Comparative Analysis of International Offshore Wind Energy Development
The new IEA-RETD report REWind Offshore highlights the importance of effective policy in stimulating deployment and driving cost reduction in the offshore wind sector. Following a year of record breaking auction prices in the Netherlands and Denmark, the study identifies the key success factors that have supported a burgeoning industry in Europe, drawing lessons learned for both policy makers and industry players.
The report, delivered through a collaboration between the Carbon Trust, Mott MacDonald, and Green Giraffe, projects that global offshore wind capacity is set to increase threefold in the period from 2015 to 2020, marking a period of industry maturation as costs fall and new offshore wind markets emerge, both within and beyond Europe. Cost reduction of 60% from 2010 to 2017 indicates that industry targets for 2025 have been exceeded 8 years ahead of schedule, suggesting that offshore wind could potentially be fully integrated into the market on a competitive basis in some European countries within the next decade. However, the report suggests that a more cautionary approach is expected in new markets with less established industry structures, such as the United States and East Asia.
Analysis of the evolution of regulatory frameworks identifies several examples of best practice, underpinned by the need for political stability and visibility of market scale and support mechanisms. Notable recent policy trends include the introduction of competitive auctions and centralised development models, in which government bodies take on a greater role in the development process.
These trends are seen to be having a considerable impact on the risk profile for developers, with increased allocation and price risk countered by reduced development and technical risk. In combination, this is resulting in lower perceived risks from the finance community due to growing confidence in the ability of developers and the supply chain, with offshore wind increasingly considered an attractive investment opportunity for a more diverse range of actors.
Recommendations for policymakers and industry players include:
- Governments should re-evaluate their offshore wind ambitions in light of accelerated cost reduction
- Governments should consider implementing near-term roadmaps to hedge against long-term uncertainty
- Competitive auctions can drive down costs, but should be accompanied by government de-risking activities
- Governments and industry players should continue investing in technology innovation to achieve long-term cost reduction
- Industry players should embrace collaboration to share the cost and risk of delivering large-scale projects and undertaking R&D activities
- Industry players should engage more with the public to highlight successes and improve the public perception of the offshore wind industry
You can download the full report and presentation on this page.