The International Energy Agency came out with a forecast this week which suggests that offshore wind could exceed €1 trillion. Despite stories being written that this is a massive increase in last year’s numbers, we still think the IEA is under-estimating this market.
It said that offshore wind will grow to 15 times its current size and in Europe it will become the biggest energy supply source by 2040. But all of us know that the biggest markets for wind are not in Europe, but in Asia and as those countries embrace offshore wind, Asia will push this market faster and further than anyone realizes. Our own forecast for offshore wins is due out before Christmas, and a combination of pipeline and government intent shows that the IEA report is an under-estimate.
The IEA Offshore Wind Outlook 2019 looks ahead for two decades, and is part of the World Energy Outlook 2019, set to be published on the 13th of November.
Today offshore wind only accounts for 0.3% of global electricity generation, but it has been well established that it has a theoretical potential easily capable of meeting all global energy needs.
Key findings in the IEA report show China is set to overtake the UK as installed capacity leaders by 2025, and will reach 175 GW of capacity by 2040, with other emerging players including Japan, India, the US and South Korea contributing towards a global capacity of 342 GW.
The report also envisages a sustainable development scenario where policy is used to accelerate growth to an installed capacity of 562 GW by 2040.
We often criticize energy forecasts for underestimating development, by ignoring projects not currently in the pipeline, but on this timescale the IEA has not been able to do that. The report has been hailed by many for this, “showing how falling costs and technology development have made offshore wind an obvious choice.” This is an easy opinion, when most previous forecasts have projected lower capacity, rather than considering that even now these predictions may still be conservative.
Instead Rethink argues that basing a forecast on existing policies can still cause an underestimation, albeit to a lesser extent, when considering a technology that is rapidly developing, and how climate change protest may influence government policies around the world. Countries like Taiwan are key examples of places where policy frameworks have evolved swiftly, which seems to have been neglected in the IEA forecast.
Countries likely to require floating wind technology, like Japan and France, have been tentative with their policy statements, but as floating wind is successfully deployed elsewhere, the technology will become competitive with traditional offshore towards the end of the 2020s. From then, policy shift, especially in Asia, is likely to cause an explosion of development towards the middle of the following decade.
Due to the lead time of projects, which can often extend to nearly 10 years, deviation from predictions is unlikely to be seen by 2030. Our estimates suggest that the installed capacity is more likely to follow the trajectory of the IEA’s sustainable development scenario to 2030, and probably go above this in the run up to 2040.