US$11.8 billion to be invested in offshore wind powerNews // May 30, 2007
Addressing delegates at the All-Energy conference in Aberdeen last week, Douglas-Westwood (DWL) director Andrew Reid presented the findings of a new study of the growing offshore wind energy industry and highlighted significant growth, fast-rising costs and shifting market dynamics.
Offshore wind will see US$11.8 billion of capital expenditure in the coming five year period as 3.6GW of new capacity is installed. With just over 900MW of capacity currently installed, this represents significant market growth and will lead to an annual capital expenditure of over US$3.8 billion by 2011.
In addition, DWL forecast the value of the operations and maintenance market to reach US$350 million per year by 2011 with US$950 million to be spent in total over the next five years.
Of the biggest markets, the UK is dominant with 1,645MW of new capacity forecast to 2011– a market worth US$6.8 billion. The results of the Energy Review are expected to provide further financial support and longer-term confidence in the industry.
New projects off Denmark (449MW) will be the first activity for five years but will be the only wind farms built there until after 2011. Denmark will cease to be the leader in installed capacity in 2008 when it will be overtaken by the UK.
New grid connection arrangements in Germany will, in time, help the significant market to eventually take shape there as we approach the turn of the decade. The next five years will see 536MW of capacity installed.
However, in comparison to the previous five year period, development and construction costs will rise by 42 per cent for the 2007 to 2011 period. Whilst costs have now breached US$3.6million/MW, Reid commented that the ceiling has not yet been breached and warned of higher prices to come as supply chain constraints are encountered.
Whilst this price rise is impacting on the viability of certain projects we are seeing energy majors pushing forward large projects through, via balance-sheet financing, determined to gain early market share. These companies are now becoming dominant in project development with smaller companies lacking the economic muscle and struggling to gain investment for their projects.