This is an extract from Global Wind Energy Council’s (GWEC’s) Global Offshore Wind Report 2021
Offshore wind charting new waters in the race to net zero
Offshore wind will be a key vector in the global response to climate change. Energy production accounts for around three-quarters of global greenhouse gas emissions and will be the focal area for climate change mitigation efforts. The map of hitherto competing policy recommendations has become much clearer, now that the leading international energy institutions are in agreement on the primary role of renewable energy required to meet the Paris targets and deliver carbon neutrality by 2050.
Both the IEA and IRENA have mapped out roadmaps whereby wind and solar PV energy supply around 70% of electricity generation by 2050, and both technologies dramatically scale up to deliver the required deep emissions reductions. From now to 2050, offshore wind becomes a central plank of global decarbonisation, transforming the electricity system in generation, infrastructure, flexibility and production of green fuels like hydrogen. Its application does not discriminate between emerging economies and advanced economies, nor one region of the world over another.
Offshore wind is a key technology in these net zero scenarios, with fixed-bottom offshore wind set for rapid acceleration over this decade and floating offshore wind unlocking tremendous potential for fossil fuels displacement from 2030 onward. The IEA calls for offshore wind to grow as a share of total wind deployment, from 7% in 2020 to more than 20% from 2021 onward. Its roadmap requires offshore wind annual installations to grow 13-fold, from the 6.1 GW installed in 2020 to 80 GW by 2030. IRENA foresees more than 2,000 GW of offshore wind installed capacity by 2050 in its 1.5°C scenario, nearly one-quarter of total wind power capacity at that time.
Where will offshore wind be built by 2050?
We have only begun to scratch the surface of offshore wind potential. With 35 GW installed today, primarily in Europe and China, offshore wind comprises less than 0.5% of global installed electricity capacity. Nonetheless, the offshore wind resource available worldwide is formidable. The World Bank has identified more than 71,000 GW of technical resource potential available worldwide – nearly 10 times the world’s current installed electricity capacity.
The Offshore Wind Resource Hub, launched by GWEC on World Ocean Day in 2021, consolidates territorial maps of fixed and floating offshore wind potential in nearly 100 countries. These illustrate the potential for offshore wind, as an indigenous and sustainable resource, to be distributed in every region of the world, from the Caribbean to East Asia to sub-Saharan Africa.
Based on IRENA’s target of 2,000 GW, which would be required to achieve carbon neutrality and sustain a Paris-compliant pathway, GWEC Market Intelligence foresees Asia emerging as the world’s most prominent offshore wind region, home to nearly 40% of installations by 2050, followed by Europe (32%), North America (18%), Latin America (6%), the Pacific region (4%) and Africa and the Middle East (2%).
However, the volumes of offshore wind required in every region of the world are still drastically higher than current targets, and miles ahead of current capacity. Only in Europe is there a target to 2050, set at 300 GW under the EU Offshore Renewable Energy Strategy. Even this falls far short of Europe’s foreseen share for the world to reach 2,000 GW, although volumes from the UK, Norway, Turkey and Russia will help to make up the difference.
The growth story is most pronounced in Asia, which GWEC Market Intelligence forecasts as the forerunner for offshore wind in this century. Around 760 GW of offshore wind capacity must be delivered by China, Japan, South Korea, Vietnam, the Philippines and other geographies in the region; however, current targets only stretch to 2040 and amount to 150 GW among the region’s major offshore wind leaders (China, Japan, South Korea and Taiwan).
In other regions of the world, a dramatic scale up of offshore wind is called for over the next three decades from near-zero capacity levels today. To date, the US has set cumulative federal and state targets of 110 GW but will need to raise its ambition and be joined by Canada to meet the continent’s potential. Pathfinder markets will need to activate wider interest and ambition in offshore wind in each region, such as Brazil and Colombia in Latin America, South Africa and Morocco in Africa and the Middle East and Australia in the Pacific.
To kickstart activity in countries with near-zero offshore wind, countries will need to introduce national policy frameworks for offshore wind in this decade. Targets alone will not suffice to make offshore wind the bridge for the fossil fuels-to-clean transition – long-term vision, forward-planning in enabling infrastructure and clear regulation will be required to accelerate offshore wind deployment.
Market status 2020
Offshore wind annual installations
- The global offshore wind industry had its second-best year ever in 2020 despite the impact of COVID-19.
- China led the world in new installations for the third year in a row with more than 3 GW of offshore wind grid connected in 2020.
- Steady growth in Europe accounted for the majority of remaining new capacity, led by the Netherlands, which installed nearly 1.5 GW of new offshore wind in 2020, followed by Belgium (706 MW).
- The UK and Germany installed 483 MW and 237 MW respectively, making them the No.4 and No.5 markets in new installations in 2020. The slowdown of growth in the UK was due to the gap between the execution of projects in the Contracts for Difference (CfD) 1 and CfD 2 rounds. In Germany, the slowdown was primarily caused by unfavourable market conditions and a lower volume of short-term offshore wind projects in the pipeline.
