Offshore Wind
Outlook 2019

World Energy Outlook Special ReportOffshore Wind
Outlook 2019

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Foreword
As the challenge of meeting global sustainable energy goals increases, it becomes evermore crucial to expand the range of available and affordable low-carbon technologies.
Pioneered in Europe, offshore wind is a compelling example of a rapidly maturing
technology that is poised to make a major difference in future energy systems. Working
with governments, industry and research bodies, the International Energy Agency (IEA) has
produced the most comprehensive global study on offshore wind to date.
Based on current and proposed policies, our analysis shows that global offshore wind
power capacity is set to increase 15-fold over the next two decades, turning it into a$1 trillion business. Its potential is far greater than that, however, as made clear by the IEA
Sustainable Development Scenario, which outlines a path to meeting global climate, air
quality and universal energy access goals. In this scenario, offshore wind not only helps toput the global power sector on track for full decarbonisation, it also becomes the leading
source of electricity in Europe and enables hydrogen to dramatically cut emissions fromsectors such as iron, steel and shipping.
This report lays out where offshore wind stands today, how it could develop and whichchallenges still need to be overcome. To properly assess offshore wind’s global potential,
the IEA collaborated with Imperial College London to undertake a special geospatial
analysis. Using the latest satellite data, the project mapped out in detail the speed andquality of wind along hundreds of thousands of kilometres of coastline around the world.

IEA. All rights reserved.

This new study complements IEA coverage of the renewables sector and its increasingly indepth work on electricity security. Those efforts include co-organising with the German
Federal Ministry for Economic Affairs and Energy the first Global Ministerial Conference on
System Integration of Renewables in October 2019 to share ideas for fully grasping theopportunities of wind and solar power. We are also carrying out a major new study on
global electricity security in the 21st century. The report, to be published in September
2020, will look at how to manage the integration of more variable renewables into power
grids, how to protect energy infrastructure from cybersecurity threats and how to improve
resilience to natural events.
Some may question why I decided to devote so much of the IEA’s time and effort to thisreport on offshore wind, a technology that today supplies just 0.3% of global power
generation. The reason is that its potential is near limitless. Improved technology and steep
cost reductions are putting more and more of that potential within our reach. But muchwork remains to be done for offshore wind to help decarbonise electricity and, through the
production of hydrogen, possibly other sectors as well. That work includes putting inplace policies to promote investment and spur innovation. I hope this report helps
governments make those smart policy choices for the future development of thispowerful emerging technology.
Dr. Fatih Birol
Executive Director
International Energy Agency
Foreword3

Acknowledgements
This study was prepared by the World Energy Outlook (WEO) team in the Directorate of
Sustainability, Technology and Outlooks (STO) in co-operation with other directorates andoffices of the International Energy Agency. The study was designed and directed by
Laura Cozzi, Chief Energy Modeller, and Brent Wanner, WEO lead on power sector
modelling and analysis. The other main authors were Connor Donovan, Alberto Toril and
Wilfred Yu. The study relied on support from across the entire WEO team, in particularfrom Yasmine Arsalane, Davide D’Ambrosio, Jianguo Liu, Sebastian Papapanagiotou,
Claudia Pavarini, Daniele Perugia, Leonie Staas, and Michael Waldron, as well as valuableguidance from Tim Gould, Head of the WEO Energy Supply and Investment Outlook
Division.
Edmund Hosker carried editorial responsibility. Debra Justus was the copy-editor.
Teresa Coon, Marina Dos Santos and Eleni Tsoukala provided essential support.
Mechthild Wörsdörfer, Director of STO, provided guidance throughout the project.
Valuable comments and feedback were provided by other senior management andnumerous other colleagues within the IEA. In particular, Paul Simons, Timur Gül, NickJohnstone, Peter Fraser, Paolo Frankl, Heymi Bahar, Zoe Hungerford and Cedric Philibert.
IEA Office of the Legal Counsel, IEA Office of Management and Administration, and IEA
Energy Data Centre provided support and assistance throughout the preparation of thereport.
Thanks go to the IEA’s Communication and Digitalisation Office for their help in producing
the report and website materials, particularly to Jad Mouawad, Jethro Mullen, Astrid
Dumond, Katie Lazaro, Jon Custer, Christopher Gully, Martin Tav, Rob Stone and Sabrina
Tan. Diana Browne provided essential support to the peer review process.
Valuable input to the analysis was provided by: Iain Staffell (Imperial College London);David Wilkinson (independent consultant); Christopher Andrey and Maxime Chammas(Artelys); Kirsten Adlunger (German Environment Agency), Philipp Beiter (National
Renewable Energy Laboratory, United States), Jesper Breinbjerg (Ministry of Energy,
Utilities
andClimate,Denmark),
Karsten
Capion(DanishEnergy),Sune Strøm (Ørsted), Lukas Wienholt (Federal Maritime and Hydrographic Agency,
Germany) and Christoph Wolter (Danish Energy Agency).

IEA. All rights reserved.

Our special thanks to the following organisations, without whose substantial support andco-operation this study could not have been achieved: Danish Energy; the Danish Energy
Agency; the Danish Ministry of Energy, Utilities and Climate; the German Federal Ministry
for Economic Affairs and Energy; and Iberdrola.
A high-level workshop on Offshore Wind Outlook, Paris, 13 May 2019 was organised toprovide input to this report. The participants offered valuable new insights, feedback anddata for this analysis.
Further details on these events are at www.iea.org/weo/events.
Acknowledgements

5

Many high-level government representatives and international experts from outside of the
IEA have contributed to the process, from early consultations to reviewing the draft at alater stage, and their comments and suggestions were of great value. They include:
Ben Backwell
Marco Baroni
Harmeet Bawa
James F. Bennett
Fergus Costello
Ian Cronshaw
Francois Dassa
Ruud de Bruijne
Ralf Dickel
Giles Dickson
Jon Dugstad
Fridtjof Fossum UnanderDavid G. Hawkins
Dolf Gielen
Bente Hagem
Jan Hein Jesse
Gunnar Herzig
Masazumi Hirono
Stéphane His
Takashi Hongo
Hu Jiang
Jan Hylleberg
Hans Ejsing Jorgensen
Markus Klingbeil
Oliver Knight

IEA. All rights reserved.

Ken Koyama
Masaomi Koyama
Francisco Laveron
Isabel Murray
Esben Baltzer Nielsen
Susanne Nies
Karin Ohlenforst
Pak Yongduk
Jérôme Pécresse,
Jean-François Petit
Qin Haiyan
6

Global Wind Energy Council (GWEC)
Independent consultant
ASEA Brown Boveri (ABB) Power Grids
US Bureau of Ocean Energy Management (BOEM)
Siemens Gamesa
Independent consultant
EDF
Netherlands Enterprise Agency (RVO)
Oxford Institute for Energy Studies, United Kingdom
WindEurope
Norwegian Energy Partners (NORWEP)
Research Council of Norway
Natural Resources Defense Council, United States
International Renewable Energy Agency (IRENA)
ENTSO-E and Statnett
JOSCO Energy Finance and Strategy Consultancy
World Forum Offshore Wind
Tokyo Gas
Agence Française de Développement
Mitsui Global Strategic Studies Institute, Japan
Beijing Tianrun New Energy Investment
Danish Wind Industry Association
DTU Wind Energy, Germany
Shell
The World Bank, Energy Sector Management Assistance
Program (ESMAP)
Institute of Energy Economics, Japan
Ministry of Economy, Trade and Industry, Japan
Iberdrola
Department of Natural Resources, Canada
Vattenfall
European Network of Transmission System Operators forElectricity (ENTSO-E)
Global Wind Energy Council (GWEC)
Korea Energy Economics Institute (KEEI)GE Renewable Energy
RES France
China Wind Energy Association
Offshore Wind Outlook 2019 | Special ReportSven Reutzel
Manuel Rudolph
Aaron Smith
Stuart Smith

Federal Ministry for Economic Affairs and Energy (BMWi)
German Environment Agency (UBA)
Principle Power
National Offshore Petroleum Safety and Environmental
Management Authority, Australia

Christopher Snary

Department for Business, Energy and Industrial Strategy,
United Kingdom
Department for Business, Energy and Industrial Strategy,
United Kingdom
Innogy SEØrstedNetherlands Enterprise Agency
Swedish Wind Energy Association
TenneT
Ministry of Economic Affairs & Climate Policy, The
Netherlands
Stiftung Offshore-Windenergie
Prognos
MHI Vestas Offshore Wind

James Steel
Volker Stehmann
Ulrik Stridbæk,Bert Stuij
Charlotte Unger Larson
Rob van der Hage
Noe Van Hulst
Andreas Wagner
Paul Wendring
Masato Yamada

The individuals and organisations that contributed to this study are not responsible for any
opinions or judgments it contains. All errors and omissions are solely the responsibility of
the IEA.
This document and any map included herein are without prejudice to the status of orsovereignty over any territory, to the delimitation of international frontiers and boundaries
and to the name of any territory, city or area.

Comments and questions are welcome and should be addressed to:Laura Cozzi and Brent Wanner
Directorate of Sustainability, Technology, and Outlooks
International Energy Agency
9 rue de la Fédération
75739 Paris Cedex 15
FranceIEA. All rights reserved.

Email: weo@iea.org
More information about the World Energy Outlook is available at: www.iea.org/weo

Acknowledgements

7

Table of Contents
Foreword

3

Acknowledgements

5

Executive summary

11

Offshore Wind Outlook 2019
Offshore wind power today
Current status
Market size and key players
Offshore wind technology and performance
Offshore wind costs for projects commissioned in 2018
Offshore wind outlook to 2040
Global outlook
Regional outlook
Offshore wind costs, value and competitiveness

15
15
17
19
24
27
27
28
35

Opportunities for faster growth of offshore wind48

Global technical potential for offshore wind
Improved economics for offshore wind
Increased demand for renewable hydrogen
Public acceptance

48
54
55
56

Uncertainties that could slow offshore wind growth57

Developing efficient supply chains in new markets
Environmental concerns
Onshore grid development
Implications
Achieving environmental goals
Synergies with oil and gas activities
Enhanced energy security and affordability

57
57
58
61
61
62
64

IEA. All rights reserved.

Annexes
Annex A. Tables for scenario projections & technical potential

67

Annex B. Assessing the technical potential of offshore wind71

Annex C. Definitions

85

Annex D. References

93

Table of Contents

9

Executive Summary
The need for affordable low-carbon technologies is greater than everGlobal energy-related CO2 emissions reached a historic high in 2018, driven by anincrease in coal use in the power sector. Despite impressive gains for renewables, fossil
fuels still account for nearly two-thirds of electricity generation, the same share as 20 years
ago. There are signs of a shift, with increasing pledges to decarbonise economies and tackle
air pollution, but action needs to accelerate to meet sustainable energy goals. As
electrification of the global energy system continues, the need for clean and affordable
low-carbon technologies to produce this electricity is more pressing than ever. This World
Energy Outlook special report offers a deep dive on a technology that today has a total
capacity of 23 GW (80% of it in Europe) and accounts for only 0.3% of global electricity
generation, but has the potential to become a mainstay of the world’s power supply. The
report provides the most comprehensive analysis to date of the global outlook for offshorewind, its contributions to electricity systems and its role in clean energy transitions.

The offshore wind market has been gaining momentum
The global offshore wind market grew nearly 30% per year between 2010 and 2018,
benefitting from rapid technology improvements. Over the next five years, about 150 new
offshore wind projects are scheduled to be completed around the world, pointing to anincreasing role for offshore wind in power supplies. Europe has fostered the technology’s
development, led by the United Kingdom, Germany and Denmark. The United Kingdom andGermany currently have the largest offshore wind capacity in operation, while Denmark
produced 15% of its electricity from offshore wind in 2018. China added more capacity thanany other country in 2018.

IEA. All rights reserved.

The untapped potential of offshore wind is vast
The best offshore wind sites could supply more than the total amount of electricity
consumed worldwide today. And that would involve tapping only the sites close to shores.
The IEA initiated a new geospatial analysis for this report to assess offshore wind technicalpotential country by country. The analysis was based on the latest global weather data on
wind speed and quality while factoring in the newest turbine designs. Offshore wind’s
technical potential is 36 000 TWh per year for installations in water less than 60 metres
deep and within 60 km from shore. Global electricity demand is currently 23 000 TWh.
Moving further from shore and into deeper waters, floating turbines could unlock enoughpotential to meet the world’s total electricity demand 11 times over in 2040. Our new
geospatial analysis indicates that offshore wind alone could meet several times electricity
demand in a number of countries, including in Europe, the United States and Japan. The
industry is adapting various floating foundation technologies that have already been
proven in the oil and gas sector. The first projects are under development and look to prove
the feasibility and cost-effectiveness of floating offshore wind technologies.
Executive Summary11

Offshore wind’s attributes are very promising for power systems
New offshore wind projects have capacity factors of 40-50%, as larger turbines and othertechnology improvements are helping to make the most of available wind resources. At
these levels, offshore wind matches the capacity factors of gas- and coal-fired power plants
in some regions – though offshore wind is not available at all times. Its capacity factors
exceed those of onshore wind and are about double those of solar PV. Offshore wind
output varies according to the strength of the wind, but its hourly variability is lower thanthat of solar PV. Offshore wind typically fluctuates within a narrower band, up to 20% fromhour to hour, than solar PV, which varies up to 40%.
Offshore wind’s high capacity factors and lower variability make its system value
comparable to baseload technologies, placing it in a category of its own – a variablebaseload technology. Offshore wind can generate electricity during all hours of the day andtends to produce more electricity in winter months in Europe, the United States and China,
as well as during the monsoon season in India. These characteristics mean that offshorewind’s system value is generally higher than that of its onshore counterpart and morestable over time than that of solar PV. Offshore wind also contributes to electricity security,with its high availability and seasonality patterns it is able to make a stronger contribution
to system needs than other variable renewables. In doing so, offshore wind contributes toreducing CO2 and air pollutant emissions while also lowering the need for investment in
dispatchable power plants. Offshore wind also has the advantage of avoiding many land
use and social acceptance issues that other variable renewables are facing.

Offshore wind is on track to be a competitive source of electricity

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Offshore wind is set to be competitive with fossil fuels within the next decade, as well aswith other renewables including solar PV. The cost of offshore wind is declining and is set
to fall further. Financing costs account for 35% to 50% of overall generation cost, andsupportive policy frameworks are now enabling projects to secure low cost financing inEurope, with zero-subsidy tenders being awarded. Technology costs are also falling. The
levelised cost of electricity produced by offshore wind is projected to decline by nearly 60%
by 2040. Combined with its relatively high value to the system, this will make offshore wind
one of the most competitive sources of electricity. In Europe, recent auctions indicate that
offshore wind will soon beat new natural gas-fired capacity on cost and be on a par withsolar PV and onshore wind. In China, offshore wind is set to become competitive with newcoal-fired capacity around 2030 and be on par with solar PV and onshore wind. In the
United States, recent project proposals indicate that offshore wind will soon be anaffordable option, with potential to serve demand centres along the country’s east coast.
Innovation is delivering deep cost reductions in offshore wind, and transmission costs will
become increasingly important. The average upfront cost to build a 1 gigawatt offshore
wind project, including transmission, was over $4 billion in 2018, but the cost is set to dropby more than 40% over the next decade. This overall decline is driven by a 60% reduction in
the costs of turbines, foundations and their installation. Transmission accounts for around
12

Offshore Wind Outlook 2019 | Special Reportone-quarter of total offshore wind costs today, but its share in total costs is set to increase
to about one-half as new projects move further from shore. Innovation in transmission, forexample through work to expand the limits of direct current technologies, will be essential
to support new projects without raising their overall costs.

