The Role of Offshore Wind in the Energy Transition

Offshore wind is a valuable option to provide electricity to densely populated coastal areas in a cost-effective manner, due to its location, high energy output per square metre, and its ability to be built up quickly at gigawatt-scale to deliver large volumes of clean power.

Given its potential, offshore wind is expected to play a key role in the energy transition towards 2050.

During the period from 2010 to 2022, a massive deployment of offshore wind resulted in a twenty-fold increase in installed capacity. The technology improvements and the growing maturity of the industry have resulted in a 59% decline in the weighted-average levelised cost of offshore wind for the period 2010-2022.

According to IRENA’s latest data and analysis, in 2022 global offshore wind capacity grew to 63.2 GW, which is a positive development considering the impact that the COVID-19 pandemic had on sectoral activity.

However, to comply with a 1.5^°C Scenario, the global offshore wind capacity would need to increase to 494 GW by 2030 and 2 465 GW by 2050 – a target that will not be met with the current pace of sectoral development as well as supply chain constraints the industry is experiencing.

It is also important to recognize that offshore wind developments have been concentrated in Europe and China. For a just and inclusive energy transition, other emerging economies must also increase their involvement in exploring offshore wind development.

Global focus now needs to shift towards a level of implementation that is commensurate with this scale of ambition.

For offshore wind to become a true enabler for the energy transition, there is a strong impetus to address the following challenges the industry is experiencing:

– The limited availability of sustainable and large-scale project sites.
– Accelerating permitting processes to speed up project deployment.
– The continued inflation and increased WACC for offshore wind project development.
– Recent contract for difference auctions not reflecting the real cost of projects thereby not resulting in any concrete offers.
– Increased costs across value chain especially those arising from steel sector.
– Prevalence of reliability issues due to bigger and bigger turbine designs.

Key factors hampering the acceleration of permitting protocols include a lack of central authorities, streamlined digital resources, holistic planning and a clear shared understanding of the permitting rules between promoters and permitting entities.

Moving forward, key actions for governments include improving the transparency and predictability of permitting procedures and content. They also include facilitating early and ongoing engagement between approving government entities, developers and stakeholders in order to foster process efficiencies that can lead to timely reviews of successful projects.

Related to permitting, it is necessary to stress that many markets lack the necessary ports and infrastructure to support assembly of large foundations and blades associated with of offshore wind technologies.

When undertaking an analysis on the patent data for offshore wind technologies, it is clear that the most innovative sub-space is floating offshore wind – with an emphasis being placed on foundations and mooring systems. China, USA, Denmark, Germany and Japan are innovative leaders in this space.

To make offshore wind industry more sustainable there is a push towards exploring new design and/or materials that are less resources intensive.

Patent data also reveals that offshore wind has a strong coupling potential with other sectors. Areas being explored include co-energy generation with floating PV and hydrogen production near demand centers.

The fixed-bottom offshore wind installations currently dominate the sector, also due to their cost-competitiveness compared to the floating offshore wind.

However, the floating offshore wind is gaining traction among the industry. It allows for greater access to plentiful wind resources at greater water depths - at least quadruple in magnitude when compared to fixed-bottom wind compared to fixed-bottom wind.

Floating offshore wind promotes greater flexibility regarding high wind speed site selection, while also ensuring low social and environmental impact due to floating offshore wind farms being sited in deep waters. Yet, it is crucial to ensure that environmental impacts on the marine ecosystem are not detrimental to the ecosystem’s overall sustainability, and that the technology can co-exist with the fisheries sector.

Investments in floating offshore wind projects are expected to gain momentum as the technology continues to mature. To facilitate these investments, governments and industry stakeholders will need to support the creation of stable regulatory environments, foster partnerships and continue to catalyse technological innovation.

Offshore wind is projected to account for 40% of total wind energy production in 2050, with floating offshore wind to account for 15% of the total offshore wind energy. Many industry stakeholders have expressed confidence that the floating offshore wind industry will reach full commercialization without any subsidies by 2035. Thus, it is imperative that as many floating wind farms as possible are deployed by 2030.

Hydrogen has diverse applications and, along with its derivatives such as ammonia and methanol, will contribute to an estimated 14% of the final energy demand in 2050, with 94% of this hydrogen being green.

Offshore wind is increasingly being viewed as an innovative avenue for producing hydrogen. The incentives to develop the synergies between these two sectors include: the large capacity factors available offshore; financial incentives due to the economies of scale associated with both offshore wind energy and hydrogen production; many hydrogen end users located in coastal areas already.

Coupling floating offshore wind with H2 production is still a very nascent idea according to industry stakeholders. This can be a future avenue to explore once the floating market reaches maturity as well as techno-economic underpinnings for H2 production offshore are robust.

Offshore wind is expected to play a key role in the energy transition towards 2050 but the current deployment pace must substantially increase to comply with a 1.5^°C Scenario.

Floating offshore wind has a tremendous potential to bring offshore wind power to the forefront of the transition. The industry is at a very nascent stage, which provides a unique opportunity for the international community to work together to make this technology commercially viable as soon as possible.

Some key actions to accelerate floating wind deployment include but not limited to:

– Setting long-term deployment and cost reduction targets for floating offshore wind.
– Organize floating offshore wind capacity building activities with industry leaders.
– Identify viable port sites that can support floating offshore wind deployment.
– Implement standards and certification schemes developed by international organisations.