LONDON, May 2, 2024
/PRNewswire/ -- The latest insights briefing from the
Energy Transitions Commission, Overcoming Turbulence in the
Offshore Wind Sector, highlights the need for governments and
the offshore wind industry to join forces to restore confidence in
the market, drive down costs and accelerate the clean energy
transition. The ETC's membership includes offshore wind industry
players: bp, Iberdrola, Octopus Energy, Petronas, Shell, SSE, and
Vattenfall.
Offshore wind is already delivering large-scale clean
electricity at a competitive cost around the world. In Western Europe, costs fell 60% between
2015-2022. Installations are growing rapidly. From 2015 to 2023,
global capacity has expanded sixfold from 12 to 74 GW, already
producing energy for around 90 million households, and with
vast potential to scale further.
But in 2022-2023, inflation, supply chain bottlenecks, and
higher interest rates led to rising offshore wind costs in some
markets. A perceived offshore wind "crisis" ensued, in the UK and
US markets in particular, as many projects and contracts were
cancelled.
While increases were significant, they're mostly expected to be
short-term. Costs in Western markets are already coming back down
as most drivers were temporary in nature (e.g., supply chain
bottlenecks due to COVID, a 200% increase in steel costs), although
the increase in cost of finance may remain over the medium term.
Meanwhile, technological progress and large-scale production drove
consistent cost reductions in China over the same period, illustrating that
offshore wind can be even cheaper and more competitive in the
future.
"Offshore wind is vital for the clean energy transition. It
can generate electricity when the sun isn't shining and doesn't
compete for land use. Now is a critical period to rapidly
accelerate wind capacity if the world is to achieve net-zero
emissions by mid-century. Governments should act now to restore
market confidence by setting ambitious offshore wind targets and
design auctions and contracts which provide market certainty and
drive costs down."
– Adair Turner, Chair, Energy
Transitions Commission
Estimates from the International Energy Agency (IEA) suggest
that offshore wind has the potential to generate more than 420,000
TWh per year worldwide, equivalent to 14 times today's global
electricity generation. To achieve a net-zero economy built on
clean electricity, annual wind generation needs to grow tenfold
from 2,000 TWh in 2022 to over 20,000 TWh by 2050. This will be
complemented by a thirtyfold growth of solar capacity from 1,000
TWh in 2022 to ~30,000 TWh by 2050.
However, most countries are not on track to install sufficient
offshore wind capacity by 2030 to align with a net-zero emission
trajectory.
"The energy system of the future will depend on clean, secure
and cost-competitive electricity and this report shows the critical
role offshore wind has to play. But to fully realise the
technology's potential, policymakers, system operators, regulators
and the industry need to re-focus on scaling up the sector's
capacity. Those that move fastest will unlock significant and
lasting economic benefits."
– Alistair Phillips-Davies, CEO,
SSE
Government and industry collaboration can relaunch confidence
and drive costs down
Governments and industry must closely collaborate to relaunch
confidence in offshore wind markets and bring down costs. To be on
track to install the capacity required for the transition to clean
electricity, the ETC recommends governments should:
- Set ambitious targets and predefined auction schedules, which
ensure large-scale volumes are committed and delivered year by
year.
- Design auctions and government-backed contracts to reduce the
risks of non-delivery. Changes should
include inflation-indexation to reduce developer risks and
greater penalties for withdrawing from contracts to reduce
contracts being treated as options. Governments must accept paying
somewhat higher prices to remove this optionality.
- Streamline planning, permitting and grid connection processes
while also reinforcing the grid to reduce waiting times for
offshore wind to connect.
- Ensure that wind turbine and component production can achieve
economies of scale-based cost reductions by
encouraging harmonisation of turbine components and
sizes.
- Address specific supply chain bottlenecks through, for example,
guarantees and subsidies for new installation vessels to carry
larger turbines; and balancing the desire to encourage local supply
chain content with the need to achieve high production volumes on a
multi-country/regional level.
"This briefing from ETC reinforces the reality that, despite
blips in the UK and US last year, the offshore wind industry is on
a fundamental global growth trajectory. As the briefing notes,
offshore wind has seen huge cost reductions and is cost competitive
with gas power. It's no wonder that governments in every continent
are recognising the increasing role that offshore wind plays in
keeping the lights on, and providing large scale, cost competitive
energy."
– Rebecca Williams, Chief Strategy
Officer - Offshore Wind, GWEC
"Offshore wind power is a key technology in the energy
transition. Around the world we see governments and policymakers
keen to add offshore capacity to help them on their decarbonisation
journeys. This is because the offshore wind sector is creating
industrial growth opportunities, and supporting jobs, while
contributing to the energy security and reducing emissions in the
energy system."
– Agustín Delgado, Chief Innovation and Sustainability Officer,
Iberdrola
Overcoming Turbulence in the Offshore Wind
Sector has been developed in collaboration with ETC
members from across industry, financial institutions, and
environmental advocacy. The ETC is a global coalition of leaders
from across the energy landscape committed to achieving net-zero
emissions by mid-century whose members include Arup, bp, HSBC,
Iberdrola, National Grid, Octopus Energy, Petronas, Shell, SSE,
Rabobank, Vattenfall, We Mean Business, and World Resources
Institute.
This report was developed in consultation with ETC Members, but
it should not be taken as members agreeing with every finding or
recommendation.
To access the report, please
visit: https://www.energy-transitions.org/publications/overcoming-turbulence-in-the-offshore-wind-sector/.
Notes to editors:
For further information on the ETC, please visit:
https://www.energy-transitions.org.
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SOURCE Energy Transitions Commission