Offshore wind is set to become a $1 trillion business
Offshore wind power capacity is set to increase by at least 15-fold worldwide by 2040,
becoming a $1 trillion business. Under current investment plans and policies, the global
offshore wind market is set to expand by 13% per year, passing 20 GW of additions per yearby 2030. This will require capital spending of $840 billion over the next two decades,
almost matching that for natural gas-fired or coal-fired capacity. Achieving global climate
and sustainability goals would require faster growth: capacity additions would need toapproach 40 GW per year in the 2030s, pushing cumulative investment to over $1.2 trillion.
The promising outlook for offshore wind is underpinned by policy support in an
increasing number of regions. Several European North Seas countries – including theUnited Kingdom, Germany, the Netherlands and Denmark – have policy targets supporting
offshore wind. Although a relative newcomer to the technology, China is quickly building up
its offshore wind industry, aiming to develop a project pipeline of 10 GW by 2020. In the
United States, state-level targets and federal incentives are set to kick-start the offshore
wind market. Additionally, policy targets are in place and projects under development in
Korea, Japan, Chinese Taipei and Viet Nam.
The synergies between offshore wind and offshore oil and gas activities provide newmarket opportunities. Since offshore energy operations share technologies and elementsof their supply chains, oil and gas companies started investing in offshore wind projects
many years ago. We estimate that about 40% of the full lifetime costs of an offshore windproject, including construction and maintenance, have significant synergies with theoffshore oil and gas sector. That translates into a market opportunity of $400 billion ormore in Europe and China over the next two decades. The construction of foundations andsubsea structures offers potential crossover business, as do practices related to themaintenance and inspection of platforms. In addition to these opportunities, offshore oiland gas platforms require electricity that is often supplied by gas turbines or diesel engines,
but that could be provided by nearby wind farms, thereby reducing CO2 emissions, air
pollutants and costs.

IEA. All rights reserved.

Offshore wind can accelerate clean energy transitions
Offshore wind can help drive energy transitions by decarbonising electricity and by
producing low-carbon fuels. Over the next two decades, its expansion could avoid between
5 billion and 7 billion tonnes of CO2 emissions from the power sector globally, while also
reducing air pollution and enhancing energy security by reducing reliance on imported
fuels. The European Union is poised to continue leading the offshore wind industry insupport of its climate goals: its offshore wind capacity is set to increase by at least fourfold
Executive Summary13

by 2030. This growth puts offshore wind on track to become the European Union’s largest
source of electricity in the 2040s. Beyond electricity, offshore wind’s high capacity factors
and falling costs makes it a good match to produce low-carbon hydrogen, a versatile
product that could help decarbonise the buildings sector and some of the hardest to abate
activities in industry and transport. For example, a 1 gigawatt offshore wind project could
produce enough low-carbon hydrogen to heat about 250 000 homes. Rising demand for
low-carbon hydrogen could also dramatically increase the market potential for offshore
wind. Europe is looking to develop offshore “hubs” for producing electricity and cleanhydrogen from offshore wind.

It’s not all smooth sailing
Offshore wind faces several challenges that could slow its growth in established andemerging markets, but policy makers and regulators can clear the path ahead. Developing
efficient supply chains is crucial for the offshore wind industry to deliver low-cost projects.
Doing so is likely to call for multibillion-dollar investments in ever-larger support vessels
and construction equipment. Such investment is especially difficult in the face of
uncertainty. Governments can facilitate investment of this kind by establishing a long-term
vision for offshore wind and precisely defining the measures to be taken to help make thatvision a reality. Long-term clarity would also enable effective system integration of offshorewind, including system planning to ensure reliability during periods of low wind availability.
The success of offshore wind depends on developing onshore grid infrastructure.
Whether the responsibility for developing offshore transmission lies with project
developers or transmission system operators, regulations should encourage efficientplanning and design practices that support the long-term vision for offshore wind. Those
regulations should recognise that the development of onshore grid infrastructure isessential to the efficient integration of power production from offshore wind. Without
appropriate grid reinforcements and expansion, there is a risk of large amounts of offshore
wind power going unused, and opportunities for further expansion could be stifled.
Development could also be slowed by marine planning practices, regulations for awarding
development rights and public acceptance issues.

IEA. All rights reserved.

The future of offshore wind looks bright but hinges on the right policies
The outlook for offshore wind is very positive as efforts to decarbonise and reduce local
pollution accelerate. While offshore wind provides just 0.3% of global electricity supply
today, it has vast potential around the world and an important role to play in the broader
energy system. Offshore wind can drive down CO2 emissions and air pollutants fromelectricity generation. It can also do so in other sectors through the production of cleanhydrogen and related fuels. The high system value of offshore wind offers advantages thatmake a strong case for its role alongside other renewables and low-carbon technologies.
Government policies will continue to play a critical role in the future of offshore wind andthe overall pace of clean energy transitions around the world.
14

Offshore Wind Outlook 2019 | Special ReportOffshore Wind Outlook 2019
Offshore wind is a rapidly maturing renewable energy technology. In 2018, it provided just
0.3% of global electricity supply, nevertheless its future prospects look bright. Individual
offshore wind turbines have been enlarging in physical size and rated power capacity,
bringing performance gains for offshore wind installations. Further technology
improvements are promising steep cost reductions in the near term.
New analysis of offshore wind was performed for this WEO special report, with anemphasis on three areas: its technical potential; continued evolution of the technology;
and its role in energy systems now and in the future. We undertook a detailed geospatial
analysis of the regional and global technical potential for offshore wind, considering areas
available for development on the basis of the latest wind resource data, and taking accountof wind turbine technology advances. This includes an assessment of the future evolutionof the relevant technology in close consultation with major industry market leaders,manufacturers, developers and other key stakeholders. The systems analysis considered
the role of offshore wind with scenario-based quantifications, using our World Energy
Model to provide contextual data on the wider evolution of global energy systems.
This report provides a deep dive into offshore wind power. It gives a snapshot of where themarket and technology stand today and the outlook to 2040, in light of the policy
environment and the evolving competitiveness of offshore wind. It explores the key
uncertainties for the outlook, looking at both the potential for faster growth and the main
challenges that could slow development. It concludes with a look at the implications of thegrowth of offshore wind for environmental goals, energy security and affordability.

Offshore wind power today

IEA. All rights reserved.

Current status
Offshore wind has emerged as one of the most dynamic technologies in the energy system.
For the first time in 2010 global capacity additions of offshore wind surpassed
1 gigawatt (GW). In 2018, a total of 4.3 GW of new offshore wind capacity was completed(Figure 1). From 3 GW of offshore wind in operation in 2010, installed capacity expanded to
23 GW in 2018. Annual deployment has increased by nearly 30% per year, higher than any
other source of electricity except solar photovoltaics (PV). By mid-2019, there were over
5 500 offshore turbines connected to a grid in 17 countries. Policy support has been
fundamental to this expansion, including through technology-specific capacity tenders,progress on including offshore wind in marine planning, financial support and regulatory
efforts to support grid development.
The growth of the offshore wind industry has been fostered in European countries
bordering the North Seas, where high quality wind resources and relatively shallow water
have provided exceptionally good conditions in which to develop offshore wind
Special Report | Offshore wind power today15

technologies and bring them to market. Stable policies supported nearly 17 GW of offshore
wind capacity additions in Europe between 2010 and 2018. The United Kingdom, Germany,
Belgium, Netherlands and Denmark together added 2.7 GW of capacity in 2018 alone.
China has recently taken strides forward on offshore wind and now stands among themarket leaders. In 2018, China added 1.6 GW of offshore wind capacity, the most of any
country. This rapid growth has been driven by the government’s 13th Five-Year Plan, whichcalled for 5 GW of offshore wind capacity to be completed by 2020, and for theestablishment of supply chains to support further expansion thereafter.

GW

Figure 1 ⊳ Annual offshore wind capacity additions by region, 2010-2018
5

Rest of world
China

4

Belgium
Netherlands
Denmark

3

Germany
United Kingdom

2
1

2010

2011

2012

2013

2014

2015

2016

2017

2018

Deployment of offshore wind has increased by nearly 30% per year since 2010,second only to solar PV, as the technology and industry have matured
Note: Figure reflects date of connection to grid and power output, which may be before final commissioning.

Offshore wind is set to gain a foothold in new markets in the next five years. The current
pipeline includes about 150 new offshore wind projects spread across 19 countries. Over100 projects are scheduled to be completed by 2021, pointing to further acceleration in therate of annual capacity additions. In the United States, there are 25 GW of offshore windprojects in the longer-term pipeline (US DOE, 2019). There are also large-scale projects inAustralia, Chinese Taipei, India, Japan, Korea, New Zealand, Turkey and Viet Nam.

IEA. All rights reserved.

In 2018, more than 80% of global installed offshore wind capacity was located in Europe.
Around 8 GW, one-third of the total, was in the United Kingdom and 6.5 GW in Germany,with Denmark, Netherlands and Belgium providing a further 3.6 GW between them. Even
as a relative newcomer, China already has 3.6 GW of offshore wind capacity (Figure 2).
Offshore wind power accounted for just 0.3% of global electricity supply in 2018, but
played a larger role in the leading countries. It provided 15% of electricity generation in
Denmark in 2018, where onshore and offshore wind together accounted for almost 50% ofelectricity generation. Offshore wind provided 8% of electricity generation in the United
16

Offshore Wind Outlook 2019 | Special ReportKingdom, more than twice as much as from solar PV generation, and for 3-5% of electricity
generation in Belgium, Netherlands and Germany. Despite recent growth, output from
China’s offshore wind fleet in 2018 represented just 0.1% of its overall power output.
Figure 2 ⊳ Offshore wind installed capacity and share of electricity supply by

2

4%

Installed capacity

Belgium

Finland8%

Sweden4

Netherlands

12%

Denmark

6

China

16%

Germany

8

UnitedKingdom

GW

country, 2018

Share of electricity supply (right axis)

Most leading countries in offshore wind are in Europe, led by the United Kingdom,
though China has quickly joined the top-three and is gaining momentum

Market size and key players
Today, offshore wind is a multi-billion dollar business, with developed supply chains inleading markets that span development, project construction and installation, operationand maintenance, and decommissioning activities. The offshore wind industry attracted a
growing share of investment in wind and renewable energy in recent years, nearing$20 billion in 2018, up from less than $8 billion in 2010. Investment in offshore wind in
2018 accounted for nearly one-quarter of global investment in the wind sector and 6% of
all investment in renewable energy. Investment was particularly pronounced in theEuropean Union, where offshore wind accounted for about half of total investment in wind
power in 2018 and one-quarter of total investment in renewable energy (IEA, 2019a).

IEA. All rights reserved.

Investment in offshore wind projects is mainly by large utilities and investment funds
because the projects have relatively high upfront capital costs: a 250 megawatt(MW) project costs around $1 billion. Solar PV and onshore wind by contrast have lower
upfront costs and present fewer barriers to entry for smaller players.
European companies develop and own the majority of offshore wind assets (Table 1).
Denmark-based Ørsted owns the largest share, and is actively expanding into other markets
in the United States and Asia. Germany-based RWE consolidated its share of the offshore
wind market after acquiring E.ON and Innogy renewable energy assets in the North Sea andBaltic Sea, and is now the second-largest offshore wind operator in the world.
Special Report | Offshore wind power today17

Chinese companies account for a growing share of the market. Two Chinese state-owned
enterprises rank among the top-ten developers in the industry, with around 7% market
share in terms of ownership. China Longyuan Power Group ranks as the largest producer ofwind power across Asia, while the China Three Gorges Corporation (CTG) – previously
known for its hydroelectric projects – is one of the world’s largest energy companies andhas become actively involved in the offshore wind industry. CTG set itself the goal of
becoming the leader in offshore wind power development in China, and owns five wind
installations with combined capacity of 1.2 GW, although some is under construction.
Table 1 ⊳Leading market players in the offshore wind industry, 2018

OrganisationMain
activities

Assets (GW)
In
Under
In
operation construction development

MarketHeadquarters OwnershipshareØrsted

DOO

2.97

2.79

5.23

12.86%

Denmark

Private

RWE

DOO

2.41

0.51

1.83

10.44%

Germany

PrivateChina Longyuan

DOO

1.23

0.40

1.00

5.34%

China

PublicVattenfall

DOO

0.88

1.01

4.92

3.82%

SwedenPublicMacquarie Capital

Investor

0.87

0.07

0.10

3.78%

Australia

PrivateNorthland Power

DOO

0.64

0.27

0.63

2.78%

CanadaPublicGlobal Infrastructure
Investor
Partners

0.63

0.61

-

2.73% United States

PrivateIberdrola

DOO

0.55

0.97

0.81

2.36%

Spain

PrivateEquinor

DOO

0.48

-

2.17

2.10%

NorwayPublicSiemens Financial
Services

Investor

0.46

-

-

1.98%

Germany

PrivatePublic Pension,
Denmark

Investor

0.45

-

-

1.97%

Denmark

PublicPublicÉlectricité de France

DOO

0.43

-

1.67

1.85%

FranceStadtwerke München Investor

0.41

-

-

1.79%

Germany

PublicChina Three Gorges

DOO

0.40

0.88

6.87

1.74%

China

PublicScottish andSouthern Energy

DOO

0.34

0.24

0.52

1.49%

UnitedKingdom

PublicNotes: DOO = developer, owner and operator. Market shares are adjusted to reflect each company’s equity
stake across all of its projects.

IEA. All rights reserved.

Source: IEA analysis based on BNEF (2019).

Manufacturers of offshore wind turbines are mostly based in Europe, and the market isconcentrated among a small number of companies (Table 2). Spanish-headquartered
Siemens Gamesa and MHI Vestas, a joint venture between Vestas and Mitsubishi Heavy
Industries, dominated the offshore wind industry, accounting for over two-thirds of theoffshore wind capacity installed in 2018. Together, these two manufacturers account forover 80% of all offshore capacity commissioned from 1995 through the end of 2018. The
share of turbines produced by Chinese manufacturers is expanding with its focus on themarket in Asia, accounting for close to 30% of offshore wind capacity additions in 2018.
18

Offshore Wind Outlook 2019 | Special ReportTable 2 ⊳Leading manufacturers of offshore wind turbines, 2018
Offshore windmarket share,
2018

Offshore windmarket share,
1995-2018

Offshore windcapacity sold,1995-2018 (MW)1

Siemens Gamesa

41%

63%

13 881

2

MHI Vestas

30%

18%

3 882

3

Envision

15%

4%

804

4

Goldwind

8%

3%

574

Rank

Company

5

Ming Yang

2%

1%

113

6

Sewind

2%

1%

306

7

GE Renewable Energy

0.4%

1%

177

8

Taiyuan

0.2%

0%

10

9

Senvion

-

6%

1 253

10

Bard

-

2%

405

Source: IEA analysis based on BNEF (2019).