- Outside of China and Europe, two other countries recorded new offshore wind installations in 2020: South Korea (60 MW) and the US (12 MW).
- Last year, only 1,005 MW of offshore wind capacity was awarded worldwide through auctioning, of which 759 MW was from the Netherlands and the remainder from China. A consortium of Shell and Eneco won the right to build the 759 MW Hollandse Kust North project in the Netherlands. The project is the third so called “zero-priced” bid, meaning that the project will receive only the wholesale price of electricity and no additional support or payment.
- Although awarded offshore wind capacity was relatively low compared to 2019, more than 7 GW of offshore wind auction/ tenders were launched in 2020, of which 5.5 GW is through state-issued solicitations in New Jersey, New York and Rhode Island in the US. The rest of the capacity is from Denmark (800- 1000 MW) and Japan – the East Asian country’s first auction for both floating and bottom-fixed offshore wind.
- The offshore wind market has grown from 2.2 GW in 2016 to 6.1 GW 2020, bringing offshore’s share of new wind installations from 4% to 7%, which is 3% lower than 2019. This is primarily due to the strong growth spurt of onshore wind in 2020.
Offshore wind cumulative installations
- The global offshore market grew on average by 22% each year in the past decade, bringing total installations to 35.3 GW, which accounted for 5% of total global wind capacity as of the end of 2020.
- Europe remains the largest offshore market as of the end of 2020, making up 70% of total global offshore wind installations, which is 5% lower than the previous year.
- Cumulative installations in Asia passed the milestone of 10 GW by the end of 2020, making it the second largest regional offshore market. China currently has a strong lead in offshore wind activities, followed by South Korea, Taiwan, Vietnam and Japan.
- North America has only 42 MW of offshore wind in operation as of last year, but deployment in the US is expected to accelerate from 2023.
- The UK remains in the top spot globally in terms of cumulative offshore wind capacity as of the end of 2020, while China has now overtaken Germany to become the world’s second largest offshore wind market.
Market outlook 2030
Offshore market outlook to 2030
The global offshore wind market outlook to 2030 has grown even more promising over the past 12 months as: 1) governments across the world continue to raise their ambition levels, 2) the sharp drop of offshore wind LCOE madeit one of the most competitive energy sources, 3) progress continued in commercialization and industrialisation for floating wind, 4) offshore wind increasingly played a unique role in facilitating cross industry cooperation and decarbonisation, such as oil and gas sector transition to renewables and Power-to-X.
With a compound average annual growth rate of nearly 30% until 2025 and 12.7% up to the end of the decade, new annual installations are expected to sail past the milestones of 20 GW in 2025 and potentially 40 GW in 2030. GWEC Market Intelligence expects that over 235 GW of new offshore wind capacity will be added over the next decade, bringing total offshore wind capacity to 270 GW by 2030. 30% of this new volume will be installed in the first half of the decade (2021-2025), with the remaining to be connected in the latter half (2026- 2030). The volume of annual offshore wind installations is expected to more than triple, from 6.1 GW in 2020 to 23.1 GW in 2025, bringing its share of global new installations from today’s 6.5% to 20% by 2025.
Europe retains its status as the largest regional offshore wind market as of the end of 2020, but new installations outside Europe, predominantly in Asia, already surpassed Europe last year for the first time. This situation is likely to remain through to 2030, although annual installations in Europe may pass the milestone of 10 GW in 2026. In the near term (2021-2023), the majority of growth outside Europe will come from Asia – primarily China, Taiwan and Vietnam, with contributions from the US. Japan and South Korea will grow in importance from 2024 onward.
The world’s first offshore wind project Vindeby was installed in Denmark in 1991, which makes Europe the birthplace of the offshore wind industry. Through close collaboration among European countries and experienced stakeholders in the past three decades, a robust offshore wind supply chain has been built in countries neighbouring the North Sea and Baltic Sea. As of today, offshore wind has not only established itself as a cost-competitive power generation of choice for governments in European continent, but also created nearly 100 thousand of jobs and boosted the local economic growth.
In the past decade (2011-2020), the European offshore wind market enjoyed double-digit annual growth (12%), making it the world’s largest regional market in total offshore wind installations as at the end of 2020. Looking at potential growth, GWEC Market Intelligence believes that Europe will maintain double digital growth rate in this decade (2021- 2030), as offshore wind has become the most competitive electricity generation technology after onshore wind and solar PV – but with considerable advantages in terms being able to deploy at scale, making it a key energy source to help Europe to meet its Nationally Determined Contributions (NDCs) and achieve the 2050 net zero target.
