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The next billion trillion dollar energy industry



The global wind industry is expected to be a billion dollar business, according to the International Energy Agency. The industry will grow by 13 percent per year, and will pass 20 GW of annual installations by 2030.

About 150 new offshore wind projects are expected to proceed over the next five years.

The new industry is still far behind other energy sources, including other renewable energy sources. But the potential is almost limitless. "The best offshore winds can deliver more than the total amount of electricity consumed worldwide today," the IEA said in the report. "And that would mean tapping only the sites near the coast."

In a long report with spotlight on offshore wind, the IEA found that the total technical potential for the industry is 36,000 TWh per year for installations in water below 60 meters deep and within 60 kilometers of land. This compares with a total global demand for electricity of 23,000 TWh.

But ocean winds can also go deeper and further from shore. The IEA said that floating offshore wind alone has the potential to meet the world's electricity 1

1 times over by 2040.

The early days remain, and total capacity additions topped only 4 GW in 2018.

 Offshore Wind [19659002] (Click to enlarge)

Nevertheless, the agency highlighted a long list of attractive features that make sea winds so promising.

Wind projects on land have lower capacity factors, which means that they do not produce power at all hours of the day. Offshore winds are stronger and more consistent, giving the offshore wind an average capacity factor of between 40 and 50 percent. Capacity factors and lower variability make their system value comparable to baseload technologies, placing it in a separate category – a variable baseload technology, "said the IEA. Offshore winds also tend to produce more electricity during the winter months in the US, Europe and China. which makes it more useful than wind and sun on land. Related: Iran's $ 280 Billion Sanction Skirting Scheme

On top of that, offshore wind avoids any conflict with land use that so many other energy sources

In addition, there are "synergies" between offshore wind and oil and gas offshore. The IEA says that approximately 40 percent of the total lifetime cost of an offshore wind project overlaps with oil projects. Companies that build foundations and subsea structures for oil and gas, for example, can do the same for offshore wind. The same goes for maintenance and inspection of offshore structures.

Of course, a lot depends on the cost. is lagging behind, with the leveled costs of electricity averaging $ 140 / MWh in 2018, far higher than gas, coal and other renewable energy. But the costs come down. "Offshore wind is expected to be competitive with fossil fuels over the next decade, as well as with other renewable energy sources, including photovoltaics," the IEA said. Funding costs account for 35 to 50 percent of the cost of a project, leaving plenty of room for improvement. The agency said costs could fall to $ 60 / MWh by 2030 and $ 45 / MWh by 2040 if funding costs come down.

In Europe, offshore wind is already competitive. The results of recent auctions suggest that offshore wind will soon knock out natural gas, and will be roughly equal to the sun and wind on land, the IEA said. One project in France had a strike price of only $ 50 / MWh, although it did not include transmission.

Europe was the pioneer of offshore wind, and remains a central stronghold. Denmark produced 15 per cent of its electricity from offshore wind last year. However, as is the case with most discussions on each energy source, China plays an increasingly important role. In 2018, China added more offshore winds than any other country.

However, the largest companies are now European, including Ørsted, RWE and Vattenfall. 10 of the 15 largest companies by market share are from Europe, although China Longyuan ranks third. Only one of the top 15 is from the United States – Global Infrastructure Partners – and it's an investor instead of a developer. Related: The number of oil rigs falls to the lowest level since 2017

Still, despite the potential of the offshore wind, the rate of growth is not fast enough to meet global climate targets. The IEA said the deployment must accelerate to around 40 GW of annual installations by the 2030s, resulting in $ 1.2 trillion in cumulative investment over the next two decades. Based on current trends, the agency sees only annual installations at the top 20 GW when the cumulative investment reaches $ 840 billion.

 Offshore Wind

(Click to enlarge)

There are some major obstacles that will require more accommodating political support from the government. The industry still needs to expand supply chains, building capacity for ever larger turbines, larger vessels, onshore infrastructure and transmission lines connecting turbines to the coast. There's a bit of a chicken-and-egg problem between all these moving pieces; the lack of each slows the momentum on other sides.

But the most important thing is that offshore wind has the potential. to be a game-changer, according to the IEA.

"Over the past decade, two major areas of technological innovation have been game-changers in the energy system by significantly reducing costs: the shale revolution and the rise of solar PV," said Dr. Fatih Birol, IEA CEO. "And ocean winds have the potential to to join their ranks when it comes to steep cost reduction. "

By Nick Cunningham of Oilprice.com

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