Another important component in the value chain is the construction and servicing ofoffshore wind turbines. Between 2010 and 2018 nearly $4 billion per year was invested in
the construction of offshore wind installations across Europe and China, while over
$1 billion was spent annually on operations and maintenance. As the offshore wind sector
expands, the opportunities to exploit synergies with oil and gas contractors and servicing
companies will increase (see section “Synergies with oil and gas activities”).

Offshore wind technology and performance

IEA. All rights reserved.

Offshore wind technology has made impressive advances since the first turbines were
installed near the shore in Denmark in 1991. Since then, equipment suppliers have focusedresearch and development spending on developing bigger and better performing offshore
wind turbines. The technology has grown dramatically in physical size and rated power
output.
Technology innovation has led to an increase in turbine size in terms of tip height andswept area, and this has raised their maximum output. The tip height of commerciallyavailable turbines increased from just over 100 metres (m) in 2010 (3 MW turbine) to morethan 200 m in 2016 (8 MW turbine) while the swept area increased by 230%. The larger
swept area allows for more wind to be captured per turbine. A 12 MW turbine now underdevelopment is expected to reach 260 m, or 80% of the height of the Eiffel Tower(Figure 3). The industry is targeting even larger 15-20 MW turbines for 2030. This increasein turbine size and rating has put upward pressure on capital costs as larger turbines pose
construction challenges and require larger foundations, but it has also reduced operationand maintenance costs, ultimately leading to lower levelised costs of electricity.

Special Report | Offshore wind power today

19

Figure 3 ⊳ Evolution of the largest commercially available wind turbines
Metres

324 m

300

200

100

2010
3 MW

2013
6 MW

2016
8 MW

2021*
12 MW

2030**
15-20 MWTechnology advances enabled offshore wind turbines to become much bigger
in just a few years and are supporting ongoing increases in scale* Announced expected year of commercial deployments. ** Further technology improvements through to2030 could see bigger turbines sizes of 15-20 MW.
Notes: Illustration is drawn to scale. Figures in blue indicate the diameter of the swept area.

The average turbine size used in offshore wind farms increased from 3 MW in 2010 to
5.5 MW for projects completed in 2018 (IRENA, 2019). In the same period, annual capacity
factors for new projects increased from 38% to 43%.1 New turbines of 10-12 MW promise
to achieve capacity factors well over 50% (before wake losses).2 Compared to smaller units,a bigger turbine can achieve a capacity factor improvement of two to seven percentage
points given the same site conditions. However, not all projects will necessarily see asignificant increase in performance as a result of using larger turbines. Capacity factors
remain dependent on the quality of the wind speeds of individual sites, which may not besuitable for larger turbines. There may also be a trade-off for developers between
incremental performance gains and higher costs of larger turbines.

IEA. All rights reserved.

Offshore wind provides higher capacity factors than other variable renewables. In 2018, theaverage global capacity factor for offshore wind turbines was 33% compared with 25% foronshore wind turbines and 14% for solar PV. Looking forward, new offshore wind projects
are expected to have capacity factors of over 40% in moderate wind conditions and over
50% in areas with high quality wind resources. Other variable renewable energy
technologies are also likely to see improvements, but not to match the expected capacity
factors of new offshore wind projects. For example, technology improvements are raising
expected capacity factors for onshore wind to between 30% and 40% in most regions(Figure 4).
1

Capacity factor describes the average output over the year relative to the maximum rated power capacity.

2

Wake loss refers to the effect on the space behind a turbine that is marked by decreased wind speed on adownstream wind turbine due to the fact that the turbine itself used the energy in turning the blades.

20

Offshore Wind Outlook 2019 | Special ReportFigure 4 ⊳ Indicative annual capacity factors by technology and region
80%

2018 average
Coal
Gas

60%

New projects
Wind offshore
40%

Wind onshore
Solar PV

20%

EuropeChina

UnitedStates

India

Japan

Korea

World

Offshore wind offers similar capacity factors to efficient gas-fired power plants
in several regions, with levels well above those for other variable renewables

IEA. All rights reserved.

Simulations indicate that new offshore wind projects will produce as much electricity perunit of capacity each year as some forms of dispatchable generation, and will have capacity
factors on a level with or higher than those of conventional gas-fired power plants inseveral regions, including Europe, China, India and Korea.3 In Europe, new offshore windprojects are set to have an average capacity factor of over 45%, exceeding the 2018average for Europe’s coal-fired power plants. This development has implications for how
offshore wind is integrated into electricity supply and its impact on grid infrastructure, as
well as for its suitability for producing hydrogen, an application that could greatly expand
the offshore wind market (see section “Increased demand for renewable hydrogen”).
The electricity produced from offshore wind projects depends on the available windresources at a given time, leading to variable output. High average capacity factors andvariable production put offshore wind power into a category of their own as a “variablebaseload” technology. Over the course of a year, offshore wind exhibits substantial
variability from week-to-week. It tends to produce more electricity during the winter andless during the summer in Europe, United States and China, as indicated by the simulated
output for new offshore wind projects (Figure 5). In India, the simulations indicate that themonsoon season from June to September would see higher output from offshore windprojects compared with other parts of the year. In all cases, the seasonal profile of offshore
wind is complementary to that of solar PV, which tends to produce more electricity in thesummer and less in the winter in Europe, United States and China, and less in the monsoon
season in India than at other times of the year.
3
Gas-fired capacity and other dispatchable power plants can readily adjust their output up to theirmaximum rated capacity according to market conditions and system needs.

Special Report | Offshore wind power today21

Figure 5 ⊳ Simulated average weekly capacity factors for new
offshore wind and solar PV projects by region

United States

United Kingdom

India

China

80%
60%
40%
20%

1

52 1

52 1

Wind offshore

52 1
Solar PV

52
Weeks

Seasonality of offshore wind can complement that of solar PV
Note: Based on weather data for 2018, 2013 and 2008.
Source: IEA analysis based on Renewables.ninja.4

IEA. All rights reserved.

Hour-to-hour variations in offshore wind power output tend to be comparable with thosefor onshore wind and lower than those for solar PV. Offshore wind typically fluctuates
within a narrower band, up to 20% from hour-to-hour, than is the case for solar PV, up to
40% from hour-to-hour (Figure 6). Lower hourly variability offers a potential advantage foroffshore wind over other variable renewables, though its impact on system flexibility needs
depends on a number of factors, including the correlation of its output with electricity
demand and the output from other variable renewables. At the system level, regional
diversity can also moderate the impact of the variability at the project level.
Offshore wind installations are also moving further from shore and into deeper waterwhere better quality wind resources are available. Most projects commissioned to datehave been within 50 km of shore. However, several large projects in the pipeline are
100 km or more from shore. This is becoming more common as developers look to installturbines in deeper water with improved construction techniques that reflect learning fromearlier projects and from the offshore oil and gas industry. The use of relatively low-costmonopile foundations has been the offshore wind industry standard for the majority of the
projects installed in water depths of less than 50 m. Projects located in slightly deeper
depths are also seeking to find ways to use monopile foundations rather than to have to
adopt higher cost jacket and floating foundations. In order to deploy offshore wind in yet
deeper waters, the industry has been deploying pilots and pre-commercial scale projects toimprove the designs of floating foundations and to establish their costs (Box 1).
4
Renewables.ninja is a publicly available tool that is validated and calibrated against real-world output in
70 countries (Staffell and Pfenninger, 2016), accessible at www.renewables.ninja.

22

Offshore Wind Outlook 2019 | Special ReportFigure 6 ⊳ Range of simulated hour-to-hour variations in output for new
projects by technology

60%

United States

Germany

India

China

40%
20%
0%
-20%
-40%
-60%
Wind offshore

Wind onshore

Solar PV

Offshore wind has similar hourly variability as onshore wind, but far less than solar PV
Note: Based on weather data for 2018.
Source: IEA analysis based on Renewables.ninja.

Box 1 ⊳

Floating foundations – the next frontier for offshore wind

IEA. All rights reserved.

Floating offshore wind is a fast maturing technology that could harness untapped windresources located in regions with water depths exceeding 50-60 m where traditional
fixed-bottom offshore wind installations are not economically attractive. The industry is
adapting various floating foundation technologies that have already been proven in theoil and gas sector, though design modifications are still required. Broadly, there arethree main concepts for floating foundations: spar-buoy, semi-submersible and tension
leg platforms. Other variants exist, including multiple turbines on one platform andhybrid wind/wave floating devices (IRENA, 2016; Carbon Trust, 2015).
In recent years, there have been significant developments in floating offshore windprojects including the commissioning of the world’s first multi-unit installation in 2017(30 MW Hywind in Scotland). A number of smaller demonstration projects were
installed in 2018, including Floatgen in France (2 MW) and Hibiki in Japan (3 MW). In
addition, at least ten new pre-commercial scale projects in Europe are in the pipeline(WindEurope, 2017), including the 30 MW WindFloat Atlantic in Portugal and the48 MW Kincardine in Scotland. Equinor also received approval in 2019 to build a
200 MW project off the coast of the Canary Islands which is expected to be the world’s
largest when it begins operations in the mid-2020s. These pre-commercial andcommercial-scale projects should help to establish more firmly the costs of floating
foundations. Similar undertakings are under assessment for offshore substations. Bothwill be critical to the success and deployment of offshore wind projects in deep waters.

Special Report | Offshore wind power today23Offshore wind costs for projects commissioned in 2018
For offshore wind projects completed in 2018, the global average capital cost was$4 353 per kilowatt (kW), and the average expected capacity factor was 43% (IRENA, 2019).
Applying an 8% weighted average cost of capital (WACC) in advanced economies and
7% WACC in developing economies, the global average LCOE for offshore wind in 2018 fell
below $140 per megawatt-hour (MWh) (Figure 7).5 Recent auction results point to rapidly
falling costs for offshore wind (Box 2). Nearly half of the LCOE for completed projects isdirectly attributable to the capital investment needed for offshore wind projects, including
the costs of the turbine, foundation, internal cabling, substation and offshore transmission
assets. The remaining half is attributable to the project financing cost, reflecting the highcapital-intensity of offshore wind projects.
Figure 7 ⊳ Offshore wind indicative shares of capital costs by component andlevelised cost of electricity for projects completed in 201815-20%
Installation

Levelised cost of electricity
150

8% WACC

100
4% WACC

30-40%
Turbine20-25%
Foundation
20-30%
Transmission &inter-array cabling

50

Dollars per MWh (2018)

Indicative shares of capital costby component

FinancingOperation and maintenanceOffshore wind capital cost

Offshore wind generation costs are heavily influenced by the cost of capital and wereabout $100/MWh for projects completed in 2018 based on low financing costs
Notes: WACC = weighted average cost of capital; Transmission includes offshore substations.

IEA. All rights reserved.

Source: IEA analysis based on IRENA (2019), IJGlobal (2019) and BNEF (2019).

Improved financing terms would significantly reduce the LCOE of offshore wind, as it would
the cost of other capital-intensive technologies. For example, applying a 4% WACC to 2018
costs and performance parameters yields an offshore wind LCOE of about $100/MWh,which is 30% less than the LCOE derived from the standard WACC. The sensitivity of thecalculated LCOE to the cost of capital is also shown for projected costs in the section“Offshore wind costs, value and competitiveness”.
5Standard assumptions are applied to all power generation technologies in the World Energy Outlook to
represent the required return in the face of market conditions and investment risk. Operation andmaintenance (O&M) costs below $100/kW per year and a 25-year economic lifespan are also assumed.

24

Offshore Wind Outlook 2019 | Special ReportOffshore wind turbines constitute around 30-40% of total upfront capital costs. In an effort
to improve the economics of this critical component, projects are getting larger, increasing
the numbers of wind turbines to be delivered and enabling economies of scale, while at thesame time equipment suppliers are using lighter and more resilient materials such as glassand carbon fibres for blade and nacelles6 manufacturing, as well as improving
aerodynamics. Increasing the size of turbines is also having the effect of reducing thenumber of foundation positions and inter-array cabling, which is reducing installation andoperation and maintenance costs.
Offshore transmission, array cabling (internal wiring at a wind farm) and the offshore
substation make up some 20-30% of total upfront capital costs. The costs for offshoretransmission assets, in particular, are closely tied to the regional regulations for connecting
the project to the onshore grid (see section “Onshore grid development”).
Foundations account for nearly a quarter of total project costs. Monopile structures are
currently the preferred technology, underpinning around 80% of deployment (WindEurope,2019). It is becoming possible to use this type of foundation in increasingly deep water – up
to 55-60 m in some cases – thus reducing the need for more expensive jacket foundations,which are suited to deeper water and are the second most used technology globally.
Box 2 ⊳

Rapid cost reductions are on the horizon for offshore wind

Recent strike prices in Europe for offshore wind indicate significant cost reductions on
the horizon (Figure 8). Some strike prices are at the level of wholesale electricity prices,though these are often underpinned by power purchase agreements. Exposure towholesale prices increases market risks that can lead to higher financing costs, butcompetition can help drive down project costs.

IEA. All rights reserved.

The allocation of transmission costs between developer and system operator is a key
factor in auction awards. Strike prices where the developer does not need to bear thecost of the grid connection to shore have generally been lower. For example, theDunkirk project in France was awarded to EDF at $50/MWh (EUR 44/MWh) but
excluded the offshore transmission asset. Some recent auctions which exclude the costof the offshore transmission assets have not involved subsidies, including Hollandse
Kust Zuid I and II and Hollandse Kust Zuid III and IV in the Netherlands, and He Dreiht,
Borkum Riffgrund West 1 and 2, and OWP West in Germany.
Including the offshore transmission assets within the scope of the auctions does,
however, bring competitive pressure to reduce the cost of the transmission asset andtherefore could lead to lower overall prices in the future. This has been reflected in the
recently awarded auctions in United Kingdom’s Dogger Bank wind farm, where Scottish
and Southern Energy and Equinor have joint efforts to develop 3.6 GW of total capacity.
The inclusion of transmission assets under the scope of developers, but also moving
6

Nacelle is the cover that houses all generating components of a wind turbine.

Special Report | Offshore wind power today

25into deeper waters and consequently tapping into better resources, have been major
drivers in bringing strike prices down to almost $50/MWh, on average. Ultimately, theresponsibility to deliver these projects rest in the hands of offshore wind developers,
and recent market signals indicate growing confidence from investors. This sets thestage for low-cost financing and for an increasing pipeline of future projects.
Figure 8 ⊳ Historical LCOE of offshore wind and strike prices in recent
Dollars per MWh (2018)

auctions in Europe

300
250
200
150
100
50
2010
With transmission
Without transmission

2015
Strike price
Strike price2020
HistoricalWith transmission
Project

IEA. All rights reserved.

