It is still early days for floating offshore wind. Proof-of-concept demo farms are popping up, and 11 8MW turbines are doing brisk business in the Scottish North Sea. But floating wind is a technology that is still looking for the best way to scale, and it remains very costly compared to alternative green energy sources. Still, GPs are flocking to the technology hoping to benefit from learning how to go for floating as fast and as well as possible.
It is a bet on the future. Once the world runs out of fixed-bottom locations, floating wind energy will be the natural next step – but it will take a while. BloombergNEF estimates there will be a paltry 3.6GW of floating wind capacity in 2030, increasing to around 23GW in 2035. By comparison, there should be an estimated 268GW of global fixed-bottom offshore wind capacity in 2030 and nearly 500GW in 2035.
Usually, one would not expect a technology so lacking in maturity to be anywhere near an infrastructure outfit’s radar, but offshore floating wind already features prominently in pipelines across the world.
Why floating wind?
The simple argument for floating offshore wind is that fixed-bottom plants become unfeasible at ocean depths of more than 60-70 meters. Given that 80 percent of the world’s waters are deeper than that, it is an implicit assumption in many governments’ green targets that floating wind farms will spring up over the coming decades.
This development would be beneficial not just in terms of increased production capacity, but also because floating offshore wind has clear advantages over fixed-bottom structures. First and foremost, floating wind plants should ultimately be easier to manufacture and install, as the full structure can be assembled quayside and towed to its final destination.
Floating also allows for bigger turbines. “If you increase the size of fixed-bottom turbines, the foundation size increases significantly. However, a floating foundation scales differently and does not need to expand as much,” says Michael Hannibal, partner and responsible for floating wind development at Copenhagen Infrastructure Partners.
Floating turbines are also less intrusive on the sea bed than fixed-bottom ones, and a floating turbine can better roll with the weather and wave-induced punches. This matters in a world that could see an increase in adverse weather conditions.
Furthermore, “because floating technology will make more areas of the ocean available for offshore wind, it may be easier to find maritime areas that have fewer potential conflicts with other users of the sea, avoiding fishing, shipping lanes, military zones, birds and mammals”, says Sonja Indrebø, Corio Generation’s head of floating wind. Corio is a specialist offshore wind developer and a Macquarie Green Investment Group portfolio company.
The right foundation
With such strong arguments in favour of letting offshore wind turbines go where few turbines have gone before, what is holding development back? Apart from the fact that the levelised cost of energy (LCOE) of floating wind capacity is currently twice that of fixed-bottom farms, GPs involved in the sector point to the importance of getting the foundation right.
“There are 60-70 different types of foundations. Of those, our analysis has left us with a small bunch that could be industrialised and partially built by existing suppliers,” says Hannibal.
At this time, only perhaps a handful of structures have been put to the ultimate test. There is the monopile-like spar-type used in the Hywind projects and the semi-submersible triangular Windfloat platform with the turbine in one corner. Developer BW Ideol has deployed two turbine-carrying Damping Pool barges in the shape of a squarish doughnut. Other triangular structures, such as the Stiesdal TetraSpar foundation – developed in partnership with Shell, RWE and TEPCO – have the turbine in the centre.
“We are technology agnostic. We will go with whatever floating solution fits the geography, water depth, and wind resources and works with the local supply chain,” says Indrebø, adding that “you may lose out on innovation if you have just one chosen technology”.
Kerogen Capital, however, has made their choice by acquiring BW Ideol and their floating Damping Pool barge, which co-founder and CEO Jason Cheng expects will provide an edge. “We reviewed the floating wind opportunity with our historical background in oil and gas and considered the floating foundation the most critical part of the value chain. This led us to BW Ideol and their barge-concept, which we like because it is made from concrete and combines the lowest cost with the highest degree of local content. Longer term, we expect that these factors will resonate with developers and governments.”
As for the Damping Pool barge being adequate for the job, Cheng has no doubts: “So far, two projects have been up and running since 2018 and withstood eight typhoons in Japan. It is bankable and insurable.”
The question of risk
At the moment, there is below 200MW of floating wind capacity commissioned, most of it in Norway and Scotland. This fact, perhaps alongside the mental image of an enormous wind turbine braving the ocean waves, may make floating technology seem somewhat risky. But this is a fallacy, according to the GPs.
“We are not taking technology risk. We invest in proven concepts,” says Cheng in a statement typical of the sentiment among floating offshore investors.
Indeed, this technology is anything but new. The world’s first standard commercial floating wind turbine was launched in 2009 and is still going strong, says CIP’s Hannibal.
Stonepeak is invested in floating offshore wind through the ownership of the developer Synera, which has an APAC-focused fixed and floating offshore wind pipeline and where floating wind is presented as an extension of the usual fixed-bottom offering.
“You have got the floaters, the anchors, the cables, with which there is a lot of experience from the traditional energy sector. You then have the turbines and installation methodology from the existing fixed-bottom offshore wind industry,” says Ryan Chua, senior managing director at Stonepeak.
“Looking at floating wind’s risk perspective and revenue profile through an infrastructure lens – both in terms of government support as well as the corporate demand for green energy – makes it an investable asset class,” Chua adds.
