Battling severe economic headwinds, Europe’s wind industry has picked up the pace and substantially increased offshore projects developed in the region.
According to the European Wind Energy Association (EWEA), developers connected 132 turbines to the grid in the first half of this year. Those turbines, which have the cumulative capacity to generate 523 megawatts, represent a 50 percent increase over the first half of 2011.
As EWEA points out, 2012 has turned into a surprisingly good year for offshore wind in Europe:
2012 could turn out to be the best year ever for offshore wind energy in Europe, as a further 160 turbines, totaling 647.4 MW, are built but awaiting grid connection. But this is subject to weather conditions at sea and grid connection delays.
A total of 4,336 MW offshore wind capacity was operating as of 30 June 2012 — up from 3,294 MW in June 2011 — producing electricity for the equivalent of 4 million households.
During the first half of 2012 overall, 13 wind farms were under construction. Once completed these wind farms will account for an additional capacity of 3,762 MW.
In the first six months of this year, the number of financial transactions closed equaled the number closed in all of 2011. As we pointed out last fall, no projects in 2011 had been financed through debt; however, 30 percent of projects closed this year were done so with debt. EWEA attributes the increase in deals to the diversity of commercial banks and public financing agencies engaged in the market.
However, the Danish wind consultancy MAKE Consulting estimates that project financing will need to grow by 50 percent over the next five years in order for European countries like Britain, Germany, and France to meet their offshore wind targets. With European banks continuing to develerage themselves, it’s not clear if the necessary project finance will be available. Bloomberg News also reported on an upcoming report from MAKE on the slump in sales of offshore turbines that will impact the future pipeline of projects:
Sales of offshore wind turbines collapsed in the first half, a sign the power industry and its financiers are struggling to meet the ambitions of leaders from Angela Merkel in Germany to Britain’s David Cameron.
One unconditional order was made, for 216 megawatts, 75 percent less than in the same period of 2011 and the worst start for a year since at least 2009, according to preliminary data from MAKE Consulting, a Danish wind-energy adviser. Vestas Wind Systems A/S (VWS) of Denmark, the largest manufacturer, won the contract while Germany’s Siemens AG (SIE) was among those shut out.
In Germany’s section of the North Sea, utility RWE AG (RWE) is working on foundations for its $1.2 billion Nordsee Ost development but can’t install turbines until a grid connection is made. Competitor EON AG (EOAN) said in February its Amrumbank West project will be delayed 15 months because of grid issues.
The financial crisis has helped draw out negotiations on funding. Centrica Plc (CNA), Dong Energy A/S and Siemens in June completed a $660 million financing for the Lincs wind farm off the U.K.’s shores two years after talks first started.
The cost of financing and connecting projects to the grid has raised the installed cost of offshore projects by 30 percent in the first half of this year, according to Bloomberg New Energy Finance. Analysts at the firm say they expect those costs to fall as installation techniques become more standardized and financing bottlenecks open up. In June, the UK’s Crown Estate issued a report concluding that the cost of offshore wind projects could fall by one third by 2020.
Despite the mixed picture, the industry is taking a decidedly optimistic view about growth. The industry’s trade group projects that the European offshore wind market will grow from roughly 4 gigawatts of cumulative capacity to 150 gigawatts of cumulative capacity by 2030 — meeting about 14 percent of European electricity demand.