United Kingdom
Beatrice
East Anglia 1
Triton Knoll
Moray East
Hornsea 1
Hornsea 2
Neart na Gaoithe
Cr. Beck A Dogger Bank
Cr. Beck B Dogger Bank
Dogger Bank Teeside A
Seagreen
Sofia

2025
Average

2028
Project size
350 MW

Without transmission

Strike price($/MWh)Expected
COD

185
152
95
73
178
76
148
51
54
54
54
47

2019
2020
2021
2022
2022
2022
2023
2024
2025
2025
2025
2026

Project
Germany
Baltic Eagle
Gode wind 3
Gode wind 4
Netherlands
Borssele I/II
Borssele III/IV
Denmark
Horns Rev 3
Kriegers Flak
Vesterhav
Nord/Syd
FranceDunkirk

Strike price Expected
COD($/MWh)
74
68
112

2023
2024
2023

83
62

2020
2021

118
57
73

2020
2021
2023

50

2026

Recent auctions in Europe set the stage for a fall in costs for new projects
as the industry moves to deploy higher capacity turbines
Notes: COD = commercial operation date; LCOE = levelised cost of electricity. Historical values
correspond to LCOEs including transmission. Strike prices are included for projects of over 100 MW.
Source: IEA analysis based on IRENA (2019).

26

Offshore Wind Outlook 2019 | Special ReportOffshore wind outlook to 2040
Global outlook
The global offshore wind market is set to expand significantly over the next two decades,
growing by 13% per year in the Stated Policies Scenario and faster still in the Sustainable
Development Scenario. Bolstered by policy targets and falling technology costs in theStated Policies Scenario, global offshore wind capacity is set to increase fifteen-fold from2018 to 2040 (Figure 9). Annual offshore wind capacity additions are set to double over the
next five years and increase almost fivefold by 2030 to over 20 GW per year. Beyond 2030
the cost competitiveness of offshore wind helps to maintain the pace of growth. Additional
supportive policy frameworks, including designated auction schemes, drive further growthin the Sustainable Development Scenario. In this scenario, global offshore wind capacity
rises to about 560 GW by 2040, a 65% increase over the Stated Policies Scenario, as part ofaccelerated efforts to decarbonise electricity supply. Annual capacity additions approach
30 GW by 2030 and reach 40 GW in 2040.
Figure 9 ⊳ Projected global offshore wind capacity and share of electricity
supply by scenario

GW

Installed capacity

Share of electricity supply

600

6%

400

4%

200

2%

2018

2030

2018

2040

Stated Policies Scenario

2030

2040

Sustainable Development Scenario

IEA. All rights reserved.

Global offshore wind installed capacity increases by fifteen-fold in theStated Policies Scenario, raising its share of electricity supply to 3% in 2040

As the global offshore wind market expands, so does its role in supplying electricity aroundthe world. In the Stated Policies Scenario, offshore wind accounts for 3% of global
electricity supply by 2040. In the Sustainable Development Scenario, its share of global
electricity supply rises to 5%.
In the Stated Policies Scenario, cumulative investment in offshore wind is about $840 billion
from 2019 to 2040. Annual investment in the offshore wind power sector averages$38 billion, double the level in 2018 (Figure 10). This level of investment means thatSpecial Report | Offshore wind outlook to 2040

27

offshore wind accounts for 10% of investment in renewables-based power plants globallyover the next two decades, roughly the same share as the total of bioenergy, concentrating
solar power, geothermal and marine energy. Across the power sector more broadly,
offshore wind captures almost 8% of all power plant investment, rivalling the share that
goes to natural gas or to nuclear power over the period.
Figure 10 ⊳ Cumulative capital spending on offshore wind, gas- and coal-fired
Trillion dollars (2018)

capacity worldwide by scenario, 2019-2040

1.5Stated Policies
Sustainable
Development

1.0

0.5

Offshore windGas-fired capacity

Coal-fired capacity

Offshore wind is set to become a $1 trillion industry over the next two decades,
matching capital spending on gas- and coal-fired capacity to 2040

In the Sustainable Development Scenario, cumulative spending in the offshore wind sector
rises by half to $1.3 trillion between 2019 and 2040 relative to the Stated Policies Scenario.
This equates to roughly $60 billion of annual investment per year on average. This means
more investment goes to offshore wind than to coal, gas or new nuclear power to 2040.
Higher aggregate spending on other renewables during this period means that offshore
wind attracts a similar share of total investment in renewables as in the Stated Policies
Scenario (about 10%).

IEA. All rights reserved.

Regional outlook
In the Stated Policies Scenario, offshore wind growth is concentrated in six regions,reflecting policy ambitions, available wind resources and the improving economics ofoffshore wind. Europe and China lead the offshore wind market with over 70% by 2040 of
installed capacity, while there is significant expansion in the United States, Korea, India andJapan, which between them capture about one-quarter of the global market (Figure 11).

28

Offshore Wind Outlook 2019 | Special ReportInstalled capacity of offshore wind by region and scenario

GW

Figure 11 ⊳600

Rest of world

500

Japan
India

400

Korea
United States

300

China

200

European Union

100
2018

STEPS
SDS
2030

STEPS
SDS
2040

European Union and China account for 70% of the global offshore wind market to 2040,
but a number of countries enter the market and increase their capacity

As of mid-2019, many regions have adopted policy targets for offshore wind to 2030
(Table 3). The European Union has the strongest ambitions to 2030, with targets inindividual member states totalling 65-85 GW by 2030. China’s Five-Year plans areencouraging provinces to expand their construction capacities for offshore wind to 2020,
while state-level targets set the course for rapid growth in the United States. India, Korea
and Chinese Taipei also have ambitious targets, while other countries, including Japan andCanada, are laying the groundwork for future offshore wind development.
Table 3 ⊳Policies targeting at least 10 GW of offshore wind by 2030

Region/country

Policy target

European Union

65-85 GW by 2030

China

5 GW by 2020 (10 GW construction capacity)

United States

22 GW by 2030

India

5 GW by 2022 and 30 GW by 2030

Chinese Taipei

5.5 GW by 2025 and 10 GW by 2030

Korea

12 GW by 2030

IEA. All rights reserved.

European Union continues to be the leader in offshore wind
Offshore wind is set for robust growth in the European Union (EU) over the next two
decades. In the Stated Policies Scenario, the European Union accounts for nearly 40% of the
global offshore market by 2040, increasing installed capacity to almost 130 GW by 2040.
Annual investment in the offshore power sector increases from $11 billion in 2018 to an
average of $17 billion per year over the outlook period. Offshore wind also plays an
Special Report | Offshore wind outlook to 2040

29

important role in meeting new electricity demand: output from new offshore wind projects
far outpaces overall electricity demand growth to 2040, and offshore wind provides morethan one-in-six kilowatt-hours generated within the European Union in 2040 (Figure 12).
Figure 12 ⊳Outlook for offshore wind in the European Union, 2018-2040
Share of electricity supply

GW

Average annual capacity additions

10

20%

8

16%

6

12%

4

8%

2

4%
2018

2019-30

2031-40

Stated Policies Scenario

2018

2030

2040

Sustainable Development Scenario

In the European Union, offshore wind is set to play a central role and has the potential
to become the largest source of electricity supply, matching onshore wind

In the Sustainable Development Scenario, the European Union’s offshore installed capacity
increases by almost 40% relative to the Stated Policies Scenario, reaching 175 GW by 2040.
Cumulative investment in offshore wind reaches $500 billion over the projection period, or$23 billion per year. Together with other renewables, nuclear power and carbon capture,utilisation and storage, offshore wind lifts the low-carbon share of generation above 90% in
the European Union in 2040. Offshore wind accounts for one-fifth of electricity supply in
2040 and rivals onshore wind as the largest source of electricity in the European Union,
exceeding nuclear power.

IEA. All rights reserved.

Member states have made various commitments that underpin the future development ofoffshore wind in the European Union (Table 4).7 These targets are under regular review as
offshore wind technology matures. The United Kingdom is set to be the leading EU offshore
wind market to 2030, followed by Germany and the Netherlands. France, Poland andIreland are also committed to develop offshore wind capacity.
The offshore wind industry is looking to develop 180 GW of offshore wind in the North Sea
by 2050 (NSWPH, 2019). The 2016 North Seas Energy Cooperation agreement brought
together a number of European countries with the aim of improving conditions for thedevelopment of offshore wind in the North Sea. It prioritises four main work areas:
This includes countries such as Estonia, Belgium, Denmark, United Kingdom, Germany, Netherlands,
France, Finland, Greece, Ireland, Latvia, and Poland, which have made technology-specific targets or
permitting timelines for offshore wind technology.

730

Offshore Wind Outlook 2019 | Special Reportmaritime spatial planning; development and regulation of offshore grids; finance foroffshore wind projects; and standards, technical rules and regulations for offshore wind.
Alternative pathways to achieving a net-zero emissions economy may include significantly
higher electricity demand due to demand for hydrogen or other fuels (see section“Increased demand for renewable hydrogen”) and expanded opportunities for offshore
wind development, as seen in scenarios developed in support of the European Union’s
long-term strategy that include 240-450 GW of offshore wind in 2050 (European
Commission, 2018).
Table 4 ⊳Policy targets for offshore wind in the European Union

Country

PolicyCapacity target

Year setUnited Kingdom

UK Offshore Sector Deal

Up to 30 GW by 2030

2019

Germany

The Renewable Energies Act

15-20 GW by 2030

2017

Netherlands

The Offshore Wind Energy Roadmap

11.5 GW by 2030

2017

Denmark

Energy Agreement

5.3 GW by 2030

2019

PolandDraft National Energy and Climate Plan

Up to 5 GW by 2030

2018

FranceMulti-Annual Energy Plan

4.7-5.2 GW by 2028

2019

Belgium

Draft National Energy and Climate Plan

4 GW by 2030

2019

Ireland

Climate Action Plan 2019

3.5 GW by 2030

2019

Italy

Draft National Energy and Climate Plan

0.9 GW by 2030

2018

China moves strongly ahead with offshore wind
China has already undertaken a number of offshore wind projects and is set to play acentral role in the long-term growth of offshore wind, alongside the European Union. In theStated Policies Scenario, China has the largest offshore wind fleet of any country around2025, surpassing the United Kingdom. Offshore wind capacity additions steadily increase
throughout the period of the outlook, averaging more than 6 GW per year after 2030
(Figure 13). Average annual investment in the offshore wind likewise rises from $6 billion in2018 to $9 billion per year from 2019 to 2040, accounting for nearly one-quarter of global
investment in offshore wind over the period.

IEA. All rights reserved.

In the Sustainable Development Scenario, China reaches almost 175 GW of installedcapacity by 2040, matching the size of the offshore wind fleet in the European Union.
Annual investment increases to $13 billion on average between 2019 and 2040, meaningthat 8% of total power plant investment in China is allocated to offshore wind.
Improving economics and firm policy support guide China’s ambitions for the offshore wind
sector. The country’s 13th Five-Year Plan calls for 5 GW of capacity to be installed by 2020and for 10 GW more to be in the construction pipeline, split among the coastal provinces so
as to help develop local supply chains (Table 5). The National Development and Reform
Commission (NDRC) recently adopted a competitive bidding scheme for offshore windcapacity in an effort to drive down costs (NDRC, 2019). Around 2030, offshore wind reaches
Special Report | Offshore wind outlook to 2040

31

cost parity with coal-fired generation in LCOE terms, a critical milestone that supports
continued long-term growth in China. In the Sustainable Development Scenario, CO2 pricing
helps offshore wind reach cost parity with coal-fired power plants in the mid-2020s, andthis leads to accelerating average capacity additions of over 10 GW per year after 2030.
Outlook for offshore wind in China, 2018-2040

Figure 13 ⊳Share of electricity supply

GW

Average annual capacity additions

12

6%

10

5%

8

4%

6

3%

4

2%

2

1%
2018

2019-302018

2031-40

Stated Policies Scenario

2030

2040

Sustainable Development Scenario

China builds as much offshore wind capacity as the European Union over the
next two decades, with its growth complementing other low-carbon sources

Table 5 ⊳Offshore wind targets by province in China’s 13th Five-Year Plan

Province

Grid-connectedby 2020(MW)

Total construction
pipeline by 2020
(MW)

Tianjin100

200

Liaoning

-

100

Hebei

-

500

Jiangsu

3 000

4 500

Zhejiang

300

1 000

Shanghai

300

400

Fujian

900

2000

Guangdong

300

1 000

Source: China National Development and Reform Commission (2016).

IEA. All rights reserved.

United States
Offshore wind gains significant ground in the United States over the next two decades. In
the Stated Policies Scenario, the United States adds nearly 40 GW of offshore wind capacity
by 2040, with related investment totalling $100 billion over the period. In the Sustainable
Development Scenario, the United States increases its offshore wind capacity by 80%,32

Offshore Wind Outlook 2019 | Special Reportreaching nearly 70 GW by 2040. This pace of growth calls for average investment of over
$7 billion per year. Offshore wind provides over 5% of the US electricity supply in 2040,
compared with the 3% level reached in the Stated Policies Scenario (Figure 14).
Figure 14 ⊳ Outlook for offshore wind in the United States, 2018-2040
GW

Average annual capacity additions

Share of electricity supply

6

6%

5

5%

4

4%

3

3%

2

2%

1

1%

2018

2019-302018

2031-40

Stated Policies Scenario

2030

2040

Sustainable Development Scenario

Offshore wind is set to gain traction in the United States after more than a decadeof false starts, reaching 3% of generation in the Stated Policies Scenario
Note: No offshore wind capacity was completed in 2018 in the United States.

Table 6 ⊳Offshore wind targets and support policies in the United States
PolicyTarget, awards or
incentives

Year

New York

Climate Leadership and Protection Act

9 GW installed by 2035

2019

Massachusetts

Act to Advance Clean Energy,
Act to Promote Energy Diversity

3.2 GW installed by 2035

2016

New Jersey

Offshore Wind Economic Development Act

3.5 GW installed by 2030

2018

Connecticut

Act Concerning the Procurement of Energy
Derived from Offshore Wind

2 GW installed by 2030

2019

State/Jurisdiction

Virginia

Virginia Energy Plan

2 GW installed by 2028

2018

Maryland

Clean Energy Jobs Act

1.2 GW installed by 2030

2019

Rhode Island’20 Clean Energy Goal

1 GW by 2025

2019

US Federal

Production tax credit (PTC)$0.009-0.023/kWh*1992

US Federal

Investment tax credit (ITC)

12-18%**

2002

IEA. All rights reserved.

* The exact value of the PTC for wind facilities depends on the year of construction. ** The ITC applies toprojects starting construction before 2020.

