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Global Offshore Wind Energy

Markets and Strategies: 2012–2025

June 2012

Market Study Excerpt

The attached excerpt represents sample pages from IHS EER’s market study released in June 2012.
The complete 240-page study is available for purchase and immediate download at
www.emerging-energy.com.

©2012 EMERGING ENERGY RESEARCH, LLC. All rights reserved. Reproduction of this publication in any
form without prior written permission is strictly forbidden. The information contained herein is from sources
considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses
which are based upon it.
Market Study Excerpt
Offshore wind is increasingly faced with pressure to deliver capacity on a large scale while proving it
is capable of reducing costs prior to projects in deeper waters, further from shore become the norm.
During this ‘make or break’ window leading up to around 2016, the industry will either have had to
position itself for sustained build-out, or face a rapid decline as a non-competitive technology.
Currently, an overwhelming majority of projects are installed within a relative ‘comfort zone’ of up to
30 meters water depth and at 30 km distance from shore; 93% of European and nearly 100% of Asia
Pacific capacity. The industry’s challenge in the longer term will be to increase capacity additions at
lowered costs, but in more difficult conditions.

Exhibit 1-1: Global Offshore Wind Industry Experience: Year-End 2011

60
WindFloat Beatrice Belwind ‐ Phase 1 Alpha Ventus
Water Depth (m)

40

20
Suizhong Demonstration

26% 68% 94% 100%

0
0 20 40 60
Distance from Shore (km)

Cumulative capacity of completed projects 
X % within the defined water depth/distance 
from shore zone

Source: IHS Emerging Energy Research

For now, interest in the offshore sector continues to grow, with investor commitments, policy support,
and technological innovations driving the industry forward. The global offshore market is expected to
reach nearly 95 GW of installed wind energy capacity by 2025. This represents 13% of total global
wind additions between 2012 and 2025. However, costs remain high and financial backing for capital-
intensive projects is needed as the next generation of offshore projects heads for uncharted territory.

1.1 Global Demand Forecasts: 2012–2025

Installed offshore wind power capacity across the globe still only accounts for less than 2% of total
wind energy capacity installed worldwide. Currently, this amounts to 4.2 GW, of which over 91% is
installed in Europe, where offshore activations have become a regular and expanding contributor to
wind power growth over the past decade. The share of offshore wind in Europe’s total wind additions
peaked in 2010 at 9%, dropped off slightly in 2011 to 8%, but is expected to jump to over 20% in

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 2012. The slightly sporadic nature of offshore wind additions is attributable to the limited number of
markets activating offshore projects coupled with their varying levels of maturity.

Offshore wind build-out continues to be moderately paced compared to onshore wind, with the
industry averaging just around 625 MW per annum between 2007 and 2011, although this number
has increased to just over 1 GW per year in the past two years. Onshore, the industry has averaged
over 30 GW globally on an annual basis in the same time period. Cost, technology, and logistical
challenges continue to highlight the nascent condition of the sector, as overcoming these bottlenecks
is considerably more difficult than for the onshore wind industry given the complex nature of offshore
projects coupled with ongoing credit shortcomings.

1.2 Ownership Trends Highlight Shifting Utility Involvement

Global offshore wind boasted approximately 52 operational and commissioned wind projects,
including pilot and near-shore projects, in 13 countries for a total installed base of over 4.2 GW by
year-end 2011 (including partially or non-commissioned project capacity). The global offshore wind
market remains highly concentrated, largely in the hands of Europe’s larger utilities. Through
continued project activations and acquisitions, market leaders DONG, Vattenfall, and E.ON owned a
combined 77% of all utility-owned capacity and over 54% of total commissioned global offshore
capacity at the end of 2011. Together with other regionally active utilities, these companies make up
the overwhelming bulk of offshore wind ownership at more than 70%.

Exhibit 1-3: Global Offshore Wind Installed Base Market Share: Year-end 2011
Total Utility Ownership: Total IPP/Investor Ownership:
2,383 MW 1,005 MW

EWE
1.4%
Scottish & Southern
2.1%
Others
3.1%

RWE Innogy
5.0%
Total Ownership Market: Other Investors
Eneco New Energy 
5.0%
3,388 MW GE 2.4%
2.5%
Others
9.1%
DONG Renewables Vindpark Vänern
3.0% Belwind Consortium*
29.3%
Centrica 16.4%
Ampere
6.0%
IPPs/ Equity Fund
Investors 4.5%
30% Shanghai Donghai
Shell Wind Power 10.1%
5.4%

Utilities  Pension Danmark
70% Huaneng
8.2%
10.1%

E.ON Marubeni 
19.6% Corporation
Longyuan
8.6%
9.9%

Trust Company of the 
West (TCW)
Vattenfall 9.7%
28.5%

Source: Developers, IHS Emerging Energy Research

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1.3 Risk Mitigation Dictates Business Models

As projects begin to reveal highly individual characteristics, challenges that could potentially span
across the sector’s project pipeline have emerged. These include material, manufacturing, and quality
control issues as much as transmission or foundation installation issues or skills shortages. The
resulting cost overruns and comparatively high degree of unscheduled maintenance have revealed a
new set of risk profiles. With a vast pipeline capacity on the verge of entering construction phases
across the region, managing these risk profiles and retaining bankability will become increasingly vital
as the development value chain optimizes to meet the industry’s challenges.

