Market Potential

This subchapter complements the social and economic rationale for floating offshore wind presented above by outlining the vast potential for large-scale floating wind deployment. After a brief overview of the market potential around the world, this subsection evaluates the prospective of floating wind in four countries. These markets have been selected for in-depth research because they offer very favourable conditions for floating offshore wind development, have already installed a floating demonstrator or are in the process of developing either prototypes or pre-commercial demonstration projects. Assessing a jurisdiction’s wind potential is also a vital first step in designing policies and strategies for offshore wind (Adelaja, et al., 2012) and this section therein serves as an important step in understanding the various funding mechanisms later on in the thesis. Importantly, the assessment of the markets with the most prominent wind potential will later inform our choice of jurisdiction-specific funding mechanisms that are applied to our model floating offshore wind farm.

The global market potential for wind power is significant. Literature indicates that the wind energy potential in deep waters around the world could provide the world with more electricity than there is currently demand for (Timilsina et al., 2013). The global potential of floating wind energy amounts to 7 TW (Snieckus, 2015a). With 3.4 GW of these expected to be grid-connected by 2030, Snieckus (2015a) speaks of the

floating industry currently being on the verge of making a “great leap forward into industrial reality”. It may therefore be argued that the floating wind industry could indeed become a “truly global market” (ORE Catapult, 2015b, p.5).

Concept development, research activities and pilot project funding is no longer limited to Europe. Currently, the US Department of Energy and the Japanese Ministry of Trade and Industry (MITI) are the most prominent non-European examples of governmental bodies that support the development of floating technology (DNV, 2012).

Potential in Europe

In Europe, the United Kingdom, France, Norway and Portugal offer great conditions for the application of floating offshore wind constructions. The offshore wind resource in the North Sea alone could produce energy that would meet the EU’s present-day electricity consumption more than four times over (Arapogianni and Genachte, 2013). Further suitable areas can be found in the Atlantic and Mediterranean Sea (EWEA, 2013). Europe’s currently installed offshore wind capacity of 11.03GW, including fixed offshore wind, meets about 1.5% of Europe’s total electricity demand.

Europe is at the forefront of floating offshore wind. The world’s first and second demonstrator were installed here and the first pre-commercial array is currently under construction. Indeed, floating offshore wind power has an immense potential to transform the energy mix in a variety of European countries. This may be the reason why the development of this technology is likely to play a role in the Roadmap to a low-carbon economy in 2050 (Jacobsson and Karltorp, 2012).

Since 2012, the European offshore wind industry has grown substantially. While the accumulated offshore capacity amounted to 5 GW in 2012, the grid-connected wind turbines in Europe in April 2016 reached 11.03 GW (EWEA, 2016a). This translates to about 3,230 offshore turbines installed in 11 countries. New projects totalling 26 GW are already in the final planning stages. By 2020, the installed capacity may grow up to fourfold, compared to 2008 levels, up to 40 GW (Jacobsson and Karltorp, 2012), providing electricity to almost 39 million households. By 2030, the installed capacity could even reach 150 GW, at which point it would meet 14% of the European Union’s total electricity consumption (European Wind Energy Association,

2013). Offshore wind could deliver 50% of the EU’s electricity demand by 2050, with 40 GW installed in water depths that exceed 50 meters (EWEA, 2007). Floating offshore wind specifically has an immense potential to provide the continent with renewable energy (Arapogianni and Genachte, 2013).

Potential in the United Kingdom and Scotland

The United Kingdom has been the world leader in terms of installed fixed offshore wind capacity since 2008, their 5,098MW installed capacity, which generate about 15TWh per year, accounting for almost half of European offshore capacity (RenewableUK, 2016). While in 2010 renewable energies accounted for only 10% of UK gross electricity consumption, by 2020 the state aims to increase this share to 20%. Offshore wind is going to play a significant role in meeting these targets and may deliver up to 25% of the UK’s renewable energy. This means that about 29GW of offshore wind capacity need to be built by 2020 (Delay and Jennings, 2008). By 2050, offshore wind deployment may reach 55GW (James and Costa Ros 2015).

Scotland, a country in the north of the UK, has particularly ambitious plans to become a “world leader in offshore renewable energy” (ATKINS, 2014). They plan to meet an equivalent of 100% of their demand for electricity with renewable sources by 2020, which would account for 30% of their overall energy consumption. If offshore wind deployment reaches 40GW UK-wide, the Energy Technologies Institute (ETI) expects up to 16GW of that to be delivered by floating offshore wind, the majority of which would be based in Scottish waters (RenewableUK, 2016).

