This is Dana Perkins, and you're listening to Switched on the B and EF podcast, and today we're talking about the state of the global wind industry. Now, one could say that wind has been stuck in the doldrums. For those of you who are not familiar with this term, the doldrums is actually a nautical term referring to parts of the ocean where sailing ships could get stuck for
long periods because of a lack of wind. Apart from it being a clever pun, maybe this is an apt description of where the wind industry has been for the past few years.
To put this.
Idea into numbers, year on year wind capacity installations grew by six percent in twenty twenty four. This is far short of the average annual growth rate of twenty five percent that is needed between now and twenty thirty to stay on track with net zero goals. Wind is simply
not moving fast enough. But on the other hand, the one hundred and twenty four gigawatts of wind that we expect to see installed by the end of this year represents an annual record, So arguably, if wind has been in the doldrums, maybe now it's coming out of them.
The answer to this question really lies and what has been done by policymakers to accelerate the market and how the wind industry is evolving, and then what role technology can play and unlocking new opportunities so that record breaking years are also aligned with net zero goals on policy. Certain countries are beginning to figure out the puzzle of how to scale wind and overcome barriers such as permitting
that has held many markets back. On the topic of evolution of the industry, we look to China which is not only pioneering onshore wind it previously unheard of scales. Their turbine manufacturers are also increasingly becoming a factor in the global market, and in India, wind manufacturers are beginning to achieve traction on a significant scale. When it comes to technology, the prospect of floating wind could unlock opportunities
to expand capacity in previously inaccessible location. So on today's show, Tom Rowland's Reese takes over hosting duties where he is joined by bnaf's head of Wind Oliver Metcalf. Oliver talks about some of the work his team has been doing, particularly in recent reports titled Unlocking Investment to triple renewables by twenty thirty, alongside the third quarter twenty twenty four wind turbine ordered data set, volume surges and floating offshore
wind Big Potential but Big Price tag. BNF subscribers can access these reports at BNAF go on the Bloomberg terminal, or at BNF dot com. Right now, let's hear Tom and Oliver's conversation about wind. Where we are now and where the wind is blowing.
Ollie, Hi, Hi Tom. So I'm going to start by maybe putting a little bit of pressure on you as the head of wind. And so I was looking at some of the output from our new energy outlook, which of course is not a forecast, it's a scenario modeling exercise. And we have two main scenarios. One is the economic transition scenario, where if there's no new policies and economics
plays out what happens. And then there's our net zero scenario, where we add this constraint that the world has to get to net zero by twenty fifty, consistent with heating of one point seventy five degrees. So I looked at the role of solar and wind, and this is important because I know that often the conclusion of these kinds of studies is like, oh, there's no silver bullet to
climate change. It's an all of the above solution. And I think it's not that that's wrong, but everything relies on the decarbonization of the power sector because so much of the other stuff requires clean electricity. And clean electricity the bulk of the heavy lifting is that's going to be done. There is going to be done by two technologies, wind and solar. This is I don't think this is controversial. So wind and solar, it is an all of above world. But wind and solar are like lynch pins to the
whole things. If they don't deliver what they need to deliver, then the whole pack of cards falls down. So I looked at the neo net zero scenario and it says that in that world of net zero, by twenty to fifty on an annual basis, we should be generating twenty nine percent of our electricity from solar, and in our economic transition scenario, actually twenty eight percent of our electricity
will be getting generated by solar. So this is if the economic transition scenario is saying that's the track we're on, and we're almost on the right track for solar. Solar is doing its bit wind net zero scenario forty four percent of our electricity generated by wind, so a bigger role than solar, but in our economic transition scenario only thirty one percent. That's telling us that we're not on track for wind. So it would seem that wind, on the trajectory we're on, is the weak link in the
energy transition. I suppose my first question to you with that framing is where is the wind industry today and the wind market today, And with this kind of thought in mind, that it's not on track, what needs to change?
