Industry interest in floating offshore wind systems in the UK has seen rapid growth, but a race to the bottom in terms of costs as well as port and production capacity could mean targets are not being met and challenge the long-term sustainability of the industry.
These questions were raised at the sold-out Floating Offshore Wind 2022 conference and exhibition in Aberdeen today (October 12).
The event came as co-organizer RenewableUK unveiled a report showing that the total pipeline of floating offshore wind projects has more than doubled in the last 12 months, in terms of capacity globally, from 91GW to 185GW. The number of projects has also increased globally during this time from 130 to 230.
The UK pipeline in particular has increased from 23 GW a year ago to over 33 GW and from 29 projects to 51, with projects being developed in the North Sea, Celtic Sea and North Atlantic.
But there are concerns about how these projects will develop. Keynote speaker Tim Peake, co-chair of the Offshore Wind Acceleration Task Force, highlighted that offshore wind construction has slowed from 40 months after the FID was hired to 140 months. He said ten-year cycles must be reduced to five to six years, otherwise targets for 50 GW of UK offshore wind by 2030 will be difficult to achieve.
Current projections from RenewableUK’s Pulse Energy report suggest 44GW by the same date would be generous, he said, with question marks also over grid connections to get the energy where it’s needed.
Focusing on floating offshore wind turbines, he said that even using the latest 15MW turbines, around 500 floating offshore wind turbines would need to be commissioned over the next eight years to meet the government’s 5GW target by 2030 d. for floating offshore wind turbines. “Is the supply chain ready?” he asked, pointing to various assumptions about the choice of foundation technology, the financial feasibility of the projects and the availability of ports.
Rebecca Williams, global head of offshore wind at GWEC, told the event that the UK is leading the way in floating offshore wind systems, but that other countries are “nipping at its heels”, particularly the US, where California has many ambitions such as with a target of 25 GW by 2045. She says South Korea is also really ambitious and has the framework to make it happen. Taiwan and Japan, which have a new auction round and are centralizing their markets accordingly.
Pablo Necochea, Lead Floating Wind Advisor, Vestas, said the industry is ready to enter the commercial phase for floating offshore wind. “What’s holding us back is the production and speed of production of these floats,” he said. “If the UK is to maintain its leadership position, we need to look to the Asia-Pacific region, where Korea is specifically looking to diversify its oil, gas and shipbuilding infrastructure and aggressively put policies in place so that they have the right price level, to support this technology and development of these projects.”
Alan Hannasenior vice president and partner, Copenhagen Offshore Partners, said that while there is a lot of positivity, there are also many challenges, with rising consumer prices, Ukraine increasing steel prices, changes in the UK government with different policies and design consultation in the wholesale electricity market, which could lead to a “generation change”.
That means there are challenges from an investor perspective, he says, across the energy space. “Swimming is able to solve some, if not all, of these problems,” he said. But we need to put floating devices on the water and we need standardization and industrialization to reduce the LCOE, he says.
Port capacity challenge
Another challenge is port capacity. Hannah says the UK is in a unique position in terms of its ports, but they need a business case for investment and security to make that investment.
Gabriel Daviswho manages Orsted’s global floating offshore wind program, said investment in deepwater infrastructure is critical to making this happen.
However, Williams said the focus should not be on ports alone, but that “we have to recognize that this is part of a much wider industrial strategy”.
There was also broad consensus that recently “clearing price” for the only contract for difference (CFD, UK funding mechanism) awarded to date for floating offshore wind was too weak and this risked a “race to the bottom”.” in terms of levelized cost of energy (LCOE), a key metric that would harm longer-term industrialization goals and set the bar too low for international markets, making floating wind less investable and losing focus on it, what will happen after the 2030 targets.
Richard Eakin, Scotwind project director at ScottishPower Renewables, agreed and said CFDs have reduced costs at a rate the local supply chain may not have been comfortable with in previous rounds. “Going forward, it has to be done the right way, not in a quick race to the bottom and getting pieces from anywhere in the world that are cheapest, and that’s not what we want to do,” he said.
Williams also said the CFD should not be seen as the sole support mechanism and noted other mechanisms such as concessional financing to locate other pieces of infrastructure.
Network connections are also a major concern – particularly delays in providing them.
Melissa Reed, UK business manager, offshore wind, at Shell, said “the grid is a huge risk. Many developers spend up front before they even know they have a network connection.”
While the Netherlands comes with a connection up front, it is unclear, particularly around time frames, in the UK, which could leave developers with stranded assets, making investment decisions challenging, she says. But on the other hand, it means developers are innovating, looking at hydrogen as an export option, for example, she said.
Focusing on Scotland, which had the recent ScotWind round, Richard Eakin, project director, ScottishPower Renewables, said the focus should be on three areas: availability of people, skills and resources; commercialization of the technology within the presented timelines; the timing and nature of network connections “which is at the forefront of most Scotwind developers’ minds at the moment”.
Alice Etheridge, Senior Offshore Coordination Manager, National Grid ESO, said through the UK’s Department for Business, Energy and Industrial Strategy (BEIS) that the offshore transmission network has been reviewed and recognized as meeting the objectives, the transmission network must be developed in a different way.
SSE Renewables received an award for the Ossian project earlier this year. Andy Lewin, project director, says £20m has already been committed to development work on this project. “We believe Ossian can be a platform to demonstrate the potential of floating wind.”
Nicholas RitchieSenior director of development, Orsted, which is developing the 1GW Stromar project, said production at scale would require mobilizing a range of skills – concrete workers, fabricators, welders – “in rural Scotland and that in itself is no mean feat “.