Water and Wind Potential in the UK and Scotland

Within the UK, Scotland specifically benefits from an excellent offshore wind resource (see Figure 2-4). Within 70 to 100km off the coast there are substantial wind, wave and tidal energy resources. The majority of its potential in the northern regions is at 50m - 100m depth at very strong average wind speeds.

Before we proceed, we provide a brief overview of the importance of wind speed on power output. The electricity output of a turbine strongly depends on the wind speed on site. See Figure 2-3 for an example of a typical power output curve that is plotted against wind speed.

Figure 2-3: Wind turbine power curve

Source: Science and Technology Facilities Council, 2016

A wind turbine only starts to generate at about 4m/s, and should not generate at speeds above 20-25m/s for safety reasons and to avoid excessive wear and tear of the material. The ideal speed for a wind turbine depends on the turbine’s capacity but generally falls between 11m/s and 14m/s.

The best mean wind speeds are measured in Scotland and off the south-west coast of the UK (James and Costa Ros, 2015). The winds over eastern Scottish waters are very high and reach average speeds of about 9.5m/s. This is due to their proximity to the track of the Atlantic depressions. In southern Scotland mean wind speeds tend to be less than 8.5m/s. The windiest waters in Scotland are located off the northern and western coasts. These areas are fully exposed to the Atlantic and closest to the passage of low pressure areas (The Scottish Government, 2010), as illustrated in Figure 2-4. Locations for floating wind farms in Scotland are therefore abundant and floating technology is essentially required to maximise Scotland’s full offshore wind potential.

In addition to vast wind resources, Scotland benefits from an existing offshore infrastructure due to decades’ worth of oil and gas exploration activities in the North Sea. Floating offshore wind development can thus benefit from established supply chains and port facilities, and may even benefit from technological synergies with the oil and gas industry, including offshore design, the fabrication and installation of the

floating substructures, mooring lines and anchors. This type of collaboration could quickly reduce floating offshore wind costs.

Interestingly, floating wind projects in Scotland could benefit from the current trend among many oil and gas companies to diversify their portfolios, given the uncertain future of the North Sea oil and gas industry. Floating offshore wind could thus seem like a viable option for to preserve local jobs and maintain a strong market position (James and Costa Ros, 2015).

Current Projects in Scotland

The two most prominent projects currently developed in Scotland are the 30MW Hywind Scotland project, developed by Statoil, and the 48MW Kincardine project, which is explained in more detail in section 4.1.1. These projects are the world’s first pre-commercial demonstrator arrays that aim to validate the cost reduction potential of floating wind from the prototype stage to the current pre-commercial demonstration array stage, as well as demonstrate cost efficient and low-risk solutions for future large-scale commercial parks (Statoil, 2014). In thus a pioneer in advancing floating offshore wind technology, Scotland takes a very important leadership role in the floating industry¹.

1 Interview with Johan Sandberg of DNV-GL, 29.10.15, Appendix D.a, Lines 97-98

Figure 2-4: Wind speed averages in Scotland

Source: The Carbon Trust, 2015

Potential in France

The European Wind Energy Agency (EWEA) ranked France to have the second largest wind potential in Europe, which is well spread across the country (EWEA, 2011). As of December 2015, 10.3GW of onshore wind power capacity were installed in France (The Wind Power Net, 2016). Despite the fact that no offshore wind mill has yet been built (Snieckus, 2016), the French Ministry of Environment, Energy and the Sea (MEDDE) sees potential in floating offshore wind to develop into a promising new industrial sector in France and utilise the potential of an estimated 200TWh per year. The strongest average winds are expected off the coast of Normandy, Brittany and Provence-Alpes-Côte d'Azur (MEDDE, 2016b). The French Environment and Energy Management Agency (ADEME) completes the first tender for floating offshore wind in April 2016 for both sites in the Mediterranean and the Atlantic Ocean. ADEME has set an aspirational target of 600MW capacity on floaters running by 2030 (Snieckus, 2015a).

Water and Wind Potential in France

3GW of offshore fixed wind capacity have been tendered so far in French waters. The French coastline is particularly suitable for floating wind structures (Snieckus, 2016) because the sea beds around the country’s coasts quickly become very deep: Just 1km away from the port of Toulon in the Mediterranean Sea, for instance, the water is already 100 meters deep¹, rendering floating wind parks the best solution to tap into the Mediterranean offshore wind potential (Zountouridou et al., 2015). This is especially the case in the Côte d'Azur region where the industry has identified the wind-richest area in the country with several GW of floating offshore wind potential (Dodd, 2015). Given average wind speeds of about 9m/s there, it is likely that the first French floating offshore wind project will be installed in the Mediterranean Sea². The Atlantic coast is an equally attractive area with large potential for floating offshore wind at similar average wind speeds (Dodd, 2015) though suitable areas tend to be further away from the shore and exhibit harsher wave and weather conditions. Several pilot projects for the Atlantic Ocean are already in their early planning stages.