Return expectations for the sector are harder to pin down, though. When asked, Stonepeak declined to comment on expected returns. A Kerogen Capital spokesperson likewise “would not wish to comment on the IRR for regulatory reasons as this would be speculating on returns”. As for CIP, it hopes to have some floating wind assets in its latest flagship, targeting average mid-teens returns, but says it employs a rolling fund concept, which means devex, capex and opex for a project may not be part of the same fund.
Bringing the costs down
Currently, floating wind’s higher LCOE reflects the lack of scale and joined-up solutions, and getting to the next level will be no mean feat, according to Hannibal. “We need to scale, and to do that, we need to innovate and improve the various components to ensure that what we scale is optimised.”
More effective manufacturing is top of mind for Indrebø. “Standardisation is necessary to reduce the levelised cost of energy. This includes not only the floaters but also the mooring systems, the ports requirements, manufacturing and assembly processes, transport and installation logistics, dynamic cables, connections and the repair of major components.”
A concerted effort at scaling and standardising could see the LCOE for floating wind reach €45/MWh by 2040, according to a recent analysis by Boston Consulting Group. This would require subsidies, and possibly quite a lot of them, to accelerate the inevitable deployment and bring the costs down.
“It is the role of governments to provide support to allow the technology to accelerate and the LCOE to come down. The subsidies can be demonstration projects, one-off subsidies grants or elevated feed-in tariff projects, and they will play a key role in the early stages of this technology,” says Chua.
CIP’s Hannibal concurs: “Floating offshore wind must go through the same journey as fixed-bottom but in less than 20 years. The ultimate goal is a cost-level comparable with complex jacket projects in five or six years, and we need the political targets to be supported by permits and tenders.”
Along with financial support, floating wind projects also make demands of port infrastructure, which is currently far from adequate.
“Harbor capacity will be the bottleneck. A demonstration project of 100MW-200MW would be feasible now, but to get these projects to commercial sizes of 500MW, we need serious harbour capacity and space to build the floaters,” says Chua.
Indrebø also points to ports as an issue. “Ports need to be upgraded as component fabrication and foundation assembly takes around five times more space for floating wind.” Corio is in discussions with port authorities to ensure access and development while Kerogen Capital’s BW Ideol has signed a partnership agreement with Ardersier Port Authority – near Inverness, in Scotland – securing exclusive and long-term access to manufacture concrete floaters.
Where will it take off first?
As floating wind projects have sprung up across the globe, none come even close in size to Hywind Tampen’s comparatively modest 88MW, which delivers green electricity to Norwegian oil and gas production. And it is not obvious where the world’s first 100MW-plus farm will appear.
BloombergNEF shared a regional breakdown of their analysis with Infrastructure Investor suggesting that APAC will have 3GW of floating offshore by 2030, while Europe will have 600MW. The Americas will not join the party until the next decade but could have almost 3GW by 2035. At that time, APAC could have 6GW and EMEA more than 14GW of floating wind capacity.
Stonepeak’s Chua has Taiwan as the leading APAC candidate: “Taiwan is pretty far on that ramp versus Japan, Korea and Australia, and also has a local supply chain that is knowledgeable about offshore wind.”
South Korea also has an advanced supply chain and ambitious green targets, and Indrebø thinks that the country “will see some of the earliest commercial-scale offshore wind projects”. Corio, TotalEnergies and SK ecoplant are developing the Gray Whale, comprising three 500MW windfarms in South Korea.
CIP has floating projects in South Korea, as well as in the US and Europe, and Hannibal is agnostic about the location. “We have built a global pipeline to be ready wherever the opportunity comes along first. It could be Italy, where a PPA auction may be underway. Korea is another great market, and we are looking to get some preliminary permits.”
Indeed, there has been no lack of interested parties whenever floating wind concessions have been on offer and, as has been the case with fixed-bottom concessions, such rights can be kept and developed or sold on to the highest bidder.
In Europe, early adopter Norway has lost ground, as demonstrated by Equinor’s shelving of the 1GW Troll project in May, and the country is yet to announce tenders, whereas Scotland already has 10 floating projects tendered. Further south, France (Quantum Energy Partners), Italy (CIP and Quantum Energy Partners), Spain (Octopus, Quantum Energy Partners and Corio) and Portugal (Octopus) are moving fast on floating.
Unlike fixed bottom, Europe’s floating concessions are not yet awarded on the basis of eye-watering auction results. In the recent Scotwind auction, floating wind developers paid £23 million-£43 million/GW ($55 million; €50 million), while German fixed-bottom developers paid €1.8 billion/GW earlier in the summer. The 1.5GW Norwegian Utsira Nord concession will be awarded only on qualitative criteria.
Chua expects Europe to move the fastest on floating wind: “The transfer of knowledge that happened in fixed will happen in floating as well, and the Asian markets will be helped by looking to that, rather than being the pioneer.”
As for the US, where CIP and Blackstone have announced floating projects off the coast of California, the rather bumpy ride for offshore wind on the East Coast probably pushed floating projects out of the way for the time being, despite lofty targets. Still, CIP’s fixed-bottom Vineyard project has defied the general East Coast trend of throwing the offshore towel in the ring, so it may be premature to count Californian floaters out.
Indrebø is not keen on discussing the timeline. “Time is hard to talk about – volume is the thing that matters. We need maturation in the supply chain and more projects to make the costs come down.”
What seems in little doubt is that, sooner or later, this is an industry that will take off and leave the contested shallow waters behind.