Providing renewable household electricity for a global population of nine billion by 2050 would require half a million offshore wind turbines, a 100-fold increase on the current number, plus the extra capacity to provide electricity for future energy demand.
Since 2010, wind energy has seen sustained growth worldwide, with the amount of power generated by offshore wind increasing by nearly 30 per cent each year. Countries worldwide, especially in Europe and the Far East, are investing heavily in floating offshore wind farms that many see as the ultimate renewable energy source. But are offshore wind farms the Holy Grail of green energy?
Floating offshore wind farms are the most recent development in this field of renewable energy. Today, floating wind farms provide less than one per cent of the world’s electricity supply.
Most existing wind turbines are attached to the seabed by a fixed foundation. These fixed-bottom turbines are limited to water depths of 50 or 60 metres. Wind remains the most common potential source of free energy. Still, 80 per cent of the wind blows uninterrupted further offshore, in water deeper than 60 metres, where turbines embedded in the sea floor are tricky to construct.
So, in the last few years, a few offshore floating wind farm projects have been launched, including the Haywind off Scotland and Windfloat off Portugal. Islands like the Philippines and Jersey are interested in offshore floating wind farm technology. Jersey certainly has no spare unutilised land that it can dedicate to onshore wind farms and knows that offshore wind farms are roughly twice as expensive as land-based ones.
Susan Gourvenec is a British geoscientist, who is a professor of offshore geotechnical engineering and deputy director of the Southampton Marine and Maritime Institute at the University of Southampton. In 2020, in an article sponsored by the World Economic Forum, she summarised some challenges that offshore floating wind farm investment faces.
Developing off-shore projects is capital-intensive... Energy policymakers will do well to be realistic in their expectations of returns
Gourvenec argues: “Unfortunately, while floating wind farms are technically feasible, they are not economically viable. Doing anything offshore is expensive. To build a one-gigawatt fixed-bottom wind farm, the cost of completing the necessary site survey is in the region of £15 million (€16m). Installing and commissioning the farm would be about £650 million (€708m), while the ongoing costs for operation and maintenance would be roughly £75 million (€81m). At the end of its life in about 25 years, another £300 (€324m) is necessary for decommissioning.” These costs could have increased by at least 20 per cent in the last three years due to high inflation.
The offshore wind farms sector faces serious headwinds.
Industry experts warn that without massive incentive-based industrial policies, it will be difficult to deliver the socio-economic benefits the world now expects from the industry. Still, no single nation can go alone in this kind of investment.
Wind farm developers argue that the headwinds faced by their sector are symptomatic of policy and financing environments that are no longer fit for purpose as the world works towards a pathway where wind generates two-fifths of the world’s electricity by 2050.
They also fear that the increasing trend of protectionist policies that isolate domestic markets and the decoupling from China’s supply chain risk delaying the global energy transition. (China remains the leading investor and innovator in offshore wind farm technology.)
Anthony Vassallo is global head of natural resources of Allianz Commercial Insurance. He describes the risks associated with offshore wind farm operations: “Although turbines are engineered to work within certain conditions, risks and challenges to the sector remain, including the known perils and challenges marine environments and extreme weather. There is little technological maturity in new construction methods, operations and turbines and a lack of real-world data concerning their use. This could affect the quality of installations if contractor expertise falls short.”
Vassallo’s arguments make a lot of sense. Orsted is the world’s biggest offshore wind farm developer. It has recently announced that it is trimming its investment and capacity targets. It will also reduce capital expenditure in the coming three years and has plans to exit markets in Norway, Spain and Portugal.
Put simply, developing offshore projects is capital-intensive. Developers sign long-term deals that give them subsidies and set prices for the electricity produced at their projects before construction starts. As costs keep increasing, developers must consider the viability of moving ahead.
Energy policymakers will do well to be realistic in their expectations of returns from wind farms’ energy investment.