We've seen a difficult couple of years for the wind industry. I think given the cost inflation we saw after the pandemic, high interest rates and supply chain bottlenecks that slowed down the growth of the wind sector on shore and offshore. It's still having effect today. So equipment costs are still much higher for wind turbines, for example, when you compare it to solar or battery technology, where we've seen costs start to fall again after the cost inflation we saw
after the pandemic. So the wind sector is still stumbling through this period of higher costs there are some kind of non economic factors that are really hitting the sector hard. So some grid connection constraints, permitting constraints tend to affect wind more than it affects solar. So that means that we've seen more sluggish growth for wind technology compared with solar, where we're seeing this boom and like you say, solar
is roughly on track for net zero. We did a bit of modeling recently looking at the tripling renewables pledge that was outlined at the end of the COP twenty eight summit in twenty twenty three. The result of that analysis, where we were contextualizing that goal and then benchmarking progress, was that if we do manage to triple renewables by twenty thirty, that puts us roughly in line with our
net zero scenario from our New Energy Outlook analysis. Or tripling renewables by twenty thirty would put us on a path to net zero by twenty fifty.
So that's the right goal.
Solars on track for that tripling renewables, and we're predicting that the wind sectors only just going to just of a double by twenty thirty, and that speaks to those economic constraints that we're seeing those continued high costs, but also some of those non economic factors that in some markets with significant support that's available to wind, it's not the economic stuff that's this holding the sector back, it's
these non economic factors like grid connections and permitting. They're kind of boring regulatory stuff that needs to get sorted from a policy perspective to see the kind of growth that would be required for the wind sector.
Like your answer, because you know, I was talking about a twenty fifty horizon and actually you've bought it much closer with this tripling renewables and twenty thirty, so expecting a doubling of wind where what we need is a tripling of wind. So these issues that you've highlighted definitely carry through and effect the market through to twenty thirty. Do you think they're chronic problems? Is there a way that these might get resolved in the longer term?
I think that the good news is that we are expecting growth in the wind market. So in terms of annual installations by twenty thirty, we're expecting seventy percent more annual installations of wind than we're expecting this year. At the moment in terms of the really hot markets, we're kind of seeing star markets rather than a growth geographically spread around the world. The good news is that we're seeing examples of markets that are beginning to resolve these constraints.
So looking at a market like Germany is really starting to resolve. It's on shore wind permitting constraints that really hit the market a few years ago, and now Germany is permitting an increase amount of onshore wind capacity every year and we're really seeing the result of that in terms of the amount of projects the government is willing to support, getting closer to their goals, and we're expecting
really strong growth over the next few years. India is another market that was mired in many difficulties, whether that was land use issues and fragmented land ownership in the country, permitting constraints, under investment in the grid. There again, we've seen regulation go in to resolve some of those constraints and now we're expecting really strong growth in the market
over the next few years. So there are countries that are beginning to resolve some of these issues, but it is a chronic issue around the world because we're seeing a lot of governments and officials announcing really high targets plans to install more wind capacity, but the chronic issues they're not putting in the supportive legislation that's required, the kind of boring regulatory stuff that I was talking about
before to realize those goals. It's easy to say a number, it's less easy to put in place that regulation to cut the red tape that needs to be cut to realize fast growth for the wind sector globally.
I mean, this is, by the way, just a reflection a classic example of the dilemma when you're working in a climate related sector of how to feel because I don't think most industries are expecting. What did you say it was seventy percent growth? Did I hear that right?
Was it seventeen in terms of annual installations seventy percent higher in twenty thirty compared with twenty twenty four.
Yeah, I mean that's huge, and then you know, doubling. Most industries don't get that. So on the one hand, if you're sort of a cheerleader for the wind industry, you'll be out celebrating, But then you have people like me saying, oh, that's not enough. From a climate perspective, it's really interesting to hear that there's these countries like
Germany and India who beginning to figure it out. I know we're both based in the US, and I think the US has had some success with wind in certain markets and is still figuring it out in other regions. Do we see any evidence where there's some sort of global harmonization, like different countries are learning on what does work and doesn't work in resolving these issues.
