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European offshore wind industry taking off

by Jerome a Paris Mon Jan 18th, 2010 at 07:40:48 AM EST

2009 marks the third year of industrialisation and growth for the nascent offshore wind sector, with a lot more to come:


Source: EWEA - The European offshore wind industry
key trends and statistics 2009
(PDF)
)

With just under 600MW installed in 2009, this is just under 10% of the wind capacity built in Europe in the year, but it's a sign of things to come as 3.5GW are already in construction and another 16GW are fully permitted.

More below. Part of the Wind power series.
Note: a version with a few additional comments on the US has been posted on DailyKos


The UK is currently the country with the most offshore wind capacity; in coming years the country and Germany will be the top two markets for offshore, with plans of more than 20GW each in the next decade or so.

Note that roughly 90% of all offshore turbines installed so far have been manufactured in Denmark, and while Germany is the home of several new ambitious manufacturers (Repower, Multibrid, BARD), the two Danish incumbents (Vestas & Siemens) are likely to keep on dominating the market for some time to come. This was a €1.5 billion industry last year, it will double this year, and triple again in the next few years...

There are two key issues to solve to ensure that the massive plans under way do happen in full:

  • getting the grid connections in place. The regulatory framework for national connections has largely been put in place (for instance, in Germany, it is the responsibility by law of the grid operators to provide access to the grid to offshore projects) and discussions are under way to set up intra-European connections across the North Sea. Investment is exepcted to take place in parallel to that in the wind farms themselves; domestic networks are also being strengthened to absorb the new generation capacity, which is largely concentrated in one region;

    While the technical challenages are real (but solvable), it must be noted that the various European countries have largely put in place a framework for the industry which works and will work into the future - all under the coordination of the EU, which has taken a leading role there. This is a good exemple of the EU regulatory powers at work for the good of all, here.

  • financing such investments. The plans will require growing investments, reaching roughly ten billion euros per year in a few years. While this is largely a utility play, ie the investments will be made by companies with strong balance sheets and with a solid capacity to invest, the amounts are so large that external financing will likely be required. That market is barely emerging, both on the debt side (which is what I do) and on the equity side (with new players like funds and a few independent developers to invest alongside experienced utility owners) and a lot of work is going to be needed.

    As I wrote the bit in the report on financing, let me quote myself...

    Positive financial trends were evident in the second half of 2009 with the Belwind and Boreas transactions, which involved different sponsors, technologies, bank groups and authorities. By creating two high-profile precedents for the sector and bringing about the involvement of many new banks, they opened the door to more deals in the future. The presence of the European Investment Bank (EIB) in the Belwind financing is also likely to be a crucial precedent for the multilateral institution as it builds up its investment in the sector.

    (...)

    The offshore wind industry was also buoyed during 2009 by the European Union’s European Economic Recovery Plan which injected €255 million of the €565 million directed towards offshore wind into five separate offshore wind farms (...) This stimulus injection was vital, and it remains crucial that this financing is released as soon as feasible and that the Commission’s review in 2010 of the European Economic Recovery Plan, or any further stimulus package, continues to target the offshore wind industry as a strategic European sector.

    To ensure that the market growth expected for 2010 is not blown off course the European institutions, particularly the EIB, must continue to increase their involvement in the offshore wind industry.

    More generally, banks must be given continued comfort that stable regulatory – and in particular revenue – regimes will be in place over the long term, and that connection to the grid is guaranteed to offshore wind projects.

    Given the continued worries in the banking world about long term liquidity availability, European institutions should consider structures to provide dedicated low-cost funding to banks active in the offshore wind sector. Such a mechanism would have the additional advantage of bringing the overall cost of offshore wind down.

    I'm especially happy that the last sentence was included in the EWEA report as it means that the concept of cost of funding - and the advantage of the public sector in that respect - is beginning to get a hearing...

Along with these two issues, the big thing now is going to be to industrialize the sector, ie ensure economies of scale by replicating processes as much as possible, both during construction and during long term maintenance. The good thing is that Europe has now attained a critical mass of projects in the water, and reached a good level of experience. There are enough projects around to justify the investment in ad hoc vessels, harbor facilities, turbine factories, personnel training, and to ensure that construction takes place as efficiently as possible (given the inevitable weather uncertainty on site). There is now enough operational data - at least on some turbine models - to streamline and optimize maintenance procedures and reduce the number or at least the complexity of interventions at sea, and reduce their cost by replication over large fleets. The hope is that costs can be driven down significantly through that learning and expansion process. And it's good industrial policy - not much of that work can be offshorised outside of Europe, that is...

