High costs, rising interest rates, and chain disruptions have given Biden, who has ambitious plans to develop U.S. offshore wind power, a head start.
However, at the same time that oil companies are canceling the delivery of an offshore wind project to New York State, China's clean energy market is warm. Different from the slow pace in the first three quarters of last year, since the fourth quarter of last year, not only have many sites started the preliminary work of offshore wind power, but the sea wind bidding boom has also rebounded significantly, and 2024 has been predicted by many brokerages as a "big year for the delivery of sea wind projects".
According to CICC, China's new wind power capacity is expected to reach 70-80 GW in 2024, and offshore wind power is expected to increase by 80% year-on-year compared with onshore wind power, which has remained largely stable.
Offshore wind resources are more abundant than onshore and the wind direction is more stable, making offshore wind power generation more power than onshore wind power generation in the same time, so it is also widely regarded by the international market as one of the key technical paths for energy transition under the goal of carbon neutrality.
So why does the "sea breeze" in China and the United States present a picture of cold and warm days?
Norway-based energy company Equinor and British energy giant BP announced in early January the termination of an agreement with the New York State Energy Research and Development Authority (NYSERDA) for Empire Wind 2, one of the largest offshore wind projects in the United States, with an estimated installed capacity of nearly $13 GW.
According to a statement from the two companies, the decision to terminate the agreement was made after "changes in the economic environment", rising inflation and interest rates, as well as the disruption of the ** chain, which made it impossible to implement the National Renewable Energy Certificate (OREC) for offshore wind.
Wall Street Insights noted that Equinor and BP were initially selected in early 2021 to sign the Empire Wind 2 contract, which is part of the largest contract in the US offshore wind market to date. Empire Wind 2 is initially expected to begin commercial operations in 2028, with the closest point located about 14 miles offshore Long Island.
This is just the latest in a series of setbacks for the US offshore wind industry, with Orsted, the world's largest offshore wind developer, also announcing a halt to the development of offshore wind projects Ocean Wind 1 and 2 in New Jersey, with the group saying impairments could reach US$5.6 billion due to rising costs and chain delays, particularly vessel shortages. In total, at least a dozen East Coast projects attempted to renegotiate offtake**, according to Reuters, with contract cancellations and broader project uncertainty dealing an early blow to hopes for U.S. offshore wind.
Other developers that have terminated offshore wind purchase agreements (PPAs) include Iberdrola subsidiary **Angrid, and a consortium between oil group Shell and Ocean Winds (a joint venture between Portugal's EDP Renewables and France's ENGIE).
*Angrid canceled its 804 megawatt Park City project and Connecticut 12 GW of federal wind power project agreement, while Shell and Ocean Winds terminated its Massachusetts 12PPAs for GW South Coast Wind Power Projects.
But the offshore wind industry has an important role to play in helping Biden** and several states, including New York, meet their goals of decarbonizing the grid and tackling climate change. New York State has set a mandatory goal of 70% of its electricity from renewable sources by 2030 and a goal to achieve zero emissions in the electric sector by 2040. Biden** has set a target of 30 gigawatts of offshore power generation capacity by 2030.
The essence of the setback of the American "Sea Breeze" lies in the significant cost **. Undesirable events include historic inflation triggered by the pandemic and Russia's invasion of Ukraine, which has dealt a severe blow to the nascent offshore wind industry. Just as several projects are preparing to sign contracts with ** vendors, the construction cost of wind power arrays has been greatly raised.
An analysis published by Energy Monitor, a division of GlobalData, found that the cost of wind turbines has increased by 38% over the past two years.
To make matters worse, the U.S. chain is not ready for a sudden massive construction boom and has not yet reached a critical scale for manufacturing offshore wind towers, blades and rotors, or building and operating ships needed for offshore installations.
According to the in-depth assessment of the U.S. instinctive wind energy chain, the U.S. wind power chain is still in its infancy in offshore wind power and has matured in onshore wind power, but the competitiveness of the United States in key wind turbine components is declining, which has put huge pressure on the offshore wind power chain.
In China, the opposite is true.
Since 2019, when the national ministries and commissions issued a document clarifying that all new offshore wind power resource development rights have been obtained through competitive allocation, the development cost of domestic offshore wind power projects has fallen rapidly in the fierce market competition environment, and some regional projects have basically achieved the goal of grid parity.
From the perspective of power generation enterprises, the whole life cycle cost of offshore wind power projects refers to all the costs spent from planning, design, construction, operation and commissioning, mainly including construction costs, operation and maintenance costs, financial costs, and decommissioning costs. The unit cost per kilowatt of the whole life cycle and the levelized cost of electricity are the two key indicators to measure the whole life cycle cost of wind farms. The above-mentioned person said.
A research report by Tsinghua University's Institute for Carbon Neutrality found that since 2006, the average levelized cost of energy (LCOE) of onshore wind power projects in China has fallen by 70%, and offshore wind power has fallen by 56% from 2010 to 2021.
From the perspective of the change trend of offshore wind turbines, the cost of offshore wind power remained relatively stable from 2017 to 2020, about 6800-6500 yuan kW; By 2021, it will drop to 3,500 yuan kilowatts, and by 2022, it will drop to about 3,300 yuan kilowatts, and the overall offshore wind turbine will drop by 506%。
According to data from the International Renewable Energy Agency (IRENA) cost database, the average LCOE of onshore wind projects in China has fallen by 70% since 2006, and offshore wind has fallen by 64% from 2010 to 2022.