• EPC players ready to increase risk appetite.

• Private equity companies squeezing into project pipelines.

• Experienced capacity owners shedding lower-risk assets.

Exhibit 1-5: Global Offshore Wind Project Development Value Chain

Project          
Project  Operation and 
Planning and Construction Asset Ownership
Management Maintenance
Permitting

Developer 
Pure Play 

Utility

IPP

EPC 
Contractor/
Specialized Providers

Financial Players/
Investors

Source: Utilities, IHS Emerging Energy Research

1.4 Global Market Heading for 5 MW Turbine Model Dominance by 2016

Turbine vendors with over 20 MW of installed capacity include Siemens, Vestas, REpower, Sinovel,
BARD, GE, and Areva, while up to 10 turbine manufacturers including Alstom, XEMC Darwind,
Mingyang, Goldwind, Sany, Shanghai Electric, United Power, Doosan, STX, and Hitachi (acquired
Fuji Heavy Industries’ wind division in March 2012) have at least a prototype already installed to date.
Furthermore, over 15 companies including Gamesa, Samsung, and Mitsubishi have a prototype
planned for installation in the next two to three years.

Currently, 5 MW and larger turbines are reaching serial production to increase site output, and
companies are stepping up competition to tap this potentially massive market. Europe is leading the
transition to these very large turbine models.

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 1.5 Supply Chain Still Constrained by Immaturity and Lack of Best Practices

Factors that highlight the uniqueness of the offshore supply value chain include sourcing difficulties
and a gap between available and necessary infrastructure, along with turbines that are scaling up in
size beyond 6 MW, avoiding weather and wave high windows for installation, and making O&M more
efficient by having onsite or near-site teams as well as increased preventive and predictive
maintenance. The most relevant trends in the execution of offshore wind projects include:

• An increase in turbine sizes is squeezing available infrastructure.

• O&M costs remain challenging to master.

• Project logistics and immature supply chain are increasing the complexity.

Supply Chain Bottlenecks Shifting as Industry Sizes up True Opportunity

The need for the offshore sector’s own supply value chain is becoming ever more apparent. Factors
that are highlighting the particularity of the offshore supply value chain include increasingly complex
projects, turbines that are scaling up in size, avoiding weather windows for installation, and making
O&M more efficient by having onsite service teams.

Developers continue to seek access to offshore wind plant components amid bottlenecks resulting
from the nascent industry’s supply constraints, especially for turbine, vessel, and transmission
capacity. While some of the industry’s supply chain bottlenecks are starting to be overcome, others
are emerging, with a high dependency on a few manufacturers, which require sufficient critical mass
for the necessary investments in increasing production facilities.

Exhibit 1-8: Europe Offshore Wind Installation Vessels by Sea Depth and Crane Capacity
Limitation Overview

≤ 80 m.

2 3

≤ 60 m.
1 1
6 2 6 6 1 2
Sea Depth 

5
Limitation

5
≤ 40 m.

10 1 1 3

≤ 20 m.
X Operating Vessel
1
X Announced Vessel
0
0 ≤ 200 Te ≤ 400 Te ≤ 600 Te ≤ 800 Te ≤ 1,000 Te ≤ 1,200 Te ≤ 1,400 Te ≤ 1,600 Te

Crane Capacity Limitation

Note: Circle size denotes number of installation vessels

Source: Companies, IHS Emerging Energy Research

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1.6 Investment Outlook

Global offshore wind turbine costs have steadily increased over the past several years, driven by tight
competition to secure turbines and the development of more technically complex projects, as near-
shore and shallow-water projects are close to being tapped out. Currently, turbines account for
around 54% of offshore wind project costs. As projects become more complex, the cost of marine
works and foundations increases, driving total cost-per-megawatt-installed up. With commodities
prices (including rare earths, copper, and steel) going up and supply chain bottlenecks like installation
vessels lifting costs, IHS EER foresees cost increases of around 6% by 2014. When new turbines
from Vestas, Gamesa, Alstom, XEMC, Samsung, and Mitsubishi enter serial production and become
commercially available from 2014–2015 onward, considerable pressure on turbine prices is expected.
Additionally, competition from Chinese manufacturers including Sinovel will play an important role in
pushing prices down, should these players produce a bankable turbine in the coming years.

Exhibit 1-9: Offshore Wind Project Cost Breakdown

Wind Turbine System Cost Split Overview Key Cost Levers

Projects are moving farther offshore, into deeper 
Development
Site Selection waters, increasing costs of foundations, installation, 
/Other
and transmission
13% WTG
34%
Foundations Bankable turbines are a particular issue, along with 
14% installation vessels, ports, and skilled staff. Ongoing 
Supply Chain
capacity investments will take time to ease this

Electricals
Steel accounts for a significant part of the cost of an 
15%
offshore project. After sustained price increases in 
Commodities
rare earth metals, copper, and steel, commodity 
Installation price tensions are expected to ease
24%

Source: IHS Emerging Energy Research

Global Offshore Market to Reach US$52 Billion by 2025

Global offshore wind investment including transmission is positioned to grow nine-fold between 2011
and 2025, rising from US$6 to nearly US$52 billion. This estimate is based on global pricing
scenarios that are based on the European experience and that take into account expected shifts in
supply capacity, demand incentives, transmission initiatives, and the industry’s move along the
learning curve in handling equipment and construction risk. The contours of this growth scenario
include:

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