In one year, offshore wind optimism increased by 40 percent – E24

There are many offshore wind farms. But very few of the wind turbines are currently floating.

As of today, floating offshore wind technology is around 60% more expensive than fixed-bottom technologies. If you get a profitable industry based on floating turbines, a deep sea of ​​opportunities opens up for the energy industry.

Actors who are organized in the Norwegian Offshore Wind Cluster work to ensure that Norwegian companies and industry have the largest possible share of this market. On Tuesday, the cluster is hosting the Sea Wind Conference 2020 in Oslo, where one of the goals is to have a political debate on how to create a Norwegian industry with billions in revenue.

The Minister of Oil and Energy, Tina Bru, is among the participants. The group’s leader, Arvid Nesse, has the following message for the minister:

– It is important to establish a domestic market if we want to become a leading export nation. Then you need a tool, he says.

Largest market

During the conference, Menon Economics will present a report prepared on behalf of the offshore wind cluster in collaboration with Export Credit Norway, Norwegian Industry, the Norwegian Shipowners Association and the Municipality of Stavanger.

In the report, they try to find answers on which instrument is best suited to trigger private investments in large-scale floating offshore wind on the Norwegian shelf, further opening up to technological development and supply chain learning effects .

Last year, Menon Economics released a report claiming that floating offshore wind energy can provide between 11,000 and 128,000 man-years in Norway over the next 30 years, as well as create value between NOK 10 and 117 billion. But the most optimistic scenario called for the state to contribute 36 billion crowns.

– In the new report, they have raised the market by 40 percent. This is an important observation, says Nesse.

The reason the report’s writers have become more optimistic is that they are now in the process of undertaking a larger project than previously expected, and that several countries have set explicit targets for offshore wind development. By 2050, the authors of the report forecast that offshore wind power will generate between 60 and 250 gigawatts.

At the same time, capacity problems and obstacles contributed to delaying development in the short term. However, the large projects that have been launched will help reduce costs more quickly due to economies of scale. Here, the report points to Equinor’s plans for an 800-megawatt floating offshore wind farm in South Korea.

But the report’s authors emphasize that forecasting in immature markets like this is challenging. In addition, there is uncertainty about the consequences of the corona pandemic.

85 billion

By 2050, Menon believes that floating offshore wind can become price competitive in markets where the potential for fixed wind power in the background is more limited.

In the most optimistic scenario of the report, offshore wind will account for about 25 percent of the total market for offshore wind. In this case, an industry based in Norway could have a turnover close to NKr 85 billion in 2050. To illustrate how large this sum is, the report notes that the oil and gas supplier industry exported around of NOK 100 billion last year.

Menon is based on four success criteria that can be decisive in terms of the market share that Norwegian players receive. You need an active domestic market, you must leave early, you must have a clear vision and the government must contribute with adapted tools.

A new opportunity

The report paints a background image where the global energy transition is going faster than expected. This means that competition for green growth opportunities is increasing.

The report’s authors believe that the current situation is in stark contrast to the period when solid-bottom offshore wind power development actually began. They note that there was a lot of activity on the Norwegian platform at the time and that, therefore, the Norwegian industry was less willing to invest in new business areas.

Floating offshore wind represents a new opportunity for the Norwegian supplier industry, Menon says. “According to the IEA, about 40 percent of the offshore wind energy value chain coincides with the oil and gas value chain. The proportion is higher for floating installations,” they write.

– It is very important to have a domestic market so that one is in a good position when the large export markets arrive. It will be especially important for small and medium-sized businesses, says Nesse.

He hopes that it will be possible to form a supply chain in which large and small work together, as was seen when the oil and gas industry grew.

– The most interesting export markets are, in the first instance, Scotland, Ireland, France, Spain and Portugal. Outside of Europe, there are South Korea, Japan and the US, and after a quarter more countries are likely to come, Nesse thinks.

Tool

Menon Economics has looked at several different instruments that the government can contribute to in order for the offshore wind industry to prosper in Norway.

They conclude that the most appropriate instrument is differential contracts. These contracts are intended to increase or ensure the income of a project. This happens if the government guarantees a fixed price for energy. The state will then pay the difference between the market price and the agreed price. If the market price is higher than the agreed price, the owners pay the state.

The authors of the report believe that such contracts should not be awarded on the basis of pure price auctions.

– I think it is important to establish qualitative criteria to reach the development of technology and the effects of learning. If you only use price as a yardstick, it’s too easy to use technology that’s more in the blink of an eye, says Nesse.

Investment grants and temporary tax regimes can also be good tools, according to the report. They note that Equinor has received a commitment of NOK 2.3 billion from Enova for the construction of Hywind Tampen. But a large-scale development will require larger sums than the current Enova framework.

Little new in the state budget

The offshore wind industry expected new financing models in the proposal for a new state budget, but the government proposed that the existing schemes be continued.

– In the state budget, there were clear objectives to build an industry, but we expected them to go further when it comes to proposed solutions, says Nesse.

He wants to make sure politicians know the content of the report.

– We hope it can inspire solutions that mean we don’t waste too much time. If you look at the bottomless sea winds, you see that the ones that left early are the ones with the positions today.

This summer, the Minister of Oil and Energy, Tina Bru, opened two areas for offshore wind energy. In the Utsira Nord area, up to 1.5 gigawatts can be produced, and at Sørlige Nordsjø II there is room to extract three gigawatts. Starting January 1, 2021, interested players can apply for a license. In North Utsira it is deep, and this is where floating wind turbines are most relevant.

-Can it be a coma that nobody applies if there is no remedy?

– I think some will apply anyway because one believes there will be long-term arrangements. There is a clear political signal in the state budget that you want to build an industry, says Nesse.