A combination of federal incentives and state-level targets support the strong growth ofoffshore wind in the United States. The US Bureau of Ocean and Energy Management has
tendered over 15 licences for offshore wind development along the east coast that are
Special Report | Offshore wind outlook to 2040

33

capable of supporting 21 GW of offshore capacity.8 There have also been proposals in the
US Congress to extend the tax credits available to offshore wind developers. Individualstates are also setting offshore wind capacity targets totalling over 20 GW by 2035
(Table 6). In a nod to the important role of offshore wind in achieving its ambitious
decarbonisation targets, New York revised its offshore wind target upwards from 2.4 GW to
9 GW by 2030. The technology could also play an important role in California’s
decarbonisation plan, but the state has not specified a capacity target for offshore wind.

Emerging markets
Offshore wind is set to establish itself in a number of new markets in the Asia Pacific region,
outside of China. In the Stated Policies Scenario, countries including Korea, India and Japanaccount for close to 60 GW of offshore wind capacity by 2040. They account for one-sixthof cumulative global investment in offshore wind, equating to over $6 billion in averageannual investment over the outlook period. In the Sustainable Development Scenario,
markets in the Asia Pacific region excluding China have average annual investment of close
to $10 billion over the period to 2040.
Korea becomes the largest market for offshore wind outside the European Union, China
and the United States, reaching 25 GW of capacity by 2040 in the Stated Policies Scenario.
Ambitious policy targets in Korea set under its Renewable Energy Plan 3020 mean that
offshore wind provides more than 10% of the country’s electricity by 2040, complementing
16% of electricity generation from solar PV and onshore wind. In terms of generation costs,
the LCOE of offshore wind reaches parity with onshore wind and solar PV in the 2030s.

IEA. All rights reserved.

Offshore wind development also makes notable progress in India, but faces stiffcompetition from low-cost solar PV and onshore wind. India has set ambitious targets foroffshore wind by 2030 and is expected to tender its first 1 GW wind farm in late 2019.
Installed capacity reaches 16 GW by 2040 in the Stated Policies Scenario, generating more
electricity than solar PV in India does today. This installed capacity increases by anadditional 40% in the Sustainable Development Scenario to 23 GW by 2040, requiring
approximately $2 billion in average annual investment.
Although Japan has not yet set a firm target for offshore wind by 2030, recent legislation
established eleven promotion zones in five prefectures, with competitive auctions to
support offshore wind deployment. In the Stated Policies Scenario, Japan has 4 GW of
installed capacity by 2040. In the Sustainable Development Scenario, the total reaches
18 GW, providing nearly 7% of the country’s electricity in 2040. While most of Japan’scurrent project pipeline uses fixed-bottom type turbines, there are relatively few shallow
areas available offshore, and this means that more ambitious deployment of offshore wind
is likely to be tied to the successful development of floating turbines. Japan has a series ofexperimental floating wind farms in place.

8

Number of licenses as of mid-2019.

34

Offshore Wind Outlook 2019 | Special ReportA number of other countries outside Asia are now actively appraising their offshore windresources. Much of this development hinges upon sustained political support and thedevelopment of local supply chains. Chinese Taipei has set offshore wind targets for 2025,
while a number of countries with significant offshore potential, including Brazil, South
Africa, Sri Lanka and Viet Nam, have expressed interest in the World Bank’s offshore windemerging markets fund. This programme provides upwards of $5 million in funding foroffshore wind research and supply chain development (World Bank, 2019).

Offshore wind costs, value and competitivenessThe long-term prospects for offshore wind depend to a large extent on how competitive it
is with other sources of electricity. This section considers the evolution of the cost
components of offshore wind, ultimately expressed through the LCOE, the system value ofoffshore wind, and its competitiveness based on the value-adjusted LCOE metric.

Capital costs
The development of offshore wind is gathering momentum. The technology is in a dynamic
stage, and developers are working to bring down costs in established and new markets withsupport from governments and regulators. Project-level upfront capital costs will continue
to depend on the choice of site, and on the inevitable trade-offs between distance fromshore, water depth and quality of the resource.

IEA. All rights reserved.

The evolution of capital costs for power generation technologies is heavily influenced bywhether there is a sufficient pipeline of projects to create the necessary momentum for atechnology to develop. Global average upfront capital costs for offshore wind (includingtransmission) are projected to decline to below $2 500/kW by 2030, more than 40% below
today’s average. This is based on the assumed learning rate that sees capital costs decline
by 15% each time global capacity doubles. By 2040, global average offshore wind costs areprojected to fall to $1 900/kW. Increased deployment enables industry learning about
offshore wind project development and management, as well as providing opportunities toestablish efficient supply chains. Wind farm operators are learning how to push costs down,
and equipment manufacturers are learning how to bring bigger and more efficientcomponents to the market.
Excluding transmission costs, the global upfront capital costs of offshore wind projects
averaged some $3 300/kW in 2018 and are projected to decline to $1 500/kW in 2030 andunder $1 000/kW in 2040 with the level of deployment in the Stated Policies Scenario. This
would mean that in 2040, transmission capital costs would be on a similar level as theoffshore wind farm. However, individual project costs varied widely reflecting project
specifics and regional particularities (Figure 15). The availability of sites in relatively shallow
waters is a critical determinant of project costs, as it is the case of the Netherlands, where
projects to be commissioned in the first-half of the next decade are at the lower end of the
global cost range (PBL, 2019). Capital costs are also likely to be lower in places where there
are enough projects of sufficient size to achieve economies of scale, as in China.
Special Report | Offshore wind outlook to 2040

35

Figure 15 ⊳ Capital costs of offshore wind projects excluding transmission,
Dollars per kW (2018)

historical and projects in development

7 000

Project size:
350 MW

6 000
5 000
4 000
3 000
2 000
1 000

2014

2016
Belgium

2018

2020

2022

Denmark

FranceGermany

2024

2026

Netherlands

China

2028

2030

Japan

Korea

Continued industry learning propels offshore wind down the cost curve, and cost reductions
can be enhanced through policy frameworks that support a healthy project pipeline
Note: Capital costs refer to the year of commissioning.
Sources: IEA analysis based on IJGlobal (2019), BNEF (2019) and company reports.

In Europe, the largest offshore wind market in terms of installed capacity, measures thatharness competitive forces such as auctions are putting downward pressure on costs andgenerally making cost information more transparent. Continued policy support and longterm design improvements in the clustering of offshore wind farms are also helping withcost reductions. Excluding transmission costs, upfront capital costs for offshore wind farms
in Europe were around $4 000/kW in 2018, though the project pipeline points to rapidly
falling costs in the near term. Average offshore wind costs are projected to decline to
below $2 000/kW in 2030 without transmission costs, and to about $1 500/kW in 2040.

IEA. All rights reserved.

In China, the first commissioned offshore wind projects were relatively close to shore – theaverage distance was less than 20 km (The Wind Power, 2019). This helped to keep total
upfront capital costs (including transmission) below $2 800/kW in 2018. China is likely to
see a range of project-level costs for some time as new projects adapt to specific site
conditions. In the Stated Policies Scenario, capacity additions of 100 GW in China over theperiod to 2040 help drive down total upfront capital costs of offshore wind by nearly half.

Offshore transmission costs
There is a trend towards locating offshore wind farms further from shore. This highlights
the importance of developing more advanced connection technologies and establishingappropriate regulations to govern the connection arrangements (Figure 16).
36

Offshore Wind Outlook 2019 | Special Reportkm

Figure 16 ⊳ Offshore wind: average distance from shore by country
80
60
40
20

UnitedKingdom

Germany

Commissioned

Netherlands

Denmark

UnitedStatesChina

Under construction and pipeline

Offshore wind farms have been moving into deeper waters, amid a trend of increasing
project sizes, that have impacted offshore transmission design as well as foundations
Sources: IEA analysis based on The Wind Power (2019) and BNEF (2019).

IEA. All rights reserved.

Large offshore wind farms that are more than 10 km from shore are usually attached to an
offshore substation that is connected to an onshore substation. There are two maintechnologies behind offshore connections: alternating current (AC) systems that transport
electricity directly through AC cables; and direct current (DC) systems where the current isconverted from AC to DC in converter stations and back to AC in the onshore substation
before the electricity is supplied to a grid. Even without considering the cost of substations,
AC transmission has a cost advantage over short distances, but over longer distances highvoltage DC (HVDC) transmission can offer significant cost savings (Figure 17).
To date, offshore wind farms have been mostly connected to shore by radial offshoretransmission assets, which imply one transmission line connecting one offshore wind farm,and the offshore transmission assets being viewed as part of the wind farm. However,where there are conflicts of use or spatial planning requirements, offshore wind farms canbe designed as clusters in which several projects are connected to what is defined as anoffshore “hub-and-spoke” with the aim of avoiding the impact that building several
offshore transmission assets would have, while also reducing costs. That is the case with
the North Sea Wind Power Hub, where Tennet together with Energinet.dk, Gasunie and thePort of Rotterdam are shaping a power hub in the North Sea. Tennet, the nationaltransmission system operator in the Netherlands, has been playing a leading role since theinstallation of Borwin1. This was the first HVDC connection commissioned in Germany in2010, with a capacity of 400 MW and 125 km offshore. Today, the longest offshore cable islocated in Germany and spans 160 km, while the largest capacity of an offshore cable
supports 916 MW.
Special Report | Offshore wind outlook to 2040

37

Figure 17 ⊳ Indicative upfront capital cost for high-voltage transmission cables
Dollars per kW (2018)

by type and distance from shore

High voltage alternating current

High voltage direct current

10-50 50-100 100-150 150-200

10-50 50-100 100-150 150-200

km

km

1 600
1 200
800
400

With increased distances from shore, offshore wind farms require new transmission
connection technologies and regulation models to bring project costs down
Note: Installation costs for transmission cables vary based on site conditions.
Sources: IEA analysis; Xiang et al. (2016); DIW ECON (2019).

The responsibility for designing, installing and maintaining offshore transmission assets isdefined by regulation, and can rest with the transmission system operator (TSO),
government or project developer. This differs from arrangements for onshore wind, wheretransmission line liabilities are nearly always the responsibility of TSOs.

IEA. All rights reserved.

There are several models for developing offshore wind transmission in Europe. In the
United Kingdom, licences for offshore transmission assets are granted through competitive
auctions where offshore wind farm developers can also be in charge of building thetransmission asset and then transfer it to the TSO or to a competitively appointed offshoretransmission owner for operation. In other European markets such as Germany,
Netherlands, France and Denmark, it is currently the system operator that provides theoffshore grid connection (and in some cases the offshore substation), although Denmark
has announced its intention to bring responsibility for developing offshore transmission
assets into its competitive bidding framework.
There is not a one-size-fits-all solution that could guarantee the perfect regulatory
framework to manage offshore transmission assets. TSOs may be able to achieve betterco-ordination and standardisation of projects when the transmission connections fall under
their scope. Equally it could be argued that including offshore transmission assets in
auction schemes harnesses competitive market forces and could lower infrastructure costs(DIW ECON, 2019). Market transparency and long-term planning should be at the heart ofwhatever approach is taken, together with the need to support the development ofoffshore wind (Box 4).
38

Offshore Wind Outlook 2019 | Special ReportOperation and maintenance costs
In much the same way as capital costs, operation and maintenance (O&M) costs are going
through a phase of major development and improvement that is leading to cost reductions.
Global average O&M costs for offshore wind stood at about $90/kW in 2018, and areprojected to go down by one-third by 2030, before declining towards $50/kW in 2040.
Regions, such as China, where offshore wind markets are more developed show lower costs
for O&M than others (Figure 18).

Dollars per kW (2018)

Figure 18 ⊳Regional average annual O&M costs for new projects

150

United States
Korea
Europe
Japan
World
India
China

100

50

2018

2030

2040

Economies of scale and industry synergies, along with digitalisation andtechnology development will bring current costs for O&M down by 40% in 2040

Digitalisation is bringing new techniques for monitoring that proactively identify failures
not only in the turbines but also in structures and connections, helping to reduce costs. For
example, the use of drones for visual inspections can enable preventative maintenance andcuts down on the need for labour-intensive inspections, along with speeding up
maintenance work. In addition, synergies with the oil and gas industry have allowed
offshore wind projects to draw on that industry’s expertise in offshore structures inplanning and carrying out maintenance activities (see section “Synergies with oil and gas
activities”). The result of these improvements can help prolong the expected lifetime of
projects, improving their economics and reducing the LCOE for offshore wind.

IEA. All rights reserved.

Capacity factors
As set out in the section “Offshore wind technology and performance”, offshore windtechnology advancements are helping to improve performance. The size of turbines has
increased and most current projects under construction in Europe involve the installationof 8-10 MW models (WindEurope, 2019). Larger turbines are able to raise wind farm
electricity production by reaching a wider range of wind speeds, ultimately generating
more electricity. Offshore wind farms are moving further from shore, where wind speeds
tend to be higher – the maximum distance reached 90 km in recent years while distances
rarely exceeded 20 km before 2006 (IRENA, 2019).
Special Report | Offshore wind outlook to 2040

39

Figure 19 ⊳ Regional average annual capacity factors for new projects
60%

EuropeUnited States
World
Japan
China
India
Korea

40%

20%

2018

2030

2040

Technology advances including bigger turbine sizes and operation in areas with highquality wind resources will boost offshore wind performance in the years ahead
Sources: IEA analysis based on IRENA (2019).

The ability to make use of higher quality wind resources by moving into deeper waters
further from the shore has helped capacity factors reach 43% (after wake losses) for
projects commissioned in 2018. Global average capacity factors are expected to increase by
five percentage points by 2040 (Figure 19). Capacity factors move towards 60% in Europe
by 2040 as a consequence of high quality resources and technology development. In China,
new projects reach 45% annual capacity factors in 2040. Korea and India have lower quality
wind resources overall, but new offshore wind projects are still expected to see capacity
factors near 40%.

Cost of financing

IEA. All rights reserved.

Global investment in offshore wind totalled around $20 billion in 2018. Improved market
maturity, underpinned by policies, regulations and the early involvement of public financeplayers, has facilitated lower cost financing over time from a diverse set of actors. Project
finance – a financing model that requires a high degree of co-ordination and risk allocation
among developers, banks and other actors – now represents the largest source of new
asset financing. This suggests improved investor confidence in offshore wind developments
and a greater degree of project standardisation than a few years ago, when most financecame from the balance sheets of developers and government-backed sources.
Commercial banks have increased their financing of offshore wind projects, a reflection ofboth the stable policy frameworks put in place in a number of countries and the successful
track record of well-known investors involved in providing backing for early projects. The
participation of public finance institutions such as the European Investment Bank, EKF in
Denmark and KfW development bank in Germany has been instrumental in helping tomanage risk and attract private capital, but their involvement has declined as the market
40

Offshore Wind Outlook 2019 | Special Reportachieved higher degrees of scale and as an array of private sector investors entered themarket (IEA, 2018a). At the same time, there is a growing market for refinancing, whether
by banks or through the capital markets, as well as for asset acquisitions on the part ofinstitutional investors and pension funds.
Figure 20 ⊳ Offshore wind: indicative nominal cost of debt in Europe (left) and
LCOE sensitivity analysis to cost component changes (right)

Indicative cost of equity: top-five
offshore wind European companies

Indicative cost of debt
7%
6%

12%

High risk premium

5%

10%

Low riskpremium

4%

14%

8%

3%

6%

2%

4%
Weighted average(by capacity installed)

Base rate

1%
2010

2014

2018

2010

2014

2%
2018

Offshore wind in Europe has benefited from low interest rates and debt risk premiums,
allowing developers to decrease project WACCs, the largest component of LCOE
Note: WACC = weighted average cost of capital; LCOE = levelised cost of electricity.
Sources: IEA analysis based on Bloomberg (2019) and company reports.