Oh, yes: you can call me a wind shill!

Display:
I've always wanted to inquire (but was afraid to ask?), but your Fig. 3.2 makes it quite clear:

Among all the European countries, one is conspicuously absent of the offshore wind lineup, although it's one of the largest countries (pop. above 60 M) and can boast of thousand of kilometers worth of coastline, on the Atlantic as well as the Mediterranean side (and no, I'm not talking about Spain).

What's wrong in the picture? I know that wind shills are not supposed to be prophets in their own country, but this is getting embarrassing...

by Bernard on Mon Jan 18th, 2010 at 08:19:35 AM EST
Even the project announced as "under construction" is nowhere near that status, actually. There was a tender in 2004, which gave silly results (government refusing the tariffs asked by developers, which were lower than what Germany and UK offer today), and no movement since.

The technostructure does not focus on wind, and there is a lot of anti-wind lobbying by senior people (Giscard, Boiteux, Bébéar, etc...). Sarkozy has expressed his hostility, so préfets put their foot on the brake whenever permits are required.

Generally, too many people in France are exclusively focused on nuclear - and not just as a solution for France, but as an export industry to the rest of the world.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 08:44:09 AM EST
[ Parent ]
One point ot note is that while France has an excellent wind resource, the offshore bit will not necessarily be as easy as elsewhere, because the seas (other than in the Channel) around France get deeper a lot faster than in the North Sea.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 08:45:17 AM EST
[ Parent ]
Is that true of the Mediterranean as well (though clearly the wind resource in the Mediterranean pales in comparison with that in the Atlantic).

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Jan 18th, 2010 at 08:48:56 AM EST
[ Parent ]
nresources are obviously not relevant to be represented on the main offshore wind map...

http://www.wind-eole.com/fileadmin/user_upload/Downloads/Offshore/European_Offshore_Wind_Map_2009.pd f (larg-ish pdf)

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 09:29:09 AM EST
[ Parent ]
Actually, ther wind resource is rather good in the French Mediteranean:



In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 09:32:55 AM EST
[ Parent ]
Yes, but the ocean floor doesn't help. On the Atlantic it would, though.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Jan 18th, 2010 at 09:37:22 AM EST
[ Parent ]
That would be thanks to the Mistral and Tramontane.
I have lived near Marseille a couple of years back: it is a windy country.
by Bernard on Mon Jan 18th, 2010 at 12:06:31 PM EST
[ Parent ]
I did too, and it makes me wonder if there is such a thing for this as too much windstrength.

When it blows hard, I can't imagine a 80km/h windgust is exploitable. But, maybe it s...

by redstar on Mon Jan 18th, 2010 at 04:16:15 PM EST
[ Parent ]
The wind resource is great. The difficulty onshore is to find locations that don't disturb people, and offshore to find somewhere not too deep and not to close to shore.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 04:30:19 PM EST
[ Parent ]
In fact it looks like the French Atlantic coast should support offshore wind just like the North Sea, unlike the Mediterranean basis or, curiously, the Iberian Peninsula's Atlantic coast.

(source: US Geological Service bathymetry map for Europe)

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Mon Jan 18th, 2010 at 09:34:51 AM EST
[ Parent ]
I'm still looking for a better map, because there's a rather big difference for offshore wind between 20-40m depths and 50-100m depths...

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 09:55:38 AM EST
[ Parent ]
Google is my friend. Let's see...

From ifremer.fr:
*Morpho-bathymétrie de la Méditerranée Occidentale


*North-East Atlantic

From PlanetaryVisions.com.

From JustMagic.com: Google Ocean - LOL

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Mon Jan 18th, 2010 at 10:09:31 AM EST
[ Parent ]
That's still a 100m resolution.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jan 18th, 2010 at 10:18:38 AM EST
[ Parent ]
I think that's it for quick google searches for public domain data. I don't know whether this is any better.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
by Migeru (migeru at eurotrib dot com) on Mon Jan 18th, 2010 at 10:21:15 AM EST
[ Parent ]
Here is a 10m-resolution map of the Mediterranean coast of France. Doesn't seem good: a rather steady fall to about 100m depth right from the shore, no plateaus higher than -100m. So off-shore wind would be possible only in the nearest band beyond the shore.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Jan 18th, 2010 at 01:51:56 PM EST
[ Parent ]
This map is a perfect example of why offshore wind is such a good fit for the North and Baltic Seas.  The largest pool table in the world.

