The Daily Update: Offshore full of wind

Currently the offshore wind capacity of Europe stands at 25 gigawatts; this is expected to grow four-fold to 100 gigawatts by the year 2030. The UK wants to be at 40 gigawatts and the European Union is aiming at 60 gigawatts. This growth is being created by declining costs, outside investor interest and government involvement to offer subsidies together with the willingness to put in place an acceptable auction schedule of contracts.

Both the UK and EU have laid out serious targets for the cutting of carbon emissions which will need the new capacity of offshore wind power to be in place to succeed. There are reported to be enough capacity making projects already in the pipeline, but these projects are extremely sensitive to timing issues such as delays to contract auctions. Already the UK has delayed the fourth round of subsidy auctions from this year to next and France has also delayed its schedule for a year, while the German auctions scheduled for 2021-2025 are crucial in supplying a further 10 gigawatts of capacity.

The government subsidies are critical due to the high cost of offshore versus onshore renewables, but governments are very keen to avoid the public acceptance issues that are associated with onshore to a very much stronger degree than offshore. Indeed, EU targets go past 2030 out to 2050 where they are targeting offshore capacity at 300 gigawatts.

Governments are keen to get the ball rolling but look for the sector to reduce its need for government support over the coming years and look towards other investors to take on the market risk. With new technology coming online the costs are falling but the long lead time for development and construction of non-pipeline projects, currently around six to ten years, make the projects reliant on the government subsidies over the coming years.