On 21 November 2019, Glennmont Partners held a seminar in Amsterdam on market trends in offshore wind and battery storage.
Below are some key points from each of our speakers.
Offshore wind has rapidly become mature in Europe and is now fully mainstream. Significant growth of capacity is forecasted. Also, Asia and the US are fast developing.
Van Oord is continuously looking to improve and achieve further economies of scale to enhance offshore wind’s competitiveness as an energy source. Van Oord is working on a series of innovations in the installation of turbines and has some of the largest fleets of specialist vessels.
A rapid consolidation of developers and EPC contractors may be expected given the size of the individual projects. The lower to zero subsidy environment regime will lead to possible anomalies in supply and imbalances and will need further system integration to ensure that all market participants have a profitable business model.
The understanding of offshore wind’s technical performance has rapidly deepened in the last years, with a significant amount of capacity installed.
Design concepts are well tested and proven. The availability of suitable vessels is much deeper and in construction they are better able to install components in a range of weather conditions.
The offshore wind market is ready for a new set of larger turbines and towers and there is more confidence that the grid can handle significant offshore wind capacity.
New challenges may emerge as the next range of offshore wind turbines are introduced that may be floating in deeper waters and are likely to be further offshore; for example, what to do with cables in floating offshore wind installations and ground conditions.
With respect to storage and batteries, significant progress has been made to drive costs down and enhance capacity. Various forms of storage will be needed, from very short durations to longer-term durations. Storage will support merchant market environments and help to manage peaks and drops in volatile markets.
Rapid growth in renewables is expected. The share of Feed in Tariff revenues supporting total clean energy assets in Europe is rapidly decreasing as more and more projects are built on the basis of merchant revenues.
The vast majority of projects will soon be subsidy free. Price cannibalisation is a key risk for merchant renewables.
Looking forward, gas and power price correlation will decouple and renewable energy prices will lead their own trajectory, possibly leading to cannibalisation.
Geographical diversification – owning wind assets in multiple countries – can help to mitigate this risk. Technology diversification (owning gas, solar and wind) may also help to mitigate the risk.