offshore Wind Report, Global Wind Energy Council (GWEC), June 2019
Energy firms bet on offshore wind farms in America, The Economist, March 2019
World's largest offshore windfarm opens off Cumbrian coast, The Guardian, September 2018
Renewable Energy on the Outer Continental Shelf, Bureau of Ocean Management