I think victually there is a wide consensus, and it's what the wind industry has been saying for a long time. But I think policymakers are beginning to notice that these are common problems in many markets around the world, these issues around transmission, issues around permitting. Progress has been patchy in many cases. The EU has been encouraging member states to resolve some of these issues, in trying to implement some targeted changes in order to resolve some of these constraints.
I think the difference between Germany and many of the rest of the EU countries is Germany almost immediately started implementing some of those EU suggestions and turn that international level policy, whereas many other markets around the EU have been dragging their heels. Other markets like Brazil are facing significant transmission constraints, but they've held very successful transmissional auctions, bringing the private sector in to build really long distance,
high voltage transmission lines. So while those transmission issues are hitting the market today, we're expecting increasing installations towards the end of the decade as they begin to resolve. Some of those constraints are very well understood, and we're beginning to, like I say, see some markets resolve some of those issues, but it really takes active policy making because these issues
just don't fix themselves on their own. And so I think those markets where we're really seeing that growth are the ones that have set those targets, but now they're really doing the additional work to build the regulation so that those targets turn into reality, rather than arriving at twenty thirty way off that goal.
What's really interesting here as well, is there's this perception that pushing renewables, pushing a cleaner agenda is all about subsidies. This is a problem that has nothing to do with subsidies. You can't subsidize your way out of this issue. It's a non economic factor. It's to do with untangling a lot of local regulations and laws and having to do it over and over again in not just different countries, but even within the same country. Probably a lot of those laws are different.
Yeah, a really good example is the US, which has very generous subsidies in the Inflation Reduction Actor extended those subsidies until at least the end of the decade. The problem in the US isn't an economic one for wind projects. It's around project supply, so it's getting more expensive and you have to wait longer for a grid connection agreement.
In many US markets, permitting is incredibly fragmented, so some permitting is done on a federal basis, some permitting rules are on a state level, and in some cases it goes right down to the county level, and there's different permitting requirements depending on which county the wind project is getting built in. That's really difficult if you're a developer trying to navigate all of these different systems, some of
which are stricter than others. In some there may be moratoria against new wind development, and in a county next door that might not be the case. And so yeah, those things are non economic. They're these really general federal subsidies available, but they make no difference if there aren't projects coming through the pipeline to use those subsidies.
It's really interesting hearing about, you know, some of the developments in Europe, some of the developments in India and the US. Of course, we can't really talk about the global picture without talking about what's happening in China with regards wind, So how are things developing there?
So China is by far the largest wind market globally. For onshore wind, it represents over half of global annual additions every year. Wow, offshore wind, it's almost that kind of depends on the year, but it's a really really big chunk of the market. So yeah, we can't talk about the global wind industry without talking about China. The
sectors moving really fast there. So we forecast that China will add seventy one gigawatts of onshore wind capacity in twenty twenty four, seventy nine gigawats in twenty twenty five, but really really rapid growth in China compared with where we were just a few years ago. Part of the story in China is they're building these mega projects, they call them megabases, So that's really large scale projects built in the north of the country, typically for wind where
it's really windy in desert areas. We're talking about projects at the gigawatts scale. Typically, projects we only really see offshore in other markets using really large turbines, so they getting scale not only on the project side, but also the kind of technology scale as well. We recently saw a Chinese turbine manufacturer now so fifteen megawatt turbine for
use onshore in northern China. Now, it's really difficult to install turbines that big on shore usually because they're logistical constraints. You've got to ship these really long blades for a turbine that size, they might be over one hundred meters
through small towns, up mountains and things like that. They're building these projects in deserts, so there are a few of those logistical constraints, so they can use those larger turbines that when you're using a higher capacity turbines, it means you need fewer of them for a project of the same capacity. Basically, that means that using a bigger turbine cuts costs because you also need fewer foundations, fewer cables,
fewer days hiring a crane to install the things. So China's kind of realizing this scale in terms of project and turbines that are driving down the costs. That's really helping to drive growth across the market. But also there they've really pushed down the price of wind to a stop levels. So last time we did an analysis of wind turbine prices, the average price of a turbine delivered in China in the first half of twenty twenty four
was three hundred thousand dollars per megawatt. That's around a third of the cost of the average turbine price delivered in other markets around the world. That's partly due to those impacts around scale that I was talking about before, but also the Chinese market is very fragmented. There are around twelve major turbine suppliers there and over the past few years they built up a huge over manufacturing capacity
for wind turbines. For the the selles of wind turbines during this fragmented market, they've got an over capacity and these turbine makers are fighting for market share rather than necessarily focusing on the profitability of the contracts they're signing. So it means that the profitability of some of these Chinese suppliers have really suffered over the last couple of years as we've seen this astonishing reduction in price. So that is great news if you're a developer of a
wind project in China. But for the Chinese turbine makers themselves, they're now looking at ways to boost profitability, and one way they're doing that is looking to export market.