While the US has three very long coasts, much of it is similar to this section of France, and is the reason why current offshore wind may be limited there.  The difference is the US has a Saudi Arabia worth of undeveloped onshore, even if that entails significant transmission cabling and costs.

Another possibility looms in the near future.  Floating designs are already being tested, and more are on the drawing boards.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Jan 18th, 2010 at 02:17:53 PM EST
[ Parent ]
Crazy Horse:
Another possibility looms in the near future.  Floating designs are already being tested, and more are on the drawing boards.

Could these floating designs also incorporate wavebob technology to create combined wind and wave power generators?

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 18th, 2010 at 02:59:11 PM EST
[ Parent ]
I'm not familiar with this technology, even after checking the website, but it's doubtful it would be used on a stationary or floating foundation, as the wind turbines need to remain relatively stable.  A site electrical grid could possible be used together, if the power is compatible.

What an involved way of saying i don't really know.  But the reasons for doubt must be addressed.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Jan 18th, 2010 at 03:33:03 PM EST
[ Parent ]
The submarine canyons visible on that map are magnificently displayed - a perfect example to show that rivers don't always stop at the shore.
by Nomad on Mon Jan 18th, 2010 at 04:23:37 PM EST
[ Parent ]
Isn't that particularly the case in the Meditterannea where the shore was much, much farther a few millions years ago ? Those canyons were dug by rivers before the shore, if I remember correctly.

Un roi sans divertissement est un homme plein de misères
by linca (antonin POINT lucas AROBASE gmail.com) on Tue Jan 19th, 2010 at 03:23:24 AM EST
[ Parent ]
It's indeed thought that many of the dramatic Meditteranean submarine canyons were largely shaped through intensified river erosion, because of the Messinian salinity crisis, some 5-6 million years ago - whereas the erosional forces of rivers are thought not to have been as dramatic for the rest of the world.
by Nomad on Tue Jan 19th, 2010 at 03:50:42 AM EST
[ Parent ]
And purely on economic grounds, they are correct to reject it - Offshore wind is a lot more expensive to build than on-shore wind, and the increased capacity factors do not, at the current state of the art, make up for this. Which means, that for a country willing to build new nuclear capacity, any ventures into offshore wind would plain and simply cost to much.  Never mind anything else, the price per kwh is just too high. It will likely come down, but whether it will come down faster than on-shore wind (unlikely), or hell, nuclear (well, I expect the price on reactors to come down. I have trouble convincing people of this) is an open question.
by Thomas on Mon Jan 18th, 2010 at 07:26:34 PM EST
[ Parent ]
French accounting for nuclear costs is, creative.
by rootless2 on Mon Jan 18th, 2010 at 09:21:08 PM EST
[ Parent ]
That market is barely emerging, both on the debt side (which is what I do) and on the equity side (with new players like funds and a few independent developers to invest alongside experienced utility owners) and a lot of work is going to be needed.

I've always felt that wind/nuclear should be an excellent investment for pension funds. Any chance of that? Or is the inherent (necessary) conservatism of that business stild a road block?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Jan 18th, 2010 at 09:47:14 AM EST
Onshore is a quasi-commoditized business where funds accept single-digit returns - which means pension funds rather than private equity or hdge funds.

Ofshore is a bit more racy, but give nthat returns are lowish, it's going to attract the same kinds of investors, once they are convinced that the risk profile is okay.

TCW took 50% of the Centrica Boreas portfolio, paying £84M for 50% of the 220MW mainly offshore wind portfolio.


In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 09:54:31 AM EST
[ Parent ]
What about pension funds taking equity positions by using convertible bonds?

The projects gets access to cheap capital, and the original equity inivestors don't really care if the loan is converted into a sizable share ownership for the fund 10-15 years down the line, as their high demanded rate of return discounts profits 15 year into the future into almost nothing. Or is there some hole in my logic here?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Jan 18th, 2010 at 10:19:16 AM EST
[ Parent ]
accept single-digit returns
No serious stock market investor really expects a long term double digit real return...

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Mon Jan 18th, 2010 at 10:21:59 AM EST
[ Parent ]
No serious stock market investor really expects a long term double digit real return

That's why the hedge-fund industry has not been a booming sector over the past decade.

En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma

by Migeru (migeru at eurotrib dot com) on Mon Jan 18th, 2010 at 10:30:54 AM EST
[ Parent ]
When one works in this field, focused on that week's trees, one tends to miss the forrest.  This EWEA document sums up the tremendous achievement the industry is making.  That Jérôme played such a pioneering role in independent finance of key projects, as well as in bringing new players to the table should not be underestimated.

