Renewables are not uncommon in Europe. In fact, most renewable technology development was initiated in Europe. This is primarily attributed to Europe proactively managing the energy crisis and environmental concerns. Several laws have been enacted with mandatory targets and generous subsidies that have fuelled the growth of renewables in Europe. Wind energy is no exception to this; Europe is considered to be a veteran in the global wind energy market. Activity in the wind energy market originated in Europe, long before other parts of the world were seriously working on implementing it.

Chart 1.1 shows the wind energy
market development in
global regions.


In 2000, Europe accounted for 12.9 GW of installed capacity, whereas North America had only 2.6 GW and Asia Pacific a mere 1.7 GW. However, the regional difference in installed capacity has narrowed down considerably, and Europe’s share, though high in terms of cumulative capacity, is relatively small in incremental capacity additions. Europe’s share in global installations has been dropping since 2005 as other regions pick up pace and grow at a faster rate.

Chart 1.2 depicts the share of
European installations in
wind energy.


Changing Dynamics

While other regions are warming up to onshore wind and its prospects, it is considered a near-mature market in Europe. This is due to the availability of land, feasible locations and the higher capacity factor of offshore wind. Offshore wind has a capacity factor which is significantly higher than that of onshore wind. Onshore wind had an average capacity factor of 24.3 percent in 2009, whereas offshore wind had a capacity factor of more than 40.0 percent. Since 2007, Europe has heavily concentrated in increasing offshore projects. Advancements in deep water turbine technology have further increased the appeal of offshore wind to several investors. The large coastline and regulatory environment have supported the growth of offshore wind. However, as projects go deeper into the water, the need for government support increases, due to cost constraints and cabling difficulties.

Chart 1.3 presents the growth in offshore
installations from 2000 to 2009
in the European wind energy market.


In addition to regulatory support, Europe also has the most economical offshore wind cost, which has drawn the attention of several investors.

Chart 1.4 presents the cost comparison
of wind energy across
several regions.


Geographical Dominance in Offshore Wind

The United Kingdom is currently the largest producer of offshore wind energy globally. It is bestowed with the best wind resources in all of Europe. Although onshore wind overshadows offshore wind (~600 MW) currently, the recent spurt in growth has been attributed to offshore projects. General Electric and Siemens have contributed to the recent spurt in offshore projects by announcing investments to the extent of €500 million in Europe, particularly the UK. Vestas, a dominant player in onshore wind, is planning to re-enter the UK market. However, the rigorous consenting process and the reduction in consents have significantly hampered growth of onshore and offshore wind.

Germany claims to have an offshore potential of 10,000 MW by 2020. Their first offshore wind energy park went online in August 2009 and is expected to power 50,000 homes. With onshore sites diminishing, offshore is the most promising option to develop wind energy. Though historically, there have been some efforts in investing in and developing the huge offshore potential, it is now considered one of the most promising among renewables.

Dong Energy has recently bid for a 400 MW offshore wind energy farm in Denmark with a massive investment of $1.8 billion. Several other offshore projects have been commissioned that are expected to further raise the average capacity factor in Denmark.

Conclusion

Siemens controls 70.0 percent of the offshore wind turbine market. Although new companies have entered the offshore wind turbine market, Siemens has a sizeable order backlog and has cemented its position. They are in an advantageous position to exploit the $3.9 billion offshore wind turbine market in 2010.

Europe’s onshore potential, though plenty, has been more or less sidelined due to the enormous opportunities present in offshore wind. Most of the investments are to be channelled towards offshore wind development and turbine manufacturers.

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