Allianz Commercial’s “A turning point for offshore wind” report identifies emerging trends and a number of risk challenges facing the sector as it prepares for global growth.
According to Allianz, summer temperatures reached record or near-record levels in Europe, the US and Asia this year amid a climate of instability that has ensured concerns about energy security remain high. With climate deadlines looming, the number of offshore wind installations is proliferating around the world as their potential to power the net-zero transition and bolster energy security is increasingly realized. With 8.8GW of new offshore wind capacity added to the grid last year, 2022 was the second highest year in history for offshore wind installations. Global installed offshore wind capacity at end 2022 reached 64.3GW, compared to just 5.4GW in 2012.
The climate crisis, carbon deadlines and geopolitical instability have galvanized investment in global offshore wind, with international governments committing to rollout in regions far beyond the traditional North Sea hub of the industry. Last year, 8.8GW of new offshore wind capacity was added to the grid, making 2022 the second highest year in history for offshore wind installations. Global offshore wind capacity at end 2022 reached 64.3GW with China, the UK and Germany accounting for 84% of offshore wind installations. The Global Wind Energy Council (GWEC) expects 380GW of offshore wind capacity across 32 markets to be added over the next 10 years (2023-2032).
As explained, more than 99% of the total global offshore wind installation is in Europe and Asia-Pacific today, but the US is investing heavily in this sector and China has overtaken Europe as the world’s biggest market, with half of the world’s offshore wind installations in 2023 expected to be in the country.
While growth ambitions are huge, all is not plain sailing for developers, according to the report. Spiraling costs have halted major wind projects recently and the industry is impacted by inflation, capital expenses, rising interest rates, and geopolitical instability.
The scale and scope of the global offshore wind roll-out is epic. It requires the expansion of manufacturing footprint, port facilities, and infrastructure. And it needs to be fast-tracked by all stakeholders in a joint effort – financial institutions, corporates, and governments.
…said Adam Reed, Global Leader Offshore Renewables and Upstream Energy, Allianz Commercial.
The sector has to carefully manage the deployment of emerging technologies at scale. Novel approaches include so-called ‘energy islands’ which share power between grids and nations and multi-purpose wind farms that produce green hydrogen or house battery storage facilities.
Managing the increasing size of wind turbines is another key challenge. In the last 20 years they have nearly quadrupled in height – from around 70m to 260m – almost three times taller than the Statue of Liberty in New York. Rotor diameters have increased fivefold in the past 30 years. Wind turbines with capacities of 8 or 9MW are common, but newer models reach 14 to 18MW with a wind farm project in Australia recently announcing plans to use 20MW turbines.
With new technological approaches and an increase in turbine size comes a corresponding increase in risk. We are closely monitoring the many innovations in the offshore wind industry which include prototypical technologies, pilot projects, and evolving standardization. These new and unproven technologies often come with a lack of technical maturity and data available.
…says Dr Wei Zhang, Senior Risk Consultant, Natural Resources, Allianz Commercial.
Despite its invaluable contribution to the net-zero transition, the offshore wind industry needs to be mindful of responsible development and environmental stewardship, the Allianz report points out. This includes managing its impact on biodiversity and marine wildlife or the sourcing of required raw materials such as rare earth elements or lithium.