We're going to come back to the export markets. I had so many questions to ask along the way there. Firstly, I just want to dive into understand these like mega projects a little bit better. What you're describing is almost like onore offshore wind in that they're qualitatively different from your typical onshore wind, and they're I mean quantitatively as well in terms of the scale of the projects. Presumably there's a reliance on HVDC infrastructure, which is high voltage
direct current transmission. Is this a new frontier for wind, not just in terms of scale, but because it's suddenly qualitatively different. Now you can almost describe this as a different category in the same way that your typical onshore wind is different from offshore wind. This sounds like something else again, this model that is being developed in China in the same way that certain markets were pioneers for
offshore wind. Do you think that they are pioneering a model that could be replicated elsewhere.
Potentially, and these mega based projects are becoming a crucial growth driver in the way we see it for the overall Chinese wind sector. We're expecting four tyike gig whats of these wind projects to come online in twenty twenty four and twenty twenty five, but we're expecting a further one hundred and six gig what's of these projects to come online from twenty twenty six to the end of
the decade. Part of the reason that China can deliver these large projects is that they're building these projects where land is ample and there are a few permitting restrictions. Usually these are being built by big state owned developers as well, so there are kind of fewer of these regulatory barriers to building these projects those kind of areas, and that situation is harder to come by in other market. So we are seeing some really large projects under construction
in the US. So there's a couple of projects being built in the US, one in Wyoming, one in Arizona. At the moment that are a similar scale to these megabased projects we're seeing in China, And while the turbine capacity aren't as large as the project's examples we're seeing in China, they're still realizing those economic benefits you get from pure project scale. But in other markets, it's hard to find those locations in those situations where you can build projects of that kind of scale.
Got it. I mean that's super interesting, and I do wonder if if over time there might be other opportunities uncovered, you know, because it's it's not maybe as easy to search. When you're thinking about offshore wind. You look at coastline, you look at water depth, you look at wind speed, and you can already, like without too much research, identify all of the places where there's decent offshore wind potential. We are going to come back to offshore wind as well,
actually in a moment. But you said made this point about Chinese turbine manufacturers. So if I understand correctly, the picture painted is the Chinese market is big. It's growing, I believe, Or is it always that big?
No, it's big, it has grown and it will continue to grow for this.
Rest Okay, So it's always been big, it's getting bigger, and it's going to get even bigger than that. But Chinese turbine manufacturers have maybe got too big too fast, and now there's overcapacity. And I remember, whenever I've looked at this, it's always seemed like there's two separate worlds. There's Chinese wind, which is a Chinese market served by Chinese manufacturers, and that's about half the global market. And then there's the rest of the world, served by a
number of international companies, none of which are Chinese. So it's kind of been China and everyone else, both as a market and an industry. But you mentioned now that Chinese manufacturers are starting to make inroads into other markets around the world, So tell us a bit more about what that looks like and what's actually happening at the moment.
Yeah, So the Chinese tab i maker's home market has historically been huge. It's meant that there was less of a drive for them to really target export aggressively. So there has historically been some progress that they've made, but that's really rapidly started to change over the last couple of years as pricing pressure has been so intense at home that they're now looking to export markets, where they're typically able to sell turbines at a much higher rate
and earn a higher profit margin on those sales. Still, by our calculations, a turbine delivered outside of China, if it's supplied by a Chinese turbine maker, that's around twenty eight percent cheaper than an equivalent turbine supplied by a US or European manufacturer, And in many markets around the world, that price difference is very attractive, and particularly in emerging markets that are just kind of looking at wind more seriously.
