Energy transition underway: offshore wind proving its worth

We are seeing more and more how many renewable energy technologies are able to compete effectively against conventional energy sources. Stanley Reed reviews in the New York Times how offshore wind is making important gains. The cost reductions in recent years are impressive. It is hard to imagine that the nuclear industry is seeing the same reductions.

 

Offshore Wind Moves Into Energy’s Mainstream

And offshore wind, once a fringe investment, with limited scope and reliant on government subsidies, is moving into the mainstream. Europe, too, looks all the more attractive, as the United States under President Trump rethinks its stance on renewables.

“If you had polled infrastructure investors five years ago, only a few would have been looking at offshore wind,” said Suzanne Buchta, the Bank of America Merrill Lynch global co-head of green bonds.

Now, she said, they “are a little more comfortable.”

Offshore wind has several advantages over land-based renewable energy, whether wind or solar. Turbines can be deployed at sea with fewer complaints than on land, where they are often condemned as eyesores.

But the technology had been expensive and heavily dependent on government subsidies, leaving investors wary. That is now changing.

Turbines today are bigger, produce much more electricity and are deployed on much larger sites than in the past. The result is more clean power and extra revenue.

The number of major players has also expanded, creating more competition. A joint venture of Vestas, the Danish turbine maker, and Mitsubishi Heavy Industries of Japan, is now competing with Siemens, which had long dominated the market for building offshore turbines. Others, like the American giant General Electric and Chinese manufacturers, are also jumping into the game.

“For us competition is great,” said Benj Sykes, Britain country manager for Dong. “It drives innovation. It drives performance. It also drives cost.”

Companies are developing specialized vessels and improving installation techniques (taking a cue from the oil industry), cutting construction timetables. Dong and its competitors are learning to better cope with the bad weather, corrosive saltwater and scouring currents that increase costs.

The first offshore wind facility, Vindeby, began generating electricity in 1991. Frank A. Olsen, the Danish executive who led its construction, recalls that it was built using a barge with a crane mounted on a truck. Dong’s Burbo Bank Extension off Liverpool is far more advanced. In the distance, a ship lays electric cable, while a small fleet of other vessels about 80 feet long bobbed on the swell as maintenance crews finished their work.

All of those factors in concert have helped push costs down. Dong says its anticipated costs of electricity generation have halved. As recently as 2014, they were 156 euros, or $166, per megawatt-hour, a wholesale unit of electricity, on a British project. By last year, they had fallen to €78 per megawatt-hour on a series of wind farms off the Netherlands.

Those falling prices have raised hopes that offshore wind can soon compete with conventional power sources like natural gas and, eventually, do without subsidies.

Offshore is “on the cusp of a new world,” said Samuel Leupold, Dong’s executive vice president for wind.

The industry is not without challenges. Governments have been cutting financial support for clean power in a bid to balance their budgets, while President Trump’s administration seems likely, based on his promises during his election campaign, to forcefully support fossil fuels.

Planned mega-projects that will dwarf the Burbo Bank Extension will test whether investors still see renewables as an attractive investment and whether Europe will retain a leadership role when it comes to green energy in the Trump era.

For now, offshore wind is a relatively small industry, albeit one that is growing fast.

It currently accounts for less than a tenth of installations of new wind capacity around the world.

But investment in the industry nearly tripled in the five years to 2015, according to Michael Gulbrandtsen, an analyst at the Danish consulting firm Make. Offshore wind has become a significant force around Britain, Denmark, Germany and the Netherlands, where shallow and breezy waters provide ideal conditions for offshore wind. Experts say parts of North America and China also have potential.

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