Financing Wind 2017: Floating wind's cost conundrum

Can we expect major growth in the floating offshore wind sector? The answer you get largely depends on the company you keep.

Our view is the technology has great potential. This is why four people with interests in the floating wind sector features on our sixth-annual Top 100 Power People report.

There was also a rallying cry for the sector at the Floating Offshore Wind UK 2017 conference in Glasgow this week. Attendees at the event, which was run by industry associations RenewableUK and Scottish Renewables, heard RenewableUK CEO Hugh McNeal declare that: “No one should be in any doubt about the size of that possibility, of the prize that we are discussing today, or the benefits it could bring to Scotland [and the UK].”

Industry experts at this event said that floating wind projects have the chance to follow a similar cost-reduction trajectory as fixed-foundation developments. They argued that projects using floating foundations could benefit from advances in offshore turbines that play a key role in driving down the cost of fixed-foundation projects; and they could also benefit from the savings of assembling turbines onshore before towing them to sea. In short, it is exactly the sort of positivity we would expect from a dedicated floating event.

However, speakers at our sixth-annual Financing Wind conference in London two weeks ago were rather more reserved. They said there is potential in the technology, but that the fast pace of fixed-foundation projects would prove to be a major obstacle.

Keith Anderson, chief corporate officer at Scottish Power and CEO of Scottish Power Renewables, said he had “great faith and belief” in the ability of engineers to commercialise floating offshore wind; and he had “no doubt that somebody will be able to get the cost down and make it reasonably cost-competitive at some point”.

But he added that Scottish Power Renewables is still focused on fixed-foundation projects.

He said: “I’m not sitting here thinking there’s some miraculous bit of innovation that’s going to come along and completely change
the industry, but you’re seeing innovation at every part of the project… right across the whole value chain."

Jérôme Guillet, managing director at Green Giraffe, agreed that it was going to get tougher to bring disruptive innovation in the wind sector because costs are already so low, and any innovation was likely to be focused on incremental improvements.

“Offshore fixed has come down very fast and offshore floating looks very expensive in comparison,” he said. “Will the governments have the guts to pay €200/MWh for a few years to make sure that floating actually works, and can be done at scale, when they can already do fixed bottom at €50/MWh?”

Guillet added that there are places where it would work, including off the west coast of the US and in some Asian waters, notably in Japan. However, in Europe he argued there are “several hundred thousand square kilometres” of the North Sea where fixed projects still make sense: “Fixed will dominate most of the world. Floating will happen in a few markets where you can’t do fixed,” he said.

There are huge areas where floating wind projects could be built: an estimated 80% of potential offshore wind resources in Europe and Japan are in waters deeper than 60 metres, for example.

But whether they will be exploited comes down to questions about whether businesses will invest in commercialising the technology, and whether governments will back developments even before it reaches commercial maturity.

We are pretty positive on both. We are seeing firms like Statoil, Masdar, Ideol and Principle Power investing in the technology. It
is even attracting the attention and expertise of pioneers such as Danish turbines guru Henrik Stiesdal. It may be a niche interest at present, but it is starting to attract mainstream attention.

And, as Guillet said, there are areas where the technology makes sense. We expect to see those governments prepared to back schemes, even if they are costly at first.

Finally, let’s remember how fast offshore costs have dropped in recent years. Most commentators, including those working in the industry, have been too conservative on cost cuts, and have been proved wrong. Floating could repeat this trick.