1 Interview with Frederic Chino of DCNS, 23.09.15, Appendix D.b, Lines 60-63

French companies like Alstom, EDF and GDF Suez to name but a few, have experience in electrical, steel, maritime as well as oil and gas works, and already actively participate in the international offshore wind market (Offshore Wind Biz, 2015). Despite the maturity of the French maritime and offshore industry, however, there is no uniform prospective on the extent to which the offshore industry’s maturity would favour floating offshore wind development at this moment in time. While Snieckus (2016) argued that a number of shipyards on the French Atlantic coast rendered France well prepared for the assembly of floating offshore wind turbines, it is questionable whether France will be able to capitalise on this in the near future. In contrast to Norway and Scotland, France does not have the oil and gas infrastructure in place that could be used to kick-start a floating offshore wind industry¹. Nevertheless, France has high ambitions to advance floating offshore wind and project developers actively press ahead with plans to develop the technology (James and Costa Ros, 2015).

Current Projects in France

Two French projects in particular are worth highlighting to give an idea of the current market development. One is a 6MW turbine installed on a semi-submersible platform, called SeaReed, that will be deployed 15km off the Atlantic coast of Groix, Brittany.

This project, a joint endeavour by French power generation company Alstom, and DCNS, a company specialising in energy and owner of numerous naval dockyards, is in an early planning stage. The second project is called FloatGen, a 2MW turbine that is to be installed 19km off the Atlantic coast of Pays de la Loire by 2017. This project is a combination of a semi-submersible and a TLP floater. It was designed by French engineering company IDEOL, developed in collaboration with research facilities in Germany, and funded among others by the EU and ADEME (Snieckus, 2015a). Both projects have the ambition to upgrade their initially single wind mills to wind farms consisting of several turbines upon successful deployment of the respective demonstrator project (ORE Catapult, 2015b). French renewables developer Quadran is currently planning to collaborate with IDEOL to extend their floating offshore wind project to a fully commercial floating wind park of 500MW by 2020 (Quadran, 2016).

1Interview with Frederic Chino of DCNS, 23.09.15, Appendix D.b, Lines 96-99

An industry expert interviewed for this thesis, however, maintains that the first commercial wind park is not to be expected in French waters before 2022¹.

Potential in the United States and Hawaii

The majority of the American population lives along the East and the West coastlines of the country (EWEA 2013a), where the wind resource is generally abundant (Adelaja, et al., 2012). This proximity of demand to a relatively large wind resource has led the US Department of the Interior to estimate that the total US demand for electricity could be met with offshore wind that can be deployed close to population centres (DNV 2012). However, despite over 60% of the estimated wind resource in the US being located over deep waters on both coasts (DNV 2012), until today American wind power has been based entirely onshore. The total installed capacity amounted to 74GW in December 2015, which is about 20% of the world's total.

With regard to offshore wind in general and floating offshore wind in particular, the country lags behind developments in Europe and Japan (Sun, Huang, & Wu, 2012) as coal power still accounts for the majority of electricity production (Snyder and Kaiser, 2009b). Offshore wind in the US faces three main challenges: Firstly, it cannot compete with inexpensive coal power without state funding or a potential carbon tax on coal (Snyder and Kaiser, 2009b). Secondly, in contrast to densely populated Europe, relatively inexpensive onshore wind sites are still widely available in the US, which makes it unnecessary for the industry to move offshore at this moment in time.

Thirdly, the current political environment does not favour offshore wind, neither fixed nor floating. The US Congress seems to be hesitant to amend the existing energy infrastructure in any way², and a long and uncertain permission process further hinders offshore wind development (DOE, 2015).

Hawaii was the first US state that declared its ambition to become energy-independent by 2045. This includes meeting 100% of the islands' electricity demand with renewable energy (State of Hawaii, 2015). In 2013, the state had to import 91%

of the electricity it consumed (US Energy Information Administration, 2015). At the end of 2015, 202MW of onshore wind power were installed in Hawaii (Energy Hawaii, 2016), supply the state with only a negligible amount of its electricity needs

1Interview with Frederic Chino of DCNS, 23.09.15, Appendix D.b, Lines 70-72.

compared to photovoltaic and geothermal power. Hawaii largely depends on generating electricity with oil-fired power generators (Snieckus, 2015c), which drives electricity rates up to be about three times higher than those on the US mainland.

