Describing the potential of a US$1Trn market, the IEA said offshore wind’s potential is actually far greater than that, should the market follow a ‘sustainable development scenario’ which outlines a path to meeting global climate, air quality and universal energy access goals. In this scenario, offshore wind not only helps to put the global power sector on track for full decarbonisation, it also becomes the leading source of electricity in Europe and enables hydrogen to dramatically cut emissions from sectors such as iron, steel and shipping.
To assess offshore wind’s global potential, the IEA collaborated with Imperial College London to undertake a geospatial analysis of the sector. Using the latest satellite data, the project mapped out in detail the speed and quality of wind along hundreds of thousands of kilometres of coastline around the world.
“Some may question why I decided to devote so much of the IEA’s time and effort to this report on offshore wind, a technology that today supplies just 0.3% of global power generation,” said Dr Fatih Birol, the IEA’s executive director. “The reason is that its potential is near limitless. Improved technology and steep cost reductions are putting more and more of that potential within our reach. But much work remains to be done for offshore wind to help decarbonise electricity and, through the production of hydrogen, possibly other sectors as well. That work includes putting in place policies to promote investment and spur innovation. I hope this report helps governments make those smart policy choices for the future development of this powerful emerging technology.”
In a webinar organised by the IEA to discuss the findings of the report, IEA chief energy modeller Laura Cozzi said the global impact of offshore wind could be as profound as other major energy innovations in the last decade that have revolutionised markets, such as solar PV and shale.
Dr Birol reiterated her remarks, saying “In the past decade, two major areas of technological innovation have been game-changers in the energy system by substantially driving down costs: the shale revolution and the rise of solar PV. Offshore wind has the potential to join their ranks in terms of steep cost reduction.”
The authors of the report stated that the best offshore wind sites could supply more than the total amount of electricity consumed worldwide today, and that would involve tapping only the sites close to shores. They found that offshore wind’s technical potential is 36,000 TWh per year for installations in water depths of less than 60 m and 60 km from shore. Global electricity demand is currently 23,000 TWh.
“Moving further from shore and into deeper waters, floating turbines could unlock enough potential to meet the world’s total electricity demand 11 times over in 2040,” said the IEA. “Our new geospatial analysis indicates that offshore wind alone could meet several times electricity demand in a number of countries, including in Europe, the US and Japan.
“New offshore wind projects have capacity factors of 40-50%, as larger turbines and other technology improvements are helping to make the most of available wind resources. At these levels, offshore wind matches the capacity factors of gas- and coal-fired power plants in some regions – though offshore wind is not available at all times. Its capacity factors exceed those of onshore wind and are about double those of solar PV.”
The report noted that offshore wind output varies according to the strength of the wind, but its hourly variability is lower than that of solar PV. Offshore wind typically fluctuates within a narrower band, up to 20% from hour to hour, than solar PV, which varies up to 40%.
“The high capacity factor and lower variability of offshore wind make its system value comparable to baseload technologies, placing it in a category of its own – a variable baseload technology. Offshore wind can generate electricity during all hours of the day and tends to produce more electricity in winter months in Europe, the US and China, as well as during the monsoon season in India. These characteristics mean that offshore wind’s system value is generally higher than that of its onshore counterpart and more stable over time than that of solar PV. Offshore wind also contributes to electricity security, and with its high availability and seasonality patterns it is able to make a stronger contribution to system needs than other variable renewables. In doing so, offshore wind contributes to reducing CO2 and air pollutant emissions while also lowering the need for investment in dispatchable power plants. Offshore wind also has the advantage of avoiding many land use and social acceptance issues that other variable renewables are facing.”
Low cost financing and declining technology costs will see the levelised cost of electricity produced by offshore wind decline by nearly 60% by 2040, the IEA believes. Combined with its relatively high value to the system, this will make offshore wind one of the most competitive sources of electricity. The average upfront cost to build a 1 GW offshore wind project, including transmission, was more than US$4Bn in 2018, but the cost is set to drop by more than 40% over the next decade. This overall decline is driven by a 60% reduction in the costs of turbines, foundations and their installation. Transmission accounts for around one-quarter of total offshore wind costs today, but its share in total costs is set to increase to about one-half as new projects move further from shore. As a result, said the report, innovation in transmission, for example through work to expand the limits of direct current technology, will be essential to support new projects without raising their overall costs.
The IEA anticipates that under current investment plans and policies, the global offshore wind market is set to expand by 13% per year, passing 20 GW of additions per year by 2030. This will require capital spending of US$840Bn over the next two decades, almost matching that for natural gas-fired or coal-fired capacity. Achieving global climate and sustainability goals would require faster growth: capacity additions would need to approach 40 GW per year in the 2030s, pushing cumulative investment to over US$1.2Trn.
“Offshore wind can help drive energy transitions by decarbonising electricity and by producing low-carbon fuels. Over the next two decades, its expansion could avoid between 5Bn and 7Bn tonnes of CO2 emissions from the power sector globally, while also reducing air pollution and enhancing energy security by reducing reliance on imported fuels,” the report said, noting that the European Union is poised to continue leading the offshore wind industry in support of its climate goals: its offshore wind capacity is set to increase by at least fourfold by 2030, growth that puts offshore wind on track to become the European Union’s largest source of electricity in the 2040s.
Beyond electricity, offshore wind’s high capacity factors and falling costs makes it a good match to produce low-carbon hydrogen (or ’green hydrogen’ as it has become known), a versatile product that could help decarbonise the building sector and some of the hardest to abate activities in industry and transport.
A 1-GW offshore wind project could produce enough low-carbon hydrogen to heat about 250,000 homes, according to the report, and rising demand for low-carbon hydrogen could also dramatically increase the market potential for offshore wind with Europe looking to develop offshore ‘hubs’ for the production of electricity and clean hydrogen from offshore wind.
Offshore wind can also improve energy security in regions that rely on imported fuels for power generation by enhancing self-sufficiency and energy affordability. A 1-GW offshore windfarm could replace 0.8Bn m3 of gas imports to produce the same amount of electricity in an efficient gas-fired power plant. At average spot prices for liquefied natural gas in 2018, such an offshore wind project would reduce annual import fuel bills by over US$300M in Japan and US$220M in Europe.
“The competitiveness of offshore wind enables low-carbon electricity and hydrogen to be produced at a cost lower than otherwise would be possible,” the report concludes. “Both of these are critical to the achievement of environmental goals. Without the development of offshore wind, efforts to decarbonise electricity in the EU, China and US would need to depend more heavily on onshore wind and solar PV. Overall, offshore wind makes energy transitions more affordable, limits the challenges of rising flexibility needs and could, ultimately, accelerate progress towards decarbonisation.”