Last November, the European Commission presented its offshore renewable energy strategy as part of the EU Green Deal. It sets a target of 300 GW of offshore wind by 2050 for the EU, which makes offshore wind a crucial pillar in Europe’s power mix and a core part of its net zero implementation strategy. According to GWEC Market Intelligence’s Q3 2021 global offshore wind market outlook, 2021 and 2022 are expected to be relatively slow years for Europe, with new installations staying the same level as that in the past four years (2017- 2020), which is mainly due to the lower level of activities in Germany where no new offshore wind capacity is predicted in 2021. However, the European offshore market is likely to bounce back in 2023 when utility scale projects will also come online in new markets like France, and new installations in Europe are likely to double in 2023 compared with 2020.
Considering more offshore wind capacity is likely to be built in established European markets like the UK, Germany and Denmark after 2025 and the fact that installations will not take place before 2025, GWEC Market Intelligence expects that 73.8% of total predicted offshore wind capacity will be built in the second half of the decade. New installations in Europe are likely to exceed 10 GW in 2026 and then potentially approach 20 GW by 2030.
Asia built its first offshore wind project, totalling 1.3 MW, in Japan in 2003, but the regional offshore market was not ready to take off in earnest until 2014, when the Chinese National Energy Administration released the National Offshore Wind Development Plan (2014-2016). Annual installations in Asia region passed the milestone of 1.5 GW in 2018 when China also surpassed the UK as the world’s top market in new installations. Last year, Asia replaced Europe as the leading regional offshore wind market in new installations for the first time.
GWEC Market Intelligence’s latest market outlook predicts that China will continue to install the lion’s share of offshore in Asia in the first half of this decade. Taiwan is expected to be the largest offshore market in Asia after China in new installations in the same period. However, the market will become more diversified from 2025 onward, when more large-scale offshore wind projects are set to be commissioned in Japan, South Korea and Vietnam.
GWEC Market Intelligence forecasts that China’s market share in this region is likely to drop from 76% in 2021 to 56% in 2026. This decline is expected to continue, to reach 48% toward end of this decade when new capacity is also likely to be built in emerging markets such as India and the Philippines.
In total, 63% of the predicted offshore wind for this region is to be built in the second half of the decade. New installations in the region are likely to exceed 10 GW in 2026 and then reach a level of nearly 15 GW by 2030. The top five markets in this region for new installations in this decade will be China, Taiwan, South Korea, Japan and Vietnam.
China is so far the most mature offshore wind market in the region with a domestic supply chain and infrastructure quickly built up in the past five years. The rest of the markets are still at the early stage of development and most of them face the challenge of developing a local supply chain and building the necessary competencies and work forces. However, the early experience of Taiwan has proven that collaboration with European partners across markets in this region is essential for success. Other Asian markets such as Japan and South Korea are now following suit.
GWEC Market Intelligence believes that Europe will remain the largest regional offshore wind market in terms of total offshore wind installations through to 2030. Nevertheless, the gap of the global market share between the two regions is likely to narrow from today’s 40% to just 7% in 2030.
North America commissioned its first commercial offshore wind project, the 30 MW Block Island project, in Rhode Island in December 2016. The 12 MW Dominion Virginia demonstration project installed last year brings the total offshore wind capacity spinning in the region to 42 MW, making it the only region with commercial offshore wind projects outside of Europe and Asia.
Based on GWEC Market Intelligence’s global offshore wind project database, no utility-scale offshore wind projects will come online in North America until 2023. In total, 28.8 GW of offshore wind is predicted to be built in this region in this decade, of which 99% is expected to come from the United States and only 400 MW is projected from Canada.
Last year’s Global Offshore Wind Report 2020 reflected on a decade of dramatic progress in the offshore wind sector across technology innovation, cost reduction and expanding installations in Europe and Mainland China. This year’s edition highlights offshore wind’s role in the decades ahead, as one of the central planks of the world’s future energy system and a necessary vector in global climate change mitigation efforts.
Offshore wind ambitions are emerging from nearly every region of the world, as policymakers increasingly recognise the sector’s capacity to transform electricity systems and accelerate decarbonisation beyond the power sector. Still, the roadmaps which set out milestones to reach global carbon neutrality and sustain a 1.5°C pathway aim for around 2,000 GW of offshore wind capacity by 2050 – and that means a long way to go from the 35 GW installed as of the end of 2020.
Last year was the second-best year for offshore wind in terms of new installations, with 6.1 GW installed globally, across China (3 GW), the Netherlands (nearly 1.5 GW), Belgium (700 MW) and other European countries. 2020 also saw more offshore turbines spinning in South Korea and the US, as well as more than 16 MW of floating offshore wind capacity that was grid- connected in Portugal.
Looking ahead to 2030, GWEC Market Intelligence is seeing greater promise in the sector compared to its outlook from last year. New annual installations are expected to sail past 20 GW in 2026 and potentially reach 40 GW in 2030. Over 235 GW of new capacity is expected to be added over the next 10 years, bringing total offshore wind capacity by the end of the decade to 270 GW. Two-thirds of these installations will occur in the latter half of the decade.
The complete report can be accessed here