Under these market conditions, even a technology as new as floating offshore wind has one of the best chances worldwide to reach grid parity. Additionally, floating structures would not take up any more of the already limited land resource available (Snieckus, 2015c).

Water and Wind Potential in the United States and Hawaii

The total wind potential off American coasts and on the country’s lakes is estimated to amount to 3500GW, 1800GW of which could be tapped into using floating structures within 50 miles from the shore. A study by Musial (2010) found that 573GW of floating offshore wind capacity could be installed in Californian waters, 250GW in New England’s waters and 459GW on the Great Lakes.

The National Renewable Energy Laboratory NREL (2015) estimates the average wind speeds off the Californian coast to be between 7.5-10m/s (Figure 2-5). Other locations with high potential are on the East Coast, especially on the waters off the northern coastal states with average wind speeds of 9-10m/s and in the Great Lakes region with 8-9m/s average speed.

Figure 2-5: Wind speeds in the US at 90m height

Source: US Department of Energy, 2015

Hawaii has a strong offshore wind resource with an average wind speed of more than 8m/s. The water depth around the islands allow only for few fixed-bottom turbines.

But, the potential for floating offshore wind on Hawaii is estimated to be 650GW, according to the National Renewable Energy Laboratory, which exceeds the island’s electricity demand several times over (Snieckus, 2015c).

Current Offshore Wind Projects in the Unites States

The Department of Energy has set a target to deploy 10GW of offshore wind capacity by 2020 and increase this to 54GW by 2030 (Sun, et al., 2012). The first offshore deployment, a 30MW fixed-bottom wind farm that is currently being built off the coast of Rhode Island, is expected to be finalised by the end of 2016 (EIA, 2015c).

Even though the American offshore wind industry is far behind its European counterpart, only building the first offshore wind park now, some developers already consider offshore floating wind projects. Principle Power, for example, plans to deploy a 30 MW floating offshore wind project off the coast of Coos Bay, Oregon, consisting of semi-submersible structures equipped with 6MW turbines (ORE Catapult, 2015b). In Maine, the DeepCwind consortium, coordinated by the University of Maine, is currently testing a prototype called VolturnUS. Two full-scale semi-submersible floaters, carrying a 6MW turbine each, are to be deployed at a demonstration site in 95m of water depth (ORE Catapult, 2015b).

Current Projects in Hawaii

Two floating offshore wind projects, that are to be deployed about 20 kilometres off the Hawaiian island Oahu, are currently in the planning phase. The project developers, Danish Alpha Wind Energy and American Progression Energy, have proposed commercial scale projects of about 400MW and 816MW respectively (Kessler, 2016), both using semi-submersible designs. Construction could begin as early as 2020 (Snieckus, 2015c).

Potential in Japan

Japan has the third largest economy in the world and the second largest electricity market in the OECD (Govindji, James and Carvallo, 2014). Before the Fukushima

by 2030. After the accident, the government decided on an energy strategy that is meant to phase out nuclear power (The Japan Times, 2003) and focus on renewable energy (Tominaga, 2016). Today, the renewable sector is dominated by small hydro and biomass power plants, which account for 70% of total power generated in 2011.

The overall share of solar and wind power in renewables is only 13% and 11%

respectively (Govindji, James and Carvallo, 2014). In 2014, Japan had a total installed wind power capacity of 2,788MW, including 50MW from offshore wind turbines.

The total electricity produced by wind energy (5.1TWh) corresponds to just over 0.5% of the country’s total electricity demand (965.2TWh). This is relatively little, given that in European countries, the ratios of wind power to total power are much higher, amounting to 33% in Denmark and 8% in the UK (Ishihara, 2015). However, the Japanese government predicts that wind power could supply up to 20% of Japan's electricity demand by 2050 (MITI, 2016). The Fukushima accident and subsequent concerns about the safety of nuclear power plants has led Japan into taking economic risks and paying a high price for importing gas to meet electricity demand. Today, the

The total electricity produced by wind energy (5.1TWh) corresponds to just over 0.5% of the country’s total electricity demand (965.2TWh). This is relatively little, given that in European countries, the ratios of wind power to total power are much higher, amounting to 33% in Denmark and 8% in the UK (Ishihara, 2015). However, the Japanese government predicts that wind power could supply up to 20% of Japan's electricity demand by 2050 (MITI, 2016). The Fukushima accident and subsequent concerns about the safety of nuclear power plants has led Japan into taking economic risks and paying a high price for importing gas to meet electricity demand. Today, the

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