European offshore wind draws record investments in 2020

EDF's Teesside offshore wind farm in the U.K. The offshore wind sector saw a record influx of fresh investments in 2020, according to industry group WindEurope. Source: EDF

Europe's offshore wind market attracted a record €26.3 billion of investments in 2020 to finance 7.1 GW of new capacity, according to data from industry group WindEurope, providing further evidence that the renewables sector not only shrugged off the economic disruption from the coronavirus pandemic, but benefited from widespread enthusiasm for green power last year.

The U.K., Netherlands, Germany and France all saw final investment decisions made for new offshore wind farms, including the Dutch 1.5-GW Hollandse Kust Zuid project and Dogger Bank A and B in the U.K., which totals 2.4 GW. These two projects alone saw €15.5 billion in capital raised, WindEurope said in a Feb. 8 report.

On average, capital expenditure for newly financed projects was €3.6 million per MW, with a large range across projects. France's Fécamp offshore wind farm by Electricité de France SA, Enbridge Inc. and wpd AG, as well as the Saint-Brieuc project by Ailes Marines SAS, were costlier due to long permitting delays, and the Dogger Bank project also required more capital as it includes transmission costs and is located far off the coast of England.

Danish wind giant Ørsted A/S connected the largest share of new projects to the grid in 2020, followed by Switzerland-based investor Partners Group Holding AG and Spanish utility Iberdrola SA.

Offshore wind also grew in popularity for corporations seeking renewable power. Six offshore wind power purchase agreements were signed in 2020, by INEOS Ltd., Borealis BV, Deutsche Bahn AG, Amazon.com Inc. and Nestlé SA. For developers, the agreements help guarantee revenues in the long term. "This is particularly important where zero-subsidy bids are being placed and developers are fully exposed to the wholesale market price," WindEurope said.

The only government auction held last year for offshore wind saw the Dutch Hollandse Kust Noord wind farm awarded to a consortium of Royal Dutch Shell PLC and Eneco BV.

Meanwhile, Europe's floating wind fleet still has a steep climb ahead. It now totals 62 MW following the commissioning of EDP Renováveis SA and Engie SA's 25-MW WindFloat Atlantic project in Portugal last year. The project pipeline for the technology now stands at over 7 GW, with France, Norway and the U.K. fielding the most projects.

Scotland's Kincardine floating wind plant was financed during 2020 at a cost of €8.3 million/MW.

Bigger machines on the horizon

The average rated capacity of wind turbines in Europe's waters has increased by 16% every year for the past few years. For projects installed in 2020, the average was 8.2 MW, 5% more powerful than the prior year. The most widely connected machine was an 8-MW to 8.4-MW turbine from Siemens Gamesa Renewable Energy SA.

Siemens Gamesa connected 237 turbines worth 1.8 GW last year, ahead of rivals Vestas Wind Systems A/S, which commissioned 103 turbines totaling 976 MW, and General Electric Co., which did not connect any.

Turbines set to be used at projects coming online after 2022 range between 10 MW and 13 MW in size, coinciding with the rollout of GE's new 12 MW to 13 MW Haliade-X machine.

On the back of the European Commission's Green Deal emissions plan, policy resolve over offshore wind generally strengthened during 2020. The commission hiked its 2050 target 25-fold to 300 GW, and the U.K. also bumped up its 2030 target to 40 GW. Players active in European markets are also anticipating an auctions bonanza this year.

Meanwhile, in Germany there was fierce debate over the future offshore market design, with the industry pushing for a U.K.-style contract for difference approach. A plan to effectively make developers pay for the right to build wind farms was however shelved for two years.

According to WindEurope, European government commitments add up to 111 GW of capacity to be developed by 2030. To make this happen, they urged for further regulatory support.

"In the short-term up to 2030, large uncertainties remain on the ability of governments to expedite permitting, including the coordination of their maritime spatial plans, and on the pace of grid build-out on- and offshore," the group said.