The analysis of Tsinghua University's Institute of Carbon Neutrality also said that the initial investment cost of onshore wind power in China in 2021 will be 5,000-6,500 yuan kilowatts, which is a significant decrease from 2020, and the initial investment cost of wind power will continue to decline. Among them, the cost of wind turbines (including towers) in onshore wind power projects accounts for the largest proportion, accounting for 49%, construction and installation engineering costs account for 26%, grid connection costs account for 14%, and other expenses account for 11%. For offshore wind power, driven by the reduction of wind power prices and the localization and batching of large-capacity offshore wind turbines, and the improvement of construction equipment and installation technology, the initial investment cost of offshore wind power in China in 2021 will be about 11,500-15,500 yuan kW, continuing to decline.
The investment in offshore wind power mainly includes unit costs, construction and installation engineering costs, transmission projects and other expenses, of which wind turbines (including towers) account for 43% of the total investment, and construction and installation engineering costs, transmission projects and other expenses account for % and 10% respectively.
Due to the difficulty of offshore development and the different development conditions in different sea areas, the investment cost of offshore wind power in different sea areas varies greatly: as of 2021, the unit kilowatt investment of wind farms in offshore class III wind areas in Jiangsu and the northern sea areas has dropped to 13,500 yuan kW; In Shanghai, Zhejiang, and western Guangdong, the investment per kilowatt of wind farms in offshore S-type wind areas fell to 14,500 yuan kilowatts; The investment per kilowatt in the offshore I wind zone in Fujian and eastern Guangdong fell to 15,500 yuan kilowatts.
At present, offshore wind power has become an important strategic new industry for global energy transition and global economic development, and China accounted for 80% of the new global offshore wind power market in 2021.
According to the evaluation of the Wind Energy Professional Committee of the China Renewable Energy Society**, the average cost of offshore wind power projects will be 10,000-11,000 yuan kilowatts by 2025, 8,500-9,500 yuan kilowatts by 2035, and 7,500-7,800 yuan kilowatts by 2060. According to the average unit kilowatt cost of offshore wind power projects, it is estimated that the LCOE of future offshore wind power projects will reach about 0 by 202534- 0.38 yuan kWh; 0. by 203521-0.23 yuan kWh; By 2050, LCOE will reach 020-0.21 yuan kWh; By 2060, LCOe will reach 019-0.20 yuan kWh.
In 2021, due to the adjustment of national subsidy policies and other factors, China's new installed capacity of offshore wind power reached 169 GW, with a cumulative installed capacity of 26 at the end of 20214 GW, the largest in the world.
The localization of installed capacity also makes the pressure on China's first chain relatively small. In terms of unit capacity, offshore wind power has averaged 28 MW to 74 MW. According to Tsinghua's assessment, the capacity of offshore wind turbines is more than 18 megawatts, and the capacity of a single turbine of 6 megawatts and above has become the mainstream model, and China's self-developed 16 megawatt offshore wind turbines that have been rolled off the assembly line are in the leading position in the world.
In the field of offshore wind turbine parts, large-scale lightweight blades need to be developed and mass-produced, and the localization of bearings, converters, gearboxes and castings and other products need to be strengthened urgently. In terms of domestic turbines, Goldwind and China Haizhuang have successively rolled off the assembly line of 16 MW and 18 MW wind turbines, and the R&D technology of domestic machine manufacturers is basically the same as that of overseas manufacturers, and even catches up with international technology.
According to the latest industry data, China has become the world's largest wind power equipment manufacturing base, accounting for more than 2 3 percent of the world's output, and in 2022, Chinese companies will occupy six of the world's top ten wind power equipment manufacturers.
Zhao Feng, strategy director of the Global Wind Energy Council, once told ** that by 2026, except for China, most parts of the world may have bottlenecks in the industrial chain. In the field of onshore wind power, although the production capacity of China, India and other countries is relatively sufficient, the European production capacity can not actually meet the local demand, if there is a war, geopolitical conflicts and barriers, it may lead to the suspension of global capacity flow, and there may be a capacity shortage in Europe by 2026.
The situation of the offshore wind power chain is even more severe, only China's production capacity is still surplus, and Europe, North America, and Latin America and other regions may be tight.
However, the above-mentioned report of Tsinghua University also pointed out that the current development of offshore and deep-sea wind power technology is not synchronized, among which, offshore wind power technology has become cost competitive, while deep-sea wind power technology has initially entered the market, but does not have a cost advantage, and still needs the support of national policies.
In addition, there are still some technical bottlenecks to be solved, and some links of the wind energy industry chain are relatively dependent on foreign countries, mainly including wind resource analysis, wind turbine design and other engineering software, key electronic devices in key bearings, converters, controllers, carbon fiber, balsa wood, lubricants and other key materials.
The structure of the offshore wind power industry chain is similar to that of onshore wind power, which can be roughly divided into three links: upstream raw material production and parts manufacturing, midstream machine and related submarine cable construction, and downstream wind power operators. However, due to the high investment in the early stage of offshore wind power development and operation and the long project period, the developers are mainly dominated by large power central enterprises. The industry concentration of complete machine manufacturers has been continuously improved, the localization ability of key components has been continuously improved, and the level at home and abroad has gradually decreased.
However, in the future, offshore wind power will gradually develop to the deep sea, which will put forward higher requirements for the R&D, manufacturing, installation, operation and maintenance, and related equipment manufacturing of wind turbines.
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