IEA. All rights reserved.

Debt financing terms continue to improve for projects in Europe. Project leverage has
increased – the debt-to-equity ratios for projects achieving financial close averaged 75% in2018, compared with 60% a decade earlier – which indicates that commercial banks are
now more comfortable with offshore wind projects. Borrowing has been eased by low
interest rates and lower debt risk premiums: loans are currently priced at 120 to 175 basis
points above base rates (Figure 20) and maturities have typically increased to around15-18 years (Green Giraffe, 2019). Nevertheless, these terms are most common for projects
benefiting from long-term power purchase agreements awarded via government schemesor through contracting with a corporate off-taker: the bankability of projects relying on ahigh degree of revenue from wholesale markets remains less certain.
On the other side of the equation, the cost of equity has evolved in the same kind of way,with lower perceived risks from investing in offshore wind assets being underpinned by
supportive policies. This has led to the cost of equity nearly halving over the last decade forcompanies operating in the most mature markets. The combination of lower financing
costs and higher debt-to-equity ratios has directly shaped the potential WACCs that
offshore wind farms have been able to achieve in recent auctions, and has led to somerecent auctions being able to take place without any government subsidies.
Special Report | Offshore wind outlook to 2040

41

Levelised cost of electricity
The levelised cost of electricity (LCOE) combines all the previously described elements intoa single number representing the average generation cost for a technology. The cost trends
described in this section taken together mean that the global average LCOE of offshore
wind is set to decline from the 2018 level by nearly 40% to 2030, and nearly 60% to 2040.
Applying a standard WACC representing full market risk (7% in developing economies and
8% in advanced economies), the global LCOE falls from $140/MWh in 2018 to less than
$90/MWh in 2030 and close to $60/MWh in 2040. Based on the same underlying
technology costs and performance parameters but applying low-cost financing (WACC of4%), the global LCOE of offshore wind declines from $100/MWh in 2018 to $60/MWh in
2030 and less than $45/MWh in 2040.
Offshore wind costs are set to decline in all regions. Improvements in wind turbine andfoundation designs, construction processes and O&M procedures tend to have spill overeffects, driving down costs in all markets as global deployment increases. Individual
markets can accelerate those cost reductions further by using the development of a healthy
project pipeline to help establish efficient supply chains for both equipment manufacturing
and technical expertise. The LCOE of offshore wind is also influenced by the quality of windresources and water depths in areas available for energy development.

IEA. All rights reserved.

Applying a 4% WACC on the basis of the prevailing costs of debt and equity in the region,
the average LCOE of offshore wind in the European Union declines from $104/MWh in2018 to just over $60/MWh in 2030 in the Stated Policies Scenario (Figure 21). Excludingtransmission assets, the LCOE of European Union offshore wind farms is just $44/MWh in
2030. This is the relevant point of comparison for strike prices in markets such as Germanyor the Netherlands where transmission costs are socialised by transmission system
operators, paid through levies to consumers. It is also a relevant benchmark when
considering dedicated projects for hydrogen and other electro-fuels. In China, where capitalcosts are lower but current capacity factors are lower as well, the LCOE averaged around$125/MWh in 2018 (applying a 7% WACC). Based on global and local deployment, offshore
wind costs in China are projected to fall to $70/MWh in 2030 and $55/MWh by 2040,
reaching cost parity with coal-fired power generation around 2030. The costs of offshore
wind in nascent markets, including the United States, are linked to technology
development elsewhere, but are relatively uncertain until the markets evolve.
A number of factors influence the LCOE for offshore wind, but financing costs are among
the most important. As noted, a four point decline in the cost of capital – as a result of
improved debt terms, but also a lower cost of equity from developers (IEA, 2019a) –translates into nearly a 30% reduction in LCOE. Improved capacity factors are anothercritical element for project costs, as are associated technology developments that benefit
from economies of scale and standardisation. A 20% reduction in total project capital costs
could reduce LCOE by about a further 17%. The LCOE benefits across the board from theeconomies of scale and the standardisation of processes and manufacturing supply chainsthat are examined more in depth in the next section.
42

Offshore Wind Outlook 2019 | Special ReportFigure 21 ⊳ LCOEs for new offshore wind projects in the European Union, China
and the United States, 2018-2040

Dollars per MWh (2018)

With transmission
standard WACC

160
120
80
40
2030

2040

2018

2030

2040 2018

2030

2040

2040 2018

2030

2040

2040 2018

2030

2040

China

200
160
120
80
40
2018

2030

2040 2018

2030

United States

200

Dollars per MWh (2018)

Without transmission
4% WACC

European Union

200

2018

Dollars per MWh (2018)

With transmission
4% WACC

160
120
80
40
2018

2030

2040 2018

2030

IEA. All rights reserved.

Average
Offshore wind LCOEs are set to decline by 40% to 2030 and by over 50% to 2040,
with the development of efficient local supply chains boosting global technology learning
Notes: WACC= weighted average cost of capital; LCOE = levelised cost of electricity. Standard WACC applied
is 8% (real) for the European Union and United States, and 7% for China.

Special Report | Offshore wind outlook to 2040

43

System value of offshore wind
Offshore wind is characterised by high capacity factors and widespread availability, making
its value proposition potentially comparable to that of baseload technologies such as
nuclear power and coal-fired generators. Offshore wind’s value is generally higher thanthat of its onshore counterpart and more stable over time than that of solar PV, which has
a concentrated output during daylight hours. Its energy value (equivalent to the average
price received for energy sold to the market) depends on the pattern of demand and thepower mix, but in most cases remains close to the average wholesale electricity price over
the year (Figure 22), which means that in general its energy value is similar to that ofbaseload technologies. Even as the share of offshore wind increases, its energy value
remains relatively stable, because offshore wind produces energy across all hours. Offshore
wind can provide flexibility services, though incentives in most markets are insufficient towarrant the trade-off with lower energy output.
Figure 22 ⊳ Energy value by technology and region relative to average
Energy value

wholesale electricity price in the Stated Policies Scenario

150%

European Union

China

United States

30%

20%
45% 10%30% 10%Share of variable renewables

20%

125%
100%
75%
50%
15%
Gas CCGT

Solar PV

Onshore wind

30%

Offshore wind

IEA. All rights reserved.

Offshore wind maintains its energy value through to 2040, even as the share ofvariable renewables increases compared with onshore wind and solar PV

Offshore wind can also contribute to the adequacy of electricity supply (the ability of thesystem to meet demand at all times from a planning perspective). The high capacity factors
and seasonality of offshore wind means that 30% or more of its capacity can be counted
towards reliability requirements, which is a higher percentage than for onshore wind andsolar PV (Figure 23). This reduces the need for investment in other dispatchable capacity,
including investment in combined-cycle gas turbines (CCGTs).
Pairing energy storage systems with an offshore wind project, an option which is currently
being considered in connection with the North Sea Wind Power Hub, could significantly
increase the capacity credit of the output from an offshore wind project. Energy storage
44

Offshore Wind Outlook 2019 | Special Reportcould take a variety of forms, including batteries or thermal storage, both of which are
currently being explored. The addition of energy storage to offshore wind (and otherrenewables) is particularly important for the Sustainable Development Scenario, where theshare of variable renewables reaches 40% worldwide by 2040, and more than that in someregions.
Figure 23 ⊳ Average capacity credit by technology and region in the Stated
Policies Scenario

40%

Offshore wind

Onshore wind

Solar PV

30%
20%
10%

2010

2040 2010
United States

European Union

2040 2010
China

2040
India

Offshore wind makes a larger contribution to system adequacy
in key markets than onshore wind and solar PV
Note: In addition to fluctuating hourly profile for variable resources, other factors influence the capacity
credit for a given year such as increasing capacity factors for the new unit of generation through to the total
existing installed variable renewable generation in the power system.

IEA. All rights reserved.

Offshore wind could also provide flexibility services to power systems where the proper
incentives are in place, as its high capacity factors mean that it could provide both upwardand downward ramping. Some onshore wind projects already provide flexibility, largely inthe form of downward regulation (i.e. reduced output on call). With sufficient economic
incentives, onshore and offshore wind could also include upward regulation (i.e. curtailing
output prior to the need to ramp upwards). To date, flexibility services have had limited
attraction for most wind projects because revenues for such projects are often tied
exclusively to electricity generation, but technological advances enabled by digitalisation
could increase the value of flexibility for such projects in the future so as to make themeconomically attractive.
Offshore wind could also be used to produce low-carbon hydrogen, providing a zero-carbon
fuel that could be used to provide power system flexibility, or be put to use in sectors thatare hard to decarbonise, including industry, refining and transport (IEA, 2019b).

Special Report | Offshore wind outlook to 2040

45

Box 3 ⊳Calculating the capacity credit of variable renewables

In order to quantify the expected contribution to power system adequacy (capacity
credit)9 of rising shares of variable renewables (such as offshore wind, onshore windand solar PV), a new capacity credit tool has been developed. The tool incorporates
both the annual projections generated in the IEA’s World Energy Model (WEM) and theload and renewable resource profiles utilised in its hourly power module.10
The method employed in the capacity credit tool builds upon the approach that iscurrently used in the WEM and that has also been adopted by the US National
Renewables Energy Laboratory (NREL) in their Regional Energy Deployment Systemmodel (NREL, 2017). It determines the contribution that a new unit of variablegeneration may provide to the power system during peak hours (sorted from highest to
lowest) relative to a residual demand profile (actual demand less electricity production
from variable renewables sorted from highest to lowest). These peak hours may beconsidered as a proxy for the hours with the highest risk for loss of load.
Two sorted residual demand profile are computed: one with the new unit and the otherwith existing variable generation. Over the peak hours, the difference between thesorted actual demand (often termed a load duration curve) and the residual demand
profile without the new unit gives the capacity credit for the existing variablegeneration. Similarly, if we take the difference over the same period between the two
sorted residual demand curves (with and without the new unit) this provides thecapacity credit of the new unit of variable generation in the power system.

Value-adjusted LCOE of offshore wind
The competitiveness of power generation technologies calls for consideration of both thetechnology costs and the value provided to the system. The LCOE captures all the direct
costs of a technology and is a commonly used metric of competitiveness. However, power
generation technologies provide a number of services to the system that should be
included in a comprehensive assessment of competitiveness. The services provided include
contributions to the bulk energy supply, to the adequacy of the system, and to theflexibility of the system (enabling supply to match demand very closely in real-time
operations).

IEA. All rights reserved.

The value-adjusted LCOE, first presented in the World Energy Outlook-2018, assesses thevalue of each of these services to the system and combines them with the LCOE to provide
a single metric of competitiveness (IEA, 2018b). The metric can be applied to a wide rangeof power generation technologies, from variable renewables to dispatchable fossil fuels,
9

Proportion of the capacity that can be reliably expected to generate electricity during times of peakdemand in the network to which it is connected.

10

For the full WEM methodology, see www.worldenergyoutlook.org/weomodel/. Wind and solar PV
resource data used in the hourly modelling and capacity credit tool are sourced from Renewables.ninja,Open Power System Data (2019) and Ueckerdt et al. (2016).

46

Offshore Wind Outlook 2019 | Special Reportand to both existing and new projects. It is applicable in a wide range of system conditions,
including the share of variable renewables and available dispatchable technologies. It has
similarities to other metrics applied in long-term energy modelling that combine cost andvalue, including the system LCOE (Ueckerdt et al., 2013) and the value-to-cost ratio appliedby the US Energy Information Administration.
The value-adjusted LCOE has a basis in emerging electricity market designs around theworld, incorporating and combining elements of competitive energy-only markets, ancillary
service markets and capacity mechanisms (IEA, 2016; IEA, 2018c). However, the metric is
applicable in all regions, though one or more value streams or the full technology costs may
not be relevant to investors. The value-adjusted LCOE does not include site-specificnetwork integration costs or externality costs that are not directly priced in the market.
Figure 24 ⊳ Evolution of offshore wind competitiveness: value-adjusted LCOEs
by technology and region in the Stated Policies Scenario

Dollars per MWh (2018)

4% WACC160

European Union

China

United States2020 2030 2040

2020 2030 2040

2020 2030 2040

120
80
40

IEA. All rights reserved.

Dollars per MWh (2018)

Standard WACC
200

European Union

China

United States2020 2030 2040

2020 2030 2040

2020 2030 2040

160
120
80
40

Wind offshore

Coal

Gas

Wind onshore

Solar PV

Offshore wind is competitive with gas, solar PV and onshore windin several markets by 2030

Special Report | Offshore wind outlook to 2040

47

Offshore wind closes the competitiveness gap with other low-carbon technologies indifferent regions over the next decade and in some cases moves ahead of fossil fuels(Figure 24). In the European Union, offshore wind is competitive with onshore wind,solar PV alone and solar PV paired with storage. With a rapidly rising share of variable
renewables, however, the importance of flexibility in the European Union gives gas-fired
power a competitive edge despite higher costs. In China, offshore wind moves within
striking distance of other low-carbon technologies and coal-fired power by 2030, on theassumption of a modest carbon dioxide (CO2) price. Offshore wind power is an attractive
option in China because it can be built near population centres in the east and south of thecountry, complementing the extensive build-out of cross-province ultra-high transmission
systems (IEA, 2017). In overall terms, the United States appears to be a challenging placefor offshore wind to compete on a pure cost basis with onshore wind, solar PV and efficient
gas-fired power. However, the availability of offshore wind resources in the northeast of
the country and along the densely populated east coast means that it could have a role indiversifying the power mix.

Opportunities for faster growth of offshore wind
There are many factors that have a bearing on how fast the offshore wind market will
expand, and some of the most important are highlighted in this section. Changes totechnology, market conditions and policy decisions could accelerate offshore wind
deployment in the decades to come and cause it to grow faster than projected in theStated Policies Scenario. The upside potential is limited by the technical potential foroffshore wind, not only in terms of the quality of wind resources and available turbine
technologies, but also in terms of other factors that might limit its deployment including
the suitability of seabed conditions for offshore wind and the nature of regulations
concerning competing uses and environmental protection.

IEA. All rights reserved.

