Move to offshore wind electricity generation

The electric power industry accounts for around 32% of annual global carbon dioxide emissions, producing approximately 15.8 giga tonnes of CO2 emissions per year (1) – with renewable energy sources contributing ~ some 7% of the electricity generation (2).

The pre-dominant sources of electricity generation are coal (37%), natural gas (24%), hydro (16%) and nuclear (10%). Offshore wind electricity generation accounts for 0.4% of global generation (2), and is projected to reach around 3.3% by 2030 (3).

Offshore wind turbines are located on water or seas using more consistent wind speeds (compared to land) to move turbine blades and generate electricity.

Offshore wind can play a major role in helping to generate electricity and maintain supply for the world’s growing electricity demand, which is projected to double by 2050 (4).

In comparison to electricity generated in a coal plant, lifecycle emissions from an offshore wind turbine can be 99% lower per MWh. Expanding wind offshore electricity generation to take advantage of higher and more consistent wind speeds can reduce carbon dioxide emissions (compared to coal-based electricity) in (5):

• Operations and maintenance by more than 95%

• Downstream processes by more than 90%

The offshore wind electricity generation market is expected to significantly grow over the next decade. In 2020, globally installed offshore wind capacity accounted for 40 GW and this installed base is expected to grow by more than 15-fold to 630 GW by 2050. Growth rates are expected to fluctuate between 7 to 16% annually across geographies, prompted by technological, performance and cost advancements in the offshore wind industry. These improvements lead to a lowering levelized cost of electricity (LCOE) over the years, declining from 150 €/MWh just recently (in 2015) to less than 50 €/MWh by 2024 (an approximate 12% year on year decrease).

While the EMEA region currently has the largest installed capacity (25 GW in 2020), Asia-Pacific and Americas are projected to grow at higher rate over the next decades.

The following implementation options are typically considered by companies aiming to adopt offshore wind:

• Engage a third party to enter bi-lateral purchasing agreement, e.g. Power Purchase Agreement (PPA)

• Enter a multiple party consortium for offshore wind construction and operation

Image: Offshore wind market growth

Source: McKinsey. How to succeed in the expanding global offshore wind market

Climate impact

Targeted emissions sources

Offshore wind turbines used for electricity generation target carbon dioxide emissions across all stages of the product life cycle.

Switch to offshore wind electricity generation impacts emission on Scope 1 and Scope 2, and Scope 3 with a focus on:

• Category 1 (Purchased goods and services)

• Category 3 (Fuel- and energy-related activities not included in Scope 1 or Scope 2)

• Category 10 (Processing of sold products)

• Category 11 (Use of sold products)

• Category 12 (End-of-life treatment of sold products)

Decarbonization impact

Since offshore wind power generation produces low emissions during the use phase, the decarbonization impact compared to fossil-fuel based power generation (particularly coal- and gas-based) is significant. Use phase emissions for offshore wind represent around 4 gCO2e/kWh, compared to >980 gCO2e/kWh for electricity derived from coal, due to emissions produced by the combustion of material (6).

However, emissions associated with the production of wind turbines can be substantial, and depend on the type of steel used during production (grey or green). Compared to the construction of a coal plant (which requires 70-100 tonnes of steel per MW), the emissions associated with the production of the wind turbines are 10-20% higher (turbines require 80 to 120 tonnes of steel per MW).

Dismantling and decommissioning wind turbines produce CO2 emissions equivalent to other renewable energy generation sources. Wind turbines are around 90% recyclable, as most components maintain high end-of-life value.

Business impact

Benefits

Higher energy generation efficiency (than onshore), better power generation consistency (with a load factor of around 40%, vs 25-30% for onshore in Germany and 10% for solar) clean or low carbon electricity generation, lowering LCOE cost over next decade, no land usage constraints, and no interference with land structures.

Costs

• Impact on operating costs

Offshore wind turbine operating cost is one of the lowest across all electricity generation sources – competing with PV panel operating cost and expected to be the lowest within next decade, as performance and technological improvements advance. The cost of operation is expected to decline by around 50% from current levels by 2030, driven mainly by technological improvements.

• Investment required

CAPEX investments cost of offshore wind turbines in 2022 are higher compared to other widely used electricity generation methods, however, rapid reductions in technology costs are expected to make offshore cost competitive over the next decade.

• Eventual subsidies used

Regional and country-specific subsidies may apply (depending on the region of use).

Indicative abatement cost

Abatement cost for offshore wind turbines (dependent on technology currently in use):

• -110 to 30 USD/tCO2e (2022)

• -140 to -10 USD/tCO2e (2030)

Impact beyond climate and business

Co-benefits

Possibility of low consumer price of purchased energy, no water use or pollution, job opportunities, no visual on-land pollution, and no farmland disruptions.

Potential side-effects

Electricity intermittency issues, noise or vibrations with a potential threat to fish and marine wildlife, electricity transmission losses based on wind farm location, local disruption to ocean and sea life related to construction and operation

Typical business profile

All organizations along energy generation value chain and other entities, such as governments. Industry players seeking opportunities to invest in offshore wind can typically engage wind third-party end-to-end contracts, e.g. Corporate Power Purchase Agreements.

Approach

Offshore wind turbines implementation must consider geophysical or geotechnical surveying, seabed preparation, turbine transportation and set up. Additionally, it is important to consider local grid connection contracting, sea or ocean wind conditions, maintenance, decommissioning cost and strategy. Multiple approaches for construction can be deployed depending on the chosen turbine type (e.g. monopile, tripod or floating structure). The connection of the solution to a destination power grid must be assessed, first to offshore substation, an onshore substation and transmission center.

Stakeholders involved

• Company functions: Procurement, Operations

• Main providers: Siemen Gamesa, Vestas, Senvion, Adwen, Envision Energy

• Other: local electrical grid and maintenance operators

Key parameters to consider

• Solution maturity: Optimizing and efficient, expected to scale within next decade as demand for renewable energy sources grows

• Lifetime: 25 years

• Technical constraints or pre-requisites: cost of installation, maintenance and operations cost under corrosive conditions, available construction techniques

• Additional specificities (e.g. geographical, sector or regulation): water levels, wave and wind conditions impacting turbine efficiency, grid integration, local regulations will apply, rigorous environmental standards

• Eventual subsidies available: local subsidies may apply based on region and cost of application

Implementation and operations tips

The adoption of offshore wind electricity generation solutions requires the selection and analysis of type/size of installation, available geophysical and geotechnical conditions, and the cost of maintenance.

Scaling offshore wind turbine solutions requires product performance improvements and leveraged cost of electricity optimization before they can reach financial competitiveness. Countries and regions must implement standardization processes for offshore wind turbine installation to enable efficient market growth over the next decade.

Maintenance operations should be adjusted to manufacturers’ policies and energy transmission plans. Storage capability must be implemented to avoid energy shortages in low wind conditions.