At the moment, we're seeing the influx of Chinese turbine technology and those cheaper turbines begin to drive up installations and increase the pace of wind market growth in those markets. So Chinese turbine makers are having more success in places like Central Asia, Southeast Asian countries like Vietnam, they started
selling a lot of turbines. Some markets in the Middle East and Africa as well are starting to move from a situation where the market was completely dominated by US and European turbine manufacturers are now pretty much exclusively purchasing Chinese turbines in some cases, but there are also some kind of more established markets that are now making a similar switch. So I was talking about the Indian market before.
Yeah, I was just going to ask.
So the Indian market is a really exciting one for the wind industry at the moment. It's one of those markets with the highest rates of growth. But it's moving from a place where back in twenty twenty one, the vast majority of turbines commissioned were being manufactured by European
and US manufacturers like Siemens Gamesa. Now it's local Indian manufacturers that were in real dire financial straits a few years ago, and now they've kind of turned that situation around and those domestic players are winning a lot of orders, but also Chinese turbine makers are making serious inroads there
as well. Indian has some local content requirements which really favor companies that have local manufacturing capacity in the Indian market, and Envision, which is a Chinese turby maker, has set up a factory in the market and is really benefiting from securing.
A lot of orders there over the last few years.
So we track turbine orders secured by turbi makers around the world outside of China every quarter, and we've really seen over the last three years, that complete switch in the Indian market from being dominated by EU and US players to in twenty twenty four, almost all all of the orders we tracked have been for Chinese or Indian manufactured turbines.
That's super interesting, and I guess there's two factors at play there. One is that Chinese manufacturers having to look beyond China because their domestic market, although huge, was not quite huge enough of them. And then also India's wind industry beginning to pick up. And I'm really interesting because I mean, you've identified India is this exciting place for wind right now, a growth market, and given the local content requirements, we know that a certain part of that
is going to be going to Indian manufacturers. Can you ever see a scenario or a pathway forward where we might start seeing Indian wind manufacturers exporting, competing with Chinese manufacturers, competing with the US and European manufacturers potentially.
I think some of those Indian manufacturers I was talking about before have been in real financial difficulty a few years ago, and so they've been getting back on their feet in their home market. But speaking to some of them, they've definitely got plans in the future to export more of their turbines. So yeah, there's definitely potential in the market to see this slight diversification of the global turbine supply market rather than this in India specific story that
we've we've been noticing. So far, we haven't seen much progress in terms of actual turbine sales or orders come in for those Indian turbine manufacturers, so it's kind of plans rather than evidence that we're seeing so far. But yeah, there's definite potential there.
It makes me think of another question that springs to mind, a related question, because if you're looking at any country to develop their industry, whether through economic planning or you know, industrial planning or any other means, you want to look at like what is the global capacity. So, for example, it is very well known that solar at the moment,
there's global overcapacity of manufacturing. So I have often said, I don't think it makes that much sense for the US to be trying to develop its own solar supply chains, even with all the geopolitical considerations there, because fundamentally that's never going to be something you can export from. And I'm kind of thinking I was thinking the same thing in relation to you know, as I asked the question about India, is would it make sense for them to
do that if there's global oversupply. Now you mentioned that there's overcapacity in China, which is half the market, So would you say that there is a global overcapacity in wind manufacturing at the moment.
So wind of really complex machines. They're made up of loads of different components, and it's really a component by component story we're looking at is whether there's overcapacity where there needs to be more supply chain investment. So when we talk about there being overcapacity in China, that's definitely the case for mis cells, for example, so those boxes that sit on top of a wind turbine tower that house the generator, the gearbox, the main bearing, and all
of those important subcomponents. But the other thing I'd say, when we're talking about an overcapacity for Nicell manufacturing in China, wind components are so large that once a market reaches a certain level of scale, it doesn't necessarily make sense to build those nes cells in China and ship them all over the world to manufacturer blades which are eighty one hundred meters long, and ship them from China everywhere else, like it might make sense for solar or battery equipment.