I'd like to underscore the importance of two of his points.  Cost of finance plays a significant role in determining long-term cost of energy from any plant, and as offshore projects need be large enough to capture economies of scale wherever they can be found, financing costs are even more important here than onshore.

He's written here before of the benefits of public and quasi-public methods of finance to large infrastructure projects; offshore wind is one ultimate example.  That EWEA included the idea in the financing section of the report is telling, especially given J's statement that even large utility players can not finance the entire growth of the industry themselves.

Speculation perhaps, but i'd bet he also played a role in making the EIB comfortable with the industry.  

Another key point highlighted here is that of the infrastructure issues, from construction (laydown yards and harbors, steel and concrete builds, shipping and transport) and installation, down thru the entire creation of a supply chain building components and materials on a scale hitherto not achieved, on out thru the operation and maintenance years.  (Anyone thinking of a career?)

This activity is what creates the economic driver that offshore windpower is and will be more in the near future for much of northern Europe.  And here's a little known fact underscoring the importance of the industry's infrastructure.  When comparing US and European wind turbines and adjusting for wind difference, the performance of US turbines are down several percent and more against the same turbines in Europe.

Such effect is almost entirely the result of Europe having a more developed infrastructure: more complete spare parts depots, less distance, and most importantly, more trained service engineers and technicians.  Bottom line: Less downtime.  If that's true onshore, it is doubly true offshore.  This infrastructure is just reaching adolescence, one can see that increased focus must continue on the technical and financial steps which mature this key portion of the industry.

Offshore turbines are a new breed of technology, on a scale not yet seen before.  It will be some time before the industry reaches the performance standards of the onshore industry.  What's perhaps most profound about such efforts are the thousands of engineers and business persons working to make it happen.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon Jan 18th, 2010 at 02:07:21 PM EST
I'm sure there are other diaries which answer this, but I'm still missing the big picture of the projected % contribution of wind (on and off-shore) to overall European electricity production over the next (say) 20 years given projected rates of expansion - of wind, other, total supply and total demand.

Is there a danger that the industry over-sizes and comes up with persistent problems in optimising the wind component of the overall power mix.  What is the expected maximum % wind component of wind (capacity and production) that is integrable into the overall power mix without leading to power loss on calm days?  How much excess capacity needs to be build in and - at the margins - how will this be funded.  

E.g. could wind supply (say) 30% electricity production on a pan European basis before excess capacity becomes uneconomic?

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jan 18th, 2010 at 02:53:39 PM EST
wind is at around 4-5% of total electricity production in Europe (20-25% in Denmark, above 10% in Portugal, Ireland, Spain, close to that in Germany). The goal is to get in to around 20-30% of electricity generation overall, which will mean close to 40% in some countries.

The technical solutions to wind integration are known - it mainly involves reinforcing the grid to link the wind-producing regions to the rest of the network, and introducing more intermittency management tools in the system.

Spain regularly deals with more than 50% of its electricity coming from wind; it has also dealt with that proportion falling brutally from 50% to very little in a short period (because winds were too strong and triggered the safety cutoff speed of turbines).

The capacity to deal with periods of low winds already exists - it is the current system, which will simply be used less when the wind blows. There's a hell of a lot of hydro and gas in the system, and these work fine to step in when wind is absent.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 04:36:57 PM EST
[ Parent ]
There are regions within Spain (Galicia is dominant) and Germany (North Sea coast, East German lowlands) with wind penetration at the level or higher than in Denmark. This is from the German Federal Wind Energy Association's H1/2009 data (pdf!):

This is a bit skewed, though, as the three city-states get much of their electricity from neighbours, which happen to be the top five.

(But Schleswig-Holstein, Niedersachsen = Lower Saxony, Mecklenburg-Vorpommern are the three states to get further significant boost from off-shore.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Jan 19th, 2010 at 03:55:51 AM EST
[ Parent ]
I never would've guessed the UK would be that far ahead....and Denmark, wow. I'd think Germany (though true, not so much coastline, and it looks as though the'll soon be in front anyway) and the Netherlands (fly over one of their big offshore farms every time out of schiphol) would be out front.

Question on the first graph...what happened in 2003 to the cumul?

Cheers...

by redstar on Mon Jan 18th, 2010 at 04:12:19 PM EST
The UK has, by far, the best wind resource in Europe, which is still largely under-utilised. Denmark has had an early start thanks to a focused energy policy (and, offshore, thanks to very low depth waters near its shores)

The graph is indeed erroneous for year 2003...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Mon Jan 18th, 2010 at 04:38:33 PM EST
[ Parent ]


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