Global technical potential for offshore wind
A detailed assessment of the technical potential for offshore wind development wasundertaken in collaboration with Imperial College London specifically for this report.
Geospatial analysis was performed globally using the “Renewables.ninja” modelling tool
based on the latest reanalysis of satellite data by the European Centre for Medium-Range
Weather Forecasts (ECMWF) (ERA-5). Power curves corresponding to specific power output
at different wind speeds were implemented for the latest turbine designs (up to 10 MW)
and synthesised for designs up to 20 MW for which data are not yet available (Saint-Drenan
et al., 2019). Areas available for offshore wind development excluded areas that are
specified for competing uses (i.e. fishing, shipping, defence, and oil and gas exploration andproduction) and environmental protection (excluding Marine Projection Areas classified by48

Offshore Wind Outlook 2019 | Special Reportthe International Union for Conservation of Nature [IUCN]).11 Areas close to submarine
cables and earthquake fault lines were also excluded.12

Potential offshore wind performance
The quality of wind resources for energy production is best represented by the averagecapacity factor for new wind projects, which translates the wind speeds in a given area into
the average performance over the course of a year. Based on the global assessment
performed for this analysis, wind resources are generally of higher quality for energy
production nearer to the poles (Figure 25). In Europe, the North Sea, Baltic Sea, Bay of
Biscay, Irish Sea and Norwegian Sea, offshore wind has average annual capacity factors ofaround 45-65%, which is higher than the comparable figures for the United States(40-55%), China (35-45%), and Japan (35-45%). The capacity factor is also high in regions off
the coast of South America and New Zealand (50-65%). Moderate wind speeds resources inIndia translate to a 30-40% average capacity factor. The average capacity factor in generalis relatively low in regions nearer to the equator for example in Southeast Asia and parts ofwestern Africa. The detailed geospatial analysis captures varying conditions within regions,bringing out for example capacity factors in the Palk Strait between India and Sri Lanka thatare well above average for the region and comparable to those found in Europe.
Figure 25 ⊳ Average simulated capacity factors for offshore wind worldwide

Average capacity factors reflect the quality of the wind resources
available offshore around the world

IEA. All rights reserved.

Notes: Inland dots depict population density of more than 500, 2 000 and 8 000 people per km2 with darker
shades of grey.
Source: IEA analysis developed in collaboration with Imperial College London based on Renewables.ninja.
11

Classification areas Ia, Ib, II and III were excluded from the technical potential assessment (IUCN, 2013).

12

For more information on the methodology, please refer to Global Offshore Wind Outlook (IEA, 2019c).

Special Report | Opportunities for faster growth of offshore wind

49

The assessed capacity factors provided the foundation of the technical potential
assessment for offshore wind. Once exclusion areas and offshore wind farm designs havebeen factored in, the potential power capacity and annual electricity generation from each
5x5 km2 site can be estimated and aggregated regionally and globally. Adding in estimatedcosts for offshore wind farms and transmission assets enables calculations to be made of
the LCOE for each site, which are aggregated to provide supply curves by region.

Technical potential for offshore wind by region
Based on the assessment, we estimate that the technical potential for offshore wind
worldwide is more than 120 000 GW, with the potential to generate more than
420 000 terawatt-hours (TWh) of electricity per year. This is enough to meet 11-times
global electricity demand in 2040. Our study, however, does not consider other constraints
such as the availability of transmission and distribution infrastructure to bring electricity
generated to shore and other market related issues (see section “Onshore griddevelopment”). Because of their long coastlines, Russia (80 000 TWh per year, or 20% of
the total), Canada (50 000 TWh per year, or 12% of the total) and the United States (over
45 000 TWh per year, or 11% of the total) together account for more than 40% of the global
technical potential. Excess resources could be harnessed for export to other countries given
favourable market conditions.
Figure 26 ⊳ Ratio of technical potential to domestic electricity demand byregion in the Stated Policies Scenario, 2040

1 200%
1 000%
800%
600%
400%
200%
100%
Europe*Japan

United States**

India

China

IEA. All rights reserved.

Based on technical potential, many regions could cover more than or nearly all of theirdomestic electricity demand from offshore wind alone* Potential excluding Greenland and overseas territories. ** Potential available excluding Alaska and Hawaii.
Source: IEA analysis developed in collaboration with Imperial College London.

50

Offshore Wind Outlook 2019 | Special ReportA comparison of technical potential with domestic electricity demand indicates that many
countries would be able to meet their local electricity demand from offshore wind in 2040
in the Stated Policies Scenarios. For example, in Europe (excluding Greenland and overseas
territories), the technical potential of offshore wind is more than ten-times demand(Figure 26). In the United States, excluding the offshore wind potential in Alaska and
Hawaii, offshore wind could provide twice the level of total electricity demand in 2040.
India and China would be able to meet the majority of electricity demand in 2040, withtechnical potential close to 6 000 TWh per year and 8 300 TWh per year respectively. Japan
would be able to meet more than nine-times its demand based on its technical potential.
Technical potential can be divided between what is available in shallow water (i.e. < 60 m),
and in deep water (i.e. 60-2 000 m). Broadly speaking, shallow water sites are suitable forestablished fixed-bottom foundations and are easier to access, while those for deeper
water sites require floating platforms and are harder to access. The technical potential inshallow water is more than 87 000 TWh per year, which is enough to meet global electricity
demand in 2040 under the Stated Policies Scenario more than twice over. The technicalpotential of sites located in deeper waters is more than 330 000 TWh per year. Deployment
in deep water is currently costly, but the development of floating platforms technologies
could bring down costs and open up enormous potential.

IEA. All rights reserved.

Within these two broad categories, the technical potential can be further subdivided: sitesthat are near to shore (i.e. 20-60 km) and within 50 km of existing commissioned projects;
other potential sites that are close to shore; sites far from shore (i.e. 60-300 km); and sites
with existing restrictions or competing uses such as oil and gas installations. Tapping justthe most attractive potential in near shore shallow waters could provide close to
36 000 TWh globally per year, which is nearly equal to global electricity demand in 2040.
Other near shore projects could generate a further 76 000 TWh per year. Around 70% of
overall potential is in deep water and floating platform technology would be needed todevelop this potential. Beyond the accessible technical potential, sites with existing
competing uses and restrictions could provide around 17 000 TWh per year which could bemade use of if policies and regulations made this both practicable and economic.
In Europe (excluding Greenland and overseas territories), the technical potential is close to
50 000 TWh per year, with countries bordering the North Sea and Baltic Sea such as
Norway, Iceland, United Kingdom, France, Denmark, Netherlands and Germany accounting
for two-thirds of this potential. Greenland adds another 14 000 TWh of potential, though
its distance from large demand centres makes it less accessible. European countries areactively trying to expand their offshore wind markets to harness this potential and there
are plans to develop a North Sea Wind Power Hub, to connect multiple wind farms in a
hub-and-spoke configuration, with the first electricity due to come on shore in the 2030s(NSWPH, 2019). More than 1 300 TWh of Europe’s technical potential is in shallow waters
and close to shore, with a particularly large number of good sites located in the North Sea(Figure 27).

Special Report | Opportunities for faster growth of offshore wind51

Figure 27 ⊳ Regional technical potentials for offshore windThousand TWh

Europe

80
60
40
20

Near shore

Far from shore

Near shore

Far from shore

Near shore

Far from shore

Thousand TWh

East Asia
80
60
40
20

Thousand TWh

North America
80
60
40
20

IEA. All rights reserved.

Shallow water (10 - 60 m):
Deeper water (60 - 2 000 m):

Near shore (<60 km)
Near shore (<60 km)

Far from shore (60 - 300 km)
Far from shore (60 - 300 km)

There is enormous potential for offshore wind development around the world,though the quality of wind resources varies widely
Notes: Inland dots depict population density of more than 500, 2 000 and 8 000 people per km2 with darker
shades of grey. Offshore regions far from shore shown in lighter shades of orange and purple respectively.
Source: IEA analysis developed in collaboration with Imperial College London.

52

Offshore Wind Outlook 2019 | Special ReportIn East Asia, where a wave of deployment is expected in the upcoming years, the technicalpotential for offshore wind is over 22 000 TWh per year. In China, shallow coastal waters
near major cities have the technical potential to produce close to 4 700 TWh per year, of
which more than 1 800 TWh is available at sites close to the shore. This means that a gooddeal of the technical potential in China could be tapped at relatively low cost. In Japan,
most of the technical potential of more than 9 000 TWh per year is located in deep water
and would require floating platform technology in order to harness most of this potential.
Even so, shallow waters could provide some 40 TWh per year, which would be enough tomeet 4% of Japan’s electricity demand in 2040 in the Stated Policies Scenario.
In North America, strong winds in places like Hudson Bay, Labrador Sea, Gulf of Alaska andthe Atlantic seaboard together yield offshore wind potential of more than 100 000 TWh per
year. The United States has technical potential of more than 46 000 TWh per year. Onlyaround a quarter of this is in the contiguous United States, but this is still three-times morethan enough to meet the total electricity demand of United States today and to meet its
demand through to 2040 in the Stated Policies Scenario. Within the contiguous UnitedStates, shallow waters have the potential to provide more than 3 300 TWh per year anddeep waters more than 8 700 TWh per year. Some of this potential is located off theAtlantic coast near major cities such as Washington D.C., Boston and New York. There isalso technical potential of more than 900 TWh per year within the Great Lakes region.

IEA. All rights reserved.

The geospatial analysis undertaken also assessed the technical potential available at a given
generation cost level, and it indicates that several hundred gigawatts of offshore wind
could be deployed in leading markets at costs at or below that of coal- and gas-fired
generation in 2030 (Figure 28). For each 5x5 km2 site, the LCOE of a potential offshore windproject was calculated based on the estimated capacity factor combined with the projectcost. The total cost of the offshore wind installation varied according to the distance fromshore and the sea bed depth for each site. Deeper waters and farther distances from shore
served to increase the total cost above a standard assumed cost of $2 000/kW. Based on
this assessment, several regions have very large potential to develop offshore wind at low
to moderate costs:

China starts to have significant potential at about $50/MWh, despite only moderate
wind conditions (shallow and close to shore).

At around $60/MWh, an attractive cost in most cases, potential starts to become
available in the United States, Europe and Australia.



At $80/MWh, a moderate cost for a new source of electricity, China, United States andEurope each have around 1 000 GW of potential or more.

Potential remains limited in Korea due to deep waters and middling wind conditions,while India also remains limited at these cost levels due to poor wind conditions.

Japan also has limited potential at these costs, although this could potentially change
once the costs of floating turbines are better known.

Special Report | Opportunities for faster growth of offshore wind53

Dollars per MWh (2018)

Figure 28 ⊳ Offshore wind potential supply curves by region
200

Korea
India

150

Australia
Europe100

China
United States

50

0

200

400

600

800

1 000
GW

Based on near-term costs, at least 1 000 GW of offshore wind potential is available
for less than $80/MWh in China, Europe and United States
Notes: LCOEs were calculated based on a standard wind farm cost of $2 000/kW, with additional costs
related to greater distances from shore and deeper water.
Source: IEA analysis developed in collaboration with Imperial College London.

Improved economics for offshore wind
The economic attractiveness of offshore wind to investors depends on a host of factors
including technology and project costs, prevailing market conditions, the extent ofgovernment support and the evolution of other power generation technologies.

IEA. All rights reserved.

Available information for the offshore wind projects under development indicate a stepchange in project costs in the near term and industry expectations are for further robust
cost improvements in the longer term as supply chains mature. Standardisation of projectcomponents and installation procedures could also help to reduce costs. More accurate
meteorological information would help developers to choose the best sites for projects andcould help make offshore wind technology more competitive with other sources ofelectricity. Where reductions in costs outpace those detailed in section “Offshore windcosts, value and competitiveness”, the growth of offshore wind could be accelerated
further without increasing the delivered cost of electricity to consumers. Lower costs would
also boost the prospects for production of renewable hydrogen.
Market conditions will play a critical role in the long-term future for offshore wind.
Wholesale electricity prices seem likely to continue to experience downward pressure on
the back of rising shares of variable renewables with zero or near-zero marginal costs andnatural gas prices that are projected to remain at relatively low levels in several markets.
Low wholesale electricity prices make it difficult to make a market-based case forinvestment in any power generation technology, including renewables. There are some54

Offshore Wind Outlook 2019 | Special Reportnotable exceptions for offshore wind projects in Europe, though it has yet to be seen
whether this business model can be replicated for many projects. Without reforms there isa risk of inadequate signals for efficient and timely investment in new sources of power andin the power system flexibility that will be needed in the future.
Market reforms that promote such investment would improve the opportunities formarket-based deployment of offshore wind. For example, capacity mechanisms are in
operation or under consideration in several markets with the aim of remunerating
contributions to system adequacy. Given that the characteristics of offshore wind leadto relatively high capacity credits (see section “Offshore wind costs, value andcompetitiveness“), capacity mechanisms seem likely to boost the competitiveness ofoffshore wind compared with solar PV and onshore wind. Further reforms that recognise
the value of low-emission sources of electricity would also help to reinforce the businesscase for offshore wind and indeed other clean energy sources.
The economics of offshore wind would also be enhanced if transmissions network costs canbe further reduced through innovation, economies of scale and supportive action on thepart of electricity transmission grid operators. Planning that enables further expansion of
the most competitive sources of electricity from a system perspective would make asignificant difference to the prospects for offshore wind power in all regions.

Increased demand for renewable hydrogen
Demand for low-carbon hydrogen has an important role in the transition to a sustainable
future (IEA, 2019b). Its versatility means that it has the potential to contribute to thedecarbonisation of several sectors, as well as providing a low-carbon source of flexibility inpower systems. The high capacity factors and improving cost competitiveness of offshore
wind mean that it could play an important part in the production of low-carbon hydrogen.

IEA. All rights reserved.

Around 70 million tonnes (Mt) per year of hydrogen is used today, mainly in oil refining andchemical production, but it is almost all produced from fossil fuels. Using low-carbon
sources of electricity to produce hydrogen could help to support a clean energy transition
through sector coupling. For example, low-carbon hydrogen could be used to reduce CO2
emissions in hard-to-abate sectors of industry such as iron, steel and chemicals. It could
also be used in transport, where fuel cell electric vehicles powered by hydrogen would bewell suited to heavy trucks, and where there could be other uses for low-carbon hydrogenin aviation and shipping.
Offshore wind projects dedicated to produce local, renewable-based hydrogen could offer
significant cost advantages over projects using electricity direct from the grid. In part this isbecause dedicated offshore wind farms would benefit from cost reductions by avoiding theneed for transmission. For example, the LCOE of offshore wind in the European Union in
2030 is projected to be in the range of $40-70/MWh including transmission (with a 4%
WACC), but just $30-50/MWh without transmission. With average EU retail industry
electricity prices projected to be around $130/MWh, offshore wind could offer 60-80%
Special Report | Opportunities for faster growth of offshore wind55

savings on the costs of electricity input. The high upfront capital costs of electrolysers mean
they need to run as often as possible to be economic, and the high annual capacity factors
offered by offshore wind would fit well with this need (see section “Offshore wind costs,
value and competitiveness”).
The cost of producing hydrogen is declining. Hydrogen could be produced today at a
dedicated offshore wind farm without transmission costs to shore at about $9 per
kilogramme (kg) of hydrogen before transportation, with 87% of this cost related to thecost of offshore wind production and 11% related to electrolyser costs. Transportation
costs would add to this, but could potentially be relatively low if it were to be possible torepurpose existing oil and gas pipelines. Production costs are projected to fall below $4/kg
by 2040 as a result of falling costs for offshore wind and electrolysers. In the Sustainable
Development Scenario, close to 4.5 Mt of low-carbon hydrogen are used in Europe in 2040,
and offshore wind accounts for a significant share of this, with 10 GW of offshore windcapacity able to produce about 1 Mt of hydrogen per year (Figure 29).
Figure 29 ⊳ Offshore wind capacity needed to produce 1 Mt of hydrogen
50

0.8

40

0.6

30

Offshore wind

GW

1.0

Electricity generated

TWh

Mt

Hydrogen

12
10
8
6

0.4

20

0.2

10

4
2

Additional demand for hydrogen offers significant upside potential for offshore wind,as 10 GW of offshore wind capacity can produce about 1 Mt of renewable hydrogen

IEA. All rights reserved.