Right, it's not as modular I suppose.
Exactly, and the components are just just bigger. So it means that actually we're seeing some Chinese turbine manufacturers that are targeting specific markets are setting up local facilities despite the fact that they've got this over capacity at home. So Goldwyn, the largest Chinese turbine manufacturing actually the largest turbine maker in the world in terms of commissioned capacity last year according to our Wind Turby Market Shares report,
just opened manufacturing facility in Brazil for example. I mentioned Envision has its factory in India, and we've seen some Chinese turby makers talk about opening manufacturing facilities in Europe. So even though we've got this over capacity in China itself, it doesn't necessarily mean that that capacity will or can be used to service the global market, got it.
So it's not with wind, It's not as simple as adding up all the capacity in the world and then comparing it to the needs it's always going to be. It's inherently more local.
Yes, yeah, that's true, And like I said before, it's inherently kind of component based as well. Right, So there are some parts of the supply chain that are in
significant under supplies. So if you look to offshore wind, for example, if you speak to the developer today, if you want to secure an installation vessel that can install the really heavy foundations or the turbines offshore, these are really specialized vessels, and as turbines get bigger, the number of vessels in the fleet that can install these heavy components,
these tall components is shrinking. So if you speak to a developer today, you're looking much later in the decade if you're looking to book one of these vessels to install turbines or foundations at your project. So we're looking at a situation where there's massive overcapacity for some components in the market, but for other supply chain services, we're looking at a really really tight market. So it's really component by component when you look at the wind supply chain.
Speaking of offshore wind, this whole framing i've given of wind in a way needing to step up so that it isn't the weakest link. And you've provided lots of examples of, you know, reasons to be optimistic, things that are exciting, that are happening. We haven't talked about new technologies at all, and I know that your team has
been looking a little bit at floating offshore wind. So just tell us a little bit more about what the role of floating offshore wind could be and where it's at right now as a technology.
Yes, so floating off your wind could be a really exciting new avenue of growth for the wind sector. It's a much more nascent technology. So whereas the vast majority of projects up until now, turbines have been installed on foundations that are fixed to the seabed, and we're seeing some demonstrator projects, much smaller projects so far of turbines that are installed on floating platforms that are then more
than anchored to the seabed. At the moment, this is a much newer technology, it's much more expensive, and it's just at a demonstrator scale.
So when you say it's much more expensive, can we put a number on that? I think you said that an onshore wind turbine from China is a three hundred one thousand dollars per megawatt. So what are we looking at for the kind of state of the art floating wind turbine?
I think rather than looking at just the cost of the turbine, it's you sort of look at the project as a whole. Today, floating wind is well over two times as expensive for one of those kind of early demonstrated projects than an equivalent bottom fix off your wind project that we're seeing being installed at the industrial scale. So the largest project on the construction at the moment around the world is in UK waters so at bottom
fixed project, and that's three point seven gigawatts. We're expecting that to come online over the next couple of years. If you compared that to the largest operational floating wind project today, that's eighty eight megawatts or less than nine point one gigawatt. So the sectors are at completely different stages at the moment. So floating wind projects at the moment today, those early demonstrator scale projects are coming in markets that are willing to pay the cost premium needed
to bring the cost of this new technology down. So that's markets in Europe. We've had seen some early demonstrators in Japan, but beginning to see the sector look to make that next step up in scale. So I mentioned the largest project so far, it's off the coast of Norway. It's it's eighty eight megawats owned by Equanor called the
High Wind Tampon project. This year we've seen France hand out a revenue support contract to a floating wind project or will be just over two hundred and fifty megawatts. The UK has handed out a subsidy contract a couple of months ago to a project that will be four hundred megawatts.
So beginning to see these.
