Offshore wind farm; Offshore wind farm;

The offshore opportunity: Five factors that make wind power investment work

Offshore wind has been an exciting prospect since the first large scale wind farms appeared in the early 2000s.

The open seas offer higher wind speeds than on land, and the ability to generate increasing amounts of clean power at lowering costs. Offshore wind also produces more energy in the bad weather months when power is most needed by populations, a big benefit for an intermittent renewable energy. 

The UK, Germany, Belgium and Denmark have led the way and their success in producing cost-effective wind energy businesses has not gone unnoticed in the rest of the world. However, as ever in the complex energy market, local market-specific barriers often remain such as ground conditions through to regulations. Here are five insights that can help new investors and developers consider what could make an investment a success.

 

Offshore wind is maturing, and as such now needs to evolve to compete on a like for like basis with all other forms of energy. To produce on-demand value from offshore wind means taking a multidisciplinary approach from the start. ”

Cameron is an offshore wind specialist Cameron Dunn US Offshore Wind Leader

1. Work with an end-to-end partner

Like most renewable energy markets, offshore wind is still finding its feet as a global industry. Across a majority of the world there isn’t a mature supply chain in place providing affordable access to the skills and experience a programme will need. Although there is a proven supply chain in Europe, this can’t easily be replicated across the globe. So it’s vital to work with a partner that understands both the commercial realities and constraints, as well as the various technological and geological challenges posed by a given physical location and local market. Offshore wind developments are still significant investments, so having an experienced partner will also ensure value for money and lower programme risk.

2. Optimise your business model

For developers and operators, business models vary in every location, but our experience shows us that in the early stages it’s vital that organisations take an integrated approach to the commercial and technical risks associated with a new development, tailoring their plans on scheduling, design and engagement with other stakeholders accordingly. For this type of commercial structure, it’s important to understand the extent to which the developer carries risks for any delays in permitting, for costs of construction and the offtake agreement for the power generated from the assets.

Offshore wind development Offshore wind development

3. Invest in efficient designs

The success of a new offshore wind development lies in the specific strengths of its technical design and offshore wind technology is continuously evolving. Higher-capacity turbine technologies are enabling new players to operate facilities that generate more power, more consistently, improving economies of scale. Smart design is essential – weight savings can lower costs, pre-fabricated foundation assembly can lead to shorter build times and using the right tools and data means a foundation type can be more quickly selected – all ensuring value for cost. Efficient designs mean a wider range of wind projects and businesses are becoming viable. 

4. Get ready for changing equations

Until now, the value of electricity from renewables has always been off-set by its intermittency. But soon it will no longer be enough to provide raw wind power, operators will need to add value by providing energy that meets demand, at the moment it’s needed. Energy storage will be an essential part of this.  But making this work requires in-depth knowledge of energy systems, distribution and transmission, and insights into local markets and regulation.  

Offshore wind provides the solution for sustainable energy Offshore wind provides the solution for sustainable energy

5. Understand the geology

Seismic activity, differing soil strengths, rocky sea beds… Variations in the sea geology are a huge determinant of the type of turbines that can operate above. This factor has implications for energy potential, overall levels of project risk, the likelihood of gaining vital investment, and ultimate financial performance for the operator. A detailed assessment of ground conditions is essential to project success. Also, with new structural designs emerging, and innovations like floating turbine structures being considered for otherwise challenging sea bed conditions, there are more options than before. 

An attractive proposition

The need for sustainable, reliable and affordable energy has never been greater. Global generation capacity from offshore wind today stands at 17.6GW, but Bloomberg New Energy Finance (BNEF) has forecast that it could reach 115GW by 2030. Europe has led the way, Asia is investing heavily, the US is close behind. The only question is which energy market players will be first to reap the rewards.