The need for integrated thinking

3 September 2018

The IEA’s recently published Offshore Energy Outlook explores the changing dynamics that will determine offshore energy activity in different scenarios to 2040.

Policy support, a maturing supply chain and technology developments promise major cost reductions for the next wave of offshore wind projects. A new report, part of the International Energy Agency’s World Energy Outlook series, explores what these changing dynamics might mean for offshore energy activity in different scenarios and highlights the potential for greater integration and collaboration across different parts of the offshore energy sector.

Offshore wind is becoming an increasingly viable option for renewables-based electricity generation, harnessing the more consistent and higher wind speeds available at sea. Investment has picked up sharply in recent years and, with fewer restrictions on size and height than their onshore counterparts, offshore wind turbines are becoming giants. The height of commercially available turbines has increased from just over 100 metres in 2010, capable of producing 3 MW, to more than 200 metres in 2016 (8 MW), and a 12 MW turbine design now under development is 260 metres high. Installations are also moving further from shore, tapping better quality wind resources and pushing up capacity factors. Aside from lowering the cost of the electricity produced, these improvements in performance also ease the challenge of integrating offshore output into electricity grids.

The first projects using floating wind turbines are also now entering into operation, based on concepts widely deployed in the offshore oil and gas sector; cost-competitive floating technologies would widen the economic resource base for offshore electricity generation considerably. However, a significant research and investment push is still needed to move some of the nascent offshore technologies into the mainstream.

Future competitiveness

The promise of cost-competitive offshore wind in Europe’s North Sea could spark a virtuous circle of accelerated deployment and technology learning elsewhere, but there are still uncertainties over future competitiveness. The costs of offshore wind projects commissioned in 2016 vary widely, but on average are 150% higher than onshore wind and more than 50% higher than utility-scale solar photovoltaic projects. However, the results of recent auctions in Europe suggests a step change in costs for some new projects scheduled to enter into operation in the early 2020s; these include some bids that did not require any price guarantees at all, albeit at favourable conditions with the cost of grid connection taken by the transmission system operator.

Such a dramatic improvement in costs, if realised in practice, would provide a powerful stimulus for policy support and investment elsewhere in the world. This would be essential to bring offshore wind deployment beyond the levels seen in the IEA’s main scenario, in which the rise from 14 GW of capacity to 160 GW is concentrated in Europe and China, to those in its Sustainable Development scenario where the increase to 350 GW is supported by many other regions and countries. In the latter scenario, in which the power sector is almost completely decarbonised by 2040, more rapid electrification of end-users and/ or any limitations on onshore deployment – for example, due to public opposition, or to new hydropower projects – would improve the prospects for offshore developments. 

Integrated thinking

The growth of offshore wind creates potential synergies with the offshore hydrocarbons sector; integration could bring benefits in terms of reduced costs, improved environmental performance and utilisation of infrastructure. The links between the offshore industries are in three major areas:

1. The overlapping competencies required to build and maintain offshore projects and to operate in harsh marine environments. IEA estimates that around one-third of the full lifetime costs of an offshore wind project (including O&M and service costs) may have significant synergies with the oil and gas supply chain.

2. The possibility to electrify offshore oil and gas operations where there are wind farms nearby, or via floating turbines, reducing the need to run diesel or gas-fired generators on the platform and reducing emissions of CO2 and air pollutants.

3. The scope for new uses for the existing infrastructure at the end of its operational life, in ways that might aid energy transitions: for example, platforms could provide offshore bases for maintenance of wind farms, house facilities to convert power to hydrogen or ammonia or inject CO2 into depleted fields.

The North Sea, a relatively mature oil and gas basin with a thriving renewable electricity industry, is already seeing some crossover among the sectors: some oil and gas companies are major players in offshore wind; one former such company, Ørsted in Denmark, has moved entirely to wind and other renewables. As its energy profile changes, the North Sea is also likely to be the laboratory that tests the technical and commercial validity of the other, longer term concepts for collaboration. However, the need for integrated thinking extends beyond the energy sector to encompass shipping, port infrastructure and all aspects of the marine environment. 

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