Projects just beginning to reach that stage of commercial scale, and reaching that scale is going to be crucial for the sector to make those learnings to bring down the cost of the technology and to learn how to go from the very specialized process of manufacturing one of these floating platforms to the serial manufacturer of lots of these
things to build a large scale project. So the sectors going through that process today, which means that we forecast the overall capex for a floating wind project from between kind of six to eight million dollars for megawat today to decrease to four point four million to five million dollars from megawatt by twenty thirty. A lot depends on
the characteristics of the project site. So floating wind is built in deep waters usually above seventy meters water depth, but we're seeing some projects going at around seventy to one hundred meters. If you're looking off the coast of California, you're looking at projects that will be installed in waters over one thousand meters water depth. So there's a big
range in costs depending on the site specific characteristics. But we are expecting to see costs come down, which is going to be crucial if the floating wind sector is going to go from a really subsidy driven phase today to being at all competitive with other technologies.
I suppose there's a more fundamental question I have to ask about floating offshore wind is why you know you mentioned it's it's way more expensive than fixed bottom off offshore wind, which is in turn more expensive than onshore wind. So yes, these costs can come down, you know, and that would be driven by subsidies together get that scale. But why is anyone talking about floating offshore wind.
So there are a lot of markets around the world that have limited seabed areas with shallow enough waters to build bottom fixed projects. So while in many of those markets they're building bottom fixed projects today, markets like South Korea like Japan, we're expecting if they want to make offshore wind a crucial part of their wider energy transition strategy, they're going to have to start to look towards floating wind.
And another key example is the west coast of the US, where the continental shelf drops off very quickly, so you get very deep waters very quickly.
As you move further offshore.
It's very difficult in California, for example, to secure a permit for an onshore wind farm, and you've got grid today that's getting increasingly dominated by solar. Solar generation and wind generation tends to be quite complementary. But if they can't build an onshore wind project, and they don't have waters shallow enough to build a bottom fixed offshore wind project, then they're going to have to look towards floating wind. So we see a few of these markets around the
world that need to add wind to their mix. They're struggling to build on shore projects and so they're going to have to look towards floating wind at some point. I think those are the markets we're expecting to see an increasing number of commercial scale projects, probably as we move into the early twenty thirties and floating.
Off sure, I mean you mentioned it. It is moored to the seabird, so I presume that rather than it being the water depth just no longer matters. It more opens up a range of depths. Is that a fair way to describe it? Or is it that you could literally build this anywhere?
I think when you get to those really deep waters
it brings its own challenges. There are certain technical gaps at the moment for floating wind that see the still need to get resolved so it's not just a cost issue, and one of those is around electrical infrastructure, and for projects in really deep waters, they still haven't really resolved all the technical constraints around building an offshore wind substation that collects all the generation from each of the individual turbines and then exports it back to shore with a
really large cable. Now, many of the larger projects, even if they use floating turbines, they've either run the cables from each individual string of turbines all the way back to shore, so you have multiple cables running back to shore, or they've built a bottom fixed offshore wind substation, usually with a kind of really deep jacket foundation or picked a point of the site that does have slightly shallower waters to build that bottom fixed substation, even if the turbines are floating.
That doesn't become possible.
If you're looking off the coast of California and the waters are one thousand meters deep, you just can't build a bottom fixed foundation for your substation there. So there are some technical gaps for the electrical equipment that needs to go in that in that floating substation, and those haven't really been resolved or there hasn't been a solution. So some companies have been proposing, for example, underwater substations, which is just a completely wacky and new concept for
the industry. Some have been looking at floating foundations, but some of the equipment that goes into these substations don't deal too well with the small movements you'd get with being on a floating platform. And also some of the cables that will be required to run the power from this substation down to the seabed they have to be dynamic cables that can deal with kind of mooing loads, and for those really high capacity cables, some of the
technical constraints still haven't been worked out. And so yeah, there are some significant difficulties that might make delivering one of those projects in a really deep water market like California significantly more difficult than the early, smaller scale demonstrators we've seen coming online in the UK, in Norway and that we're expecting to see in East Asian markets like South Korea.
