By Labanya Prakash Jena, Regional Climate Finance Adviser, Indo-Pacific Region, Commonwealth Secretariat; and Prasad Ashok Thakur, Alumnus, IIT Bombay and IIM Ahmedabad
Floating offshore wind turbines are affixed on platforms that are firmly moored to the ocean bed and connected by dynamically suspended cables. As a technology, floating offshore wind (FOW) can be considered supplementary to fixed-seabed wind technology. It deploys fixtures and component configurations that are compatible with conventional systems, including power substations, undersea transmission networks and feed-in infrastructure of the existing grids. The deployment of FOW turbines in open seas involves conventional tugboats, buoys and anchors. These characteristics enable FOW to function in tandem with the existing electrical ecosystems and established component supply chains. The newly given access to deeper waters allows for cherry-picking of offshore wind farm site locations that offer the highest wind speeds while aiming for the lowest possible environmental and socio-economic impacts.
Huge energy generation potential
Unlike other renewable energy sources, offshore wind power has a significant advantage in generating substantial amounts of electricity. The International Energy Agency (IEA) projects that the annual global potential for offshore wind power generation can be over 420,000 TWh, more than sixteen times the global power demand, with the year 2022 as reference. In addition, FOW provides benefits such as more consistent wind patterns, minimal visual impact and greater flexibility in adhering to noise restrictions.
Current status and future trajectory
FOW is at a major turning point, similar to seabed-fixed offshore wind at about a decade ago. Although floating wind technology and pilot projects have existed for over 10 years, the number of FOW turbines in operation as of October 2022 is only around 50. However, this is expected to change, with the global installed capacity of FOW estimated to surpass 5 GW by 2030 and 25 GW by 2035. Additionally, the progress achieved in seabed-fixed offshore wind will accelerate the development of floating offshore wind, similar to how the offshore wind industry evolved from onshore achievements. By then, FOW projects will be designed to harness winds as distant as 300 km from coastlines, at ocean depths of up to 2 km. The large-scale adoption of FOW will enable coastal geographies, often densely populated, to benefit from access to large-scale clean energy. Such an exponential transition will entail innovative approaches to improve technical designs, supply chains and excellence in project implementation spanning construction, operations and maintenance. All these require substantial investment, a policy and regulatory push as well as ecosystem development.
Moving towards cost reduction
One of the key challenges in adopting FOW is its higher cost compared to other renewable energy sources. FOW is expected to become cost competitive with the near-shore fixed-bed wind technology in the medium term. FOW facilities use hardware components that are already deployed in the fixed-bottom offshore wind, shipping, and offshore oil and gas sectors; this compatibility will save additional capital investment in creating new infrastructure exclusively for FOW farms. Other key drivers for cost optimisation are a reduction in turbine costs, floating platforms and opex. Leveraging such advantages is critical, as per the IEA’s Offshore Wind Outlook 2019. It describes a scenario where one in every nine new offshore wind turbines could be a floating one by 2035.
Success of FOW pilots: Giant strides in clean energy
Globally, the number of FOW pilot projects is growing rapidly, especially in advanced countries. In the US, plans are unfolding to tender out FOW sites around northern and central California, followed by the state of Oregon and the Gulf of Maine. These initiatives are envisaged to be a part of the country’s plans for installing 15 GW of FOW by 2035. In the UK, the eastern coast of Scotland hosts two FOW facilities at present. This is in line with the FOW market estimate of 20 GW in the North Sea area in the medium term. Future opportunities are also being explored in England and Wales. The world’s first floating wind turbine in Norway has been operational for about 15 years. The Government of Norway aims to work with the private sector to commission 4.5 GW of FOW in the near future. Across the world, Japan’s Offshore Wind Promotional Law provides a favourable policy framework for FOW auction processes. Accordingly, the country organised the world’s first FOW auction to commission a 16.8 MW farm. In nearby South Korea, six private players have joined hands to fulfil the target of installing 7.5 GW of FOW near the coastal city of Ulsan. As FOW technology grows, it can be the harbinger of energy independence for several regions of the world. It is hoped that, over time, the benefits of FOW will be shared across borders. Simultaneously, it can become a tool to deliver climate justice to least developed countries (LDCs) and Small Island Developing States.
Creating a conducive policy and regulatory environment
It may not be practical to anticipate that floating offshore wind will compete directly with seabed-fixed offshore wind. Renewable energy providers can benefit from feed-in tariffs (FiTs), which offer a reliable and transparent revenue source. FiT reduces the risk for developers that are unsure if they can generate enough revenue to cover the project cost throughout the investment lifetime. Floating wind energy requires substantial investment to progress from commercial demonstration to market maturity, making the revenue stability provided by FiT payments especially advantageous. FiTs can promote investment and reduce technology costs by fostering economies of scale and learning by doing, particularly in these areas. A reverse auction, which considers market development and the falling cost of technology, is the best FiT mechanism. Policymakers open a market for a fixed quantity of FOW and developers bid competitively. This approach avoids administrative price setting, resulting in potentially greater cost efficiency.
It is important to avoid pitting the two technologies, offshore wind and FOW technologies, against each other too early in tenders or seabed auctions, as this could hinder the development of the latter. Instead, introducing floating wind through dedicated tenders or supportive mechanisms until it can compete on equal terms with more established technologies would be better.
The renewable portfolio standard (RPS) is another regulatory mechanism to increase renewable energy production. Since it is technology-neutral, nascent and expensive technologies are out of favour. This crowds out potential new industries, including FOW, and forecloses potential supply chain or soft cost breakthroughs. The alternative is to create a carve-out for FOW. This entails specifying a portion of the overall RPS that must be fulfilled using FOW. RPS can increase the deployment of FOW technology, resulting in a rapid price reduction of the technology.
Long-term certainty is the key for both FiTs and RPS. With FiTs, it is essential to provide a reasonable compensation period for FOW investors, ensuring they receive a fair return on their investments. Similarly, long-term targets should be established under the RPS to allow FOW investors to recover their return on investments.
Need for skill development
The development of floating wind technology will require the acquisition of new skill sets and the establishment of new supply chains, particularly in the design, production, handling and installation of floating foundations, mooring lines and dynamic array cables. With the expected build-out of seabed-fixed offshore wind in the near to mid-term and the rapid expansion of FOW, the market may face a shortage of relevant skill sets and suppliers. Therefore, there is an urgent need to develop the necessary skills. This can be achieved by partnering with engineering colleges and skill training institutions.
In order to maximise the benefits of FOW, it is important to tackle various obstacles. One of these challenges is to establish standardisation and commoditisation of the technology as well as scale up the supply chain to bring down costs. To achieve this, partnerships between public and private entities are necessary. For example, private companies can handle the design, production and development of offshore wind farms while public sector entities can create supportive port infrastructure to evacuate energy.
As FOW evolves to become a bankable solution to the world’s decarbonisation needs, a holistic ecosystem approach can help countries in balancing the needs of diverse stakeholders by empowering them to become a part of the global green energy transition. Strategic competencies must be summoned to integrate FOW into our shared future.