I mean, one of the things that being in this sector has taught me is to never bet against human ingenuity time and time again, whether it's with the scale of wind or whether it's with the costs of things like batteries and photovoltaic solar. You know, things that were problems can get solved. So if those technical problems with floating offshore wind can be resolved, do you have a rough view of how big an addition to the market
it could be. So you know, if we're looking at say twenty fifty, what percentage of wind could be floating offshore wind.
Well, we forecast the offs your wind market out to twenty forty and our viewers that floating turbines could make up more than ten percent of the cumulative operating offshore wind fleet by that year. But yeah, the cost of floating wind has to dramatically fall in order to see that scale of installations.
And when you calculated that ten percent, do you think that you were you know, in terms of how these technical problems get solved. Do you think that you are being sort of sober realists or techno optimists. Could this be bigger or do you think that's like an upper limit.
At the moment. There's a lot of potential for floating wind, but some of these early projects have been running into difficulties. Costs have been spiraling for some of these early scale demonstrators. Some of these things could be teething issues, but I think we've always been quite pessimistic on floating wind, and I think we're beginning to see some of our forecasts we made a few years ago start to come true compared with what some other market experts were saying.
So maybe I should better against human ingenuity a little bit more often.
Yeah, I think everything's possible from engineering perspective. It's a case of whether things make sense from a cost perspective. The good thing is that we forecast costs are going to come down, So by twenty thirty, we're expecting around a forty percent cost reduction compared with those early scale demonstrated projects we've seen to date, so that's going to
be crucial. But we're still expecting by twenty thirty and by twenty forty for floating wind projects to be significantly more expensive than bottom fixed So we're probably going to see floating wind projects not necessarily compete directly on a cost basis with bottom fixed off your wind, but like I say, they're going to come in markets that kind of have to look to floating wind if they want
to scale their offs your wind sector earlier. So those are the markets where we're expecting growth, and we're still expecting it to be a really policy subsidy driven sector in those markets all the way out to twenty forty. So that's the growth driver here, and significant cost reductions could accelerate that progress, but we're not expecting to see such quick cost reductions that floating wind is going to be a competitive technology when we think about the other technologies available it.
It's going to be in the mix, but it's not going to be a game changer, I think, is what I'm hearing.
Yeah, that's why I think that ten percent number still assumes that we resolve some of those technical constraints. We resolve some of those cost constraints, but it's still only represents kind of a small proportion of the market.
So, Ollie, I started by saying that in the energy transition, maybe wind is in danger of being the weaklink. And I think from having talked to you, I feel less pessimistic about wind. It seems to me that the although it's not maybe necessarily a technology solution like floating offshore wind that's going to resolve this, it sounds more like it's human persistence. So some of these examples you've given where countries are working out some of the thorny regulatory
questions to try and help wind maximize its potential. We're also just seeing some of the scaling that's happening in China. Are you feeling optimistic about the market? Do you think I was unfair when I said it was in danger of being the weaklink? Or as someone who looks at this small clily, do you feel that maybe the neo picture that I painted doesn't really capture the full potential and momentum that's happening in this market.
So I think things desperately need to accelerate. If you look at what my team forecasts for the next ten years or so. Like I say, we're still expecting a doubling, not a tripling, by twenty thirty and that tripling only comes by twenty thirty five. So comparing where we stand today to where we need to be, we need to accelerate rapidly. But I am filled with confidence that we
are starting to see incidences of good practice. We're starting to see countries resolve some of these constraints that are chronic across the global industry. So if some markets can solve these issues around permitting and grid, then there's no reason why we can't start to see things start to change in other markets. And hopefully my team's outlook gets rosier and rosier as we see some of this kind
of necessary legislation start to come in place. So I think you painted an accurate picture that WIND isn't where it needs to be to get the world on track for net zero. But I think if markets start to implement some of those solutions that we're seeing in some cases, then we might see a kind of acceleration that would be required to get us on track.
And if this stuff was easy, would have already done it. Ollie, thank you so much for joining today.
Thanks very much for having me on.
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