Public acceptance
Offshore wind is not subject to some of the challenges faced by other technologies in termsof public acceptance precisely because of its offshore nature. Concerns about noise, visual
impact and use of land do not arise in the same way that they do for onshore wind andsolar PV, for example. Offshore wind does face public acceptance challenges of its own,
exemplified by the decade-long challenges to the Cape Wind project in the eastern UnitedStates, and these should not be glossed over. However the challenges so far appear to begenerally less widespread and intractable than for onshore wind developments.
56

Offshore Wind Outlook 2019 | Special ReportUncertainties that could slow offshore wind growth
As a technology poised for rapid growth, offshore wind faces a number of challenges.
Developers must establish efficient supply chains, address environmental concerns, anddemonstrate that the impressive cost reductions promised by recent auction bids are
replicable in other markets and under a range of marine conditions. Offshore winddevelopers must also deal successfully with a unique set of technical and regulatory
challenges, in particular in terms of marine planning and the development of supporting
grid infrastructure on land to deliver electricity produced offshore to consumers. Strong
growth may also bring new challenges, such as gaining access to adequate quantities of therare earth elements that are critical to large offshore wind turbines. These various
challenges will have to be overcome if offshore wind is to fulfil its potential and make astrong contribution to a clean energy future.

Developing efficient supply chains in new markets
One key challenge is the need to establish clear plans that enable efficient supply chains to
be developed, limiting project risk and supporting low costs. In a perfect scenario foroffshore wind, we would see improved turbine models and lighter and resilient foundations
being delivered on time to projects, transparent planning and regulations providing clear
long-term market visibility for project developers and investors, healthy competition
among players to reduce costs, a good balance of international and national industry
partnerships, and creating a well-trained work force.
For all these things to happen, however, markets need connections in place between all thevarious offshore wind supply chain links. Governments have an important part to play at
the outset in demonstrating a clear commitment to national renewable energy goals thatprovides sufficient security to industry to procure a healthy pipeline of projects, and inbacking this up by setting clear rules, for example on the handling of grid connections andthe conducting auctions. This should engender the confidence in industry to develop supply
chains, where the standardisation of equipment and operations help to reduce costs, andto pursue further efficiencies by making the most of synergies with the oil and gas industry(see section “Synergies with oil and gas activities”).

IEA. All rights reserved.

Environmental concerns
To reduce the impact on the environment, offshore wind projects are increasingly being
examined carefully by government agencies at the planning stage to ensure thatdevelopers complete a detailed environmental impact assessment and if approved, put inplace measures to comply with marine protection standards throughout the life of the
project. For example, the Crown Estate in the United Kingdom recently blocked the
expansion of Race Bank Offshore wind farm citing environmental concerns after a Habitats
Regulations Assessment was conducted.

Special Report | Uncertainties that could slow offshore wind growth57Offshore wind projects could potentially have negative impacts on fish, marine mammals
and birds related to habitat change, displacement or injury during construction andoperational noise, risk of collisions as well as avoidance or attraction to electromagnetic
fields (WWF, 2014). On the other hand, several studies have pointed to potential benefits
including enhanced biological productivity and improved ecological connectivity. Based ona long-term environmental study on the Horns Rev project in Denmark, fish species may beattracted to foundations, providing a refuge and potentially increasing the number of
species in a project area (Danish Energy Agency, 2019).
While there are uncertainties about overall impact, it is important that measures are taken
to protect biodiversity throughout the lifetime of the offshore wind farm. The IUCN has a
set of guidelines on maritime protection areas which the industry can consult (IUCN, 2013).

Onshore grid development
The development of supporting onshore grid infrastructure is essential to the efficient
integration of power production from offshore wind projects. Without appropriate
reinforcements and perhaps some expansion of the grid, electricity from offshore wind may
be curtailed. The risk posed by taking separate approaches to renewables and to griddevelopment is larger in systems where the share of variable renewables is rising,
especially where onshore wind plays a significant role and is exposed to the same kind of
weather patterns as offshore wind.
Europe has set significant ambitions for the development of wind offshore, with member
states together aiming for 65-85 GW of capacity by 2030. With strong and reliable windspeeds, additional development in the North Sea is of great interest. Analysis was carriedout to explore the impacts of onshore grid development on integration of a wind hub in the
North Sea in 2030 (Box 4).
Box 4 ⊳

Tapping offshore wind potential in Europe calls for onshoretransmission expansion

IEA. All rights reserved.

Along with actively deploying individual offshore wind farms, Europe is also exploring
offshore “hubs” to facilitate further deployment of offshore wind. The North Sea Wind
Power Hub project represents a step towards a possible 180 GW of offshore wind by
2050 (NSWPH, 2019). At that scale, offshore wind would offer the opportunity todecarbonise not only electricity supply but also other sectors through the dedicatedproduction of hydrogen.
To illustrate the interplay between transmission network and offshore winddevelopments, analysis was conducted of the integration of an offshore wind hub in the
North Sea. The impacts of two different grid configurations for 2030 have been
simulated and analysed, based on a country-by-country representation of the European
power system, and using an hourly time resolution across the whole year based on the58

Offshore Wind Outlook 2019 | Special ReportStated Policies Scenario. One case includes network infrastructure that is economically
optimal (from a societal point of view). It has been obtained by allowing the model toinvest in the interconnection projects submitted to the ENTSO-E Ten-Year Network
Development Plan 2018 as long as they are found to generate benefits that outweightheir costs. A second case includes an additional 12 GW of offshore wind power
capacity, as well as including expanded interconnections with Germany (6 GW),
Netherlands (4 GW) and Denmark (2 GW).
The comparison between the two cases shows that adding the offshore wind hub would
trigger around 10 TWh of additional curtailment in Europe, mostly in the areas directly
connected to the hub, and would increase congestion in the network (Figure 30). There
would be significant additional congestion between the countries connected to the hub
and their neighbours, notably with the Scandinavian countries, United Kingdom andSwitzerland. Some interconnections would see additional congestion in 30% to 40% of
the hours in the year.
Figure 30 ⊳ Rise in the number of hours of cross-border grid congestion with

IEA. All rights reserved.

the addition of a 12 GW hub in the North Sea

Expanding offshore wind capacity would increase congestion
on the grid without additional network investment
Note: Other interconnections with zero additional congestion hours were not included in the figure.

Special Report | Uncertainties that could slow offshore wind growth59

To resolve these issues, an alternative case was developed by allowing the network to
adapt when adding the North Sea offshore hub. The results show that an investment of
EUR 750 million in 1.1 GW of interconnections from Denmark, Netherlands andGermany to their neighbours could help reduce the curtailment by around 1 TWh per
year, and save EUR 130 million per year of operational costs. Furthermore, theintegrated renewable energy reduces the use of thermal-based generation by the sameamount (1 TWh) and the CO2 emissions by around 0.5 Mt per year.
This comparison also shows that all onshore interconnection projects connecting
Denmark, Netherlands and Germany to their neighbours and included in the ENTSO-E
Ten-Year Network Development Plan 2018 are found to be cost effective (the benefits
they bring outweigh their investment costs) (Figure 31). These new transmission
capacities would relieve grid congestion, reduce overall generation costs and decrease
CO2 emissions in Europe. Additional interconnection projects might well increase thecost effectiveness of the integration of this project.
Figure 31 ⊳ Share of potential cross-border connection projects developedby case in Europe to 2030

100%
80%
60%
40%
20%
Denmark

Germany

FranceReference grid
Built with the North Sea Wind Hub

PolandNetherlands

UnitedKingdom

Belgium

Built without the North Sea Wind Hub
Not built

IEA. All rights reserved.

Additional investment in onshore transmission is key to making the most of offshore wind

An alternative to fully utilise production from offshore wind farms would be to producehydrogen via electrolysis, part of the long-term vision for hubs in the North Sea. At
offshore wind costs of $30-40/MWh, hydrogen could be produced for $18-22 per
million British thermal units in 2040 (or $2-2.5/kg of hydrogen), before transportation
costs. The production of hydrogen could unlock more of the offshore wind potential.
The analysis was developed in collaboration with Artelys and carried out using Artelys
Crystal Super Grid, a multi-energy systems modelling platform. A model of theEuropean electricity system based on the IEA’s Stated Policies Scenario was developed.
60

Offshore Wind Outlook 2019 | Special Report

The model allows for joint optimisation of investments and operations (cost-minimisingcriterion) for a given year using an hourly time resolution and country-level spatial
granularity. The costs considered include investment and operational costs, i.e. fuel andCO2 costs, variable O&M costs and loss of load penalties (if any) in order to ensure thatelectricity demand can be met at all times in the considered areas (all member states of
the European Union, Norway, Switzerland, Republic of Macedonia, Montenegro, Serbia
and Bosnia-Herzegovina). The model is able to simultaneously optimise investment inand the operation of all categories of assets, including different generation
technologies, flexible consumption technologies, storage assets and interconnections
between areas.
With offshore wind potential spread around the world, significant infrastructuredevelopment is likely to be necessary to ensure the cost-effective integration of renewableenergy. This will be most effective if it is forward looking. Planning practices favouring the
emergence of synergies between renewable energy deployment, onshore and offshore
grids and cross-sectoral flexibility solutions are likely to result in the most cost-effective
systems. It would make sense as part of this to consider hubs connected to several
countries or regions and to assess the scope for synergies, in particular the possible use ofoffshore hubs to exchange electricity between the interconnected areas. This could reduce
the overall costs across the connected countries even when the wind generation is low andincrease the level of security of supply.

Implications
Offshore wind is a maturing technology that can help to achieve environmental goals while
contributing to the security and affordability of electricity. The growth of offshore wind in
the Stated Policies Scenario sees expansion well beyond the North Sea to markets aroundthe world. In the Sustainable Development Scenario, offshore wind grows faster still. The
falling costs of offshore wind support expansion in all scenarios, though policy makers havean important role to play in creating the necessary conditions for this to happen.

IEA. All rights reserved.

Achieving environmental goals
In the Stated Policies Scenario, the fifteen-fold growth of global offshore wind generation
helps to decarbonise electricity supply in several key markets. Over the next two decades,
the average CO2 intensity of electricity generation declines by more than one-third. This
keeps related CO2 emissions flat in the face of demand growth of 2.1% per year. Without
the growing contribution of offshore wind, cumulative global CO2 emissions would be
about 5 gigatonnes (Gt) higher over the next two decades on the assumption that its lost
output was replaced by the average of the existing power generation mix. In the European
Union, the central role of offshore would be particularly difficult to replace. Scaling up
generation based on the current power mix in the absence of offshore wind would lead toan additional 1.4 Gt of CO2 emissions from 2019 to 2040 in the European Union, 0.5 Gt in
the United States and 1.7 Gt in China (Figure 32).
Special Report | Implications

61

Figure 32 ⊳ Avoided CO2 emissions due to the deployment of offshore wind in
the Stated Policies and Sustainable Development scenarios

2018

2025

2030

2035

2040
China

-2

European Union
Stated Policies-4

United States
India
Rest of worldGt-6
Sustainable Development-8

Offshore wind complements the growth of other clean energy sources,
avoiding more than 7 Gt of CO2 emissions to 2040 in the Sustainable Development Scenario

In the Sustainable Development Scenario, an additional 790 TWh of offshore wind helps
avoid 2.5 Gt CO2 emissions from 2019 to 2040. These CO2 emissions reductions occur
mainly in China, United States and India as a result of an accelerated deployment ofoffshore wind. They are equal to half the avoided emissions attributable to nuclear powerin the transition to a more sustainable energy pathway.
The rise of offshore wind also leads to reductions of air pollutant emissions. In China,
offshore wind development helps to limit the use of coal-fired power generation near large
population centres in the eastern and southern parts of the country. In India and countries
in Southeast Asia, offshore wind contributes to the decline in reliance on coal-fired power
generation. In the United States and Europe, offshore wind displaces some gas-fired power
generation and the related pollutants.

IEA. All rights reserved.

Synergies with oil and gas activities
The offshore wind power and oil and gas sectors share both technologies and elements of
their respective supply chains, and there is scope to exploit the linkages further. Overall
spending in offshore wind power reached $20 billion in 2018. Under the Stated Policies
Scenario, the projected global annual spending for the next decade doubles and is two-anda-half times higher in the Sustainable Development Scenario. This growth in offshore windoffers opportunities to those involved in providing a range of relevant offshore oil and gas
services, whose skills could be very valuable to offshore wind developers in the light of thesynergies between the two sectors.

62

Offshore Wind Outlook 2019 | Special ReportIn this context, it is not a surprise that oil and gas companies started investing in offshore
wind projects many years ago, against the background of a trend of increasingly large
projects requiring significant amounts of capital. For instance, Shell made its first entry into
the offshore wind business with the Vattenfall offshore wind farm Egmond aan Zee in 2007,
and is currently developing two more projects in the Netherlands that will becommissioned in the first-half of the next decade: it is also participating in the offshore
market in the United Kingdom, France and United States. Equinor, a Norwegian company,
has an active pipeline of projects of more than 2 GW, including 0.8 GW recently won in thefirst large-scale auction in New York in the United States. However, the largest portfolio of
offshore wind capacity built belongs to the Danish company Ørsted (formerly DONG
Energy), which recently sold its oil and gas assets to focus on renewable energy: it has anactive pipeline of more than 8 GW.
Figure 33 ⊳ Global offshore wind capital spending and potential synergies with
offshore oil and gas activities

2018

Offshore oiland gas2019-30

STEPS

Offshorewind2031-40

Global average annual offshore capital spending

STEPS

SDS

SDS

Europe

China

Cumulative offshore wind spending that has synergies with offshore oil & gas activities
SDS

O&M

STEPS
Cons
O&M
Cons

IEA. All rights reserved.

50

100

150

200
250
Billion dollars (2018)

A growing pipeline of offshore wind projects opens new opportunities for traditional oil andgas companies, and these increase in the Sustainable Development Scenario
Notes: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario. Con = construction andincludes activities considered as potential synergies, e.g. foundations, installation and logistics. O&M
includes potential synergies in operation and maintenance of offshore wind installations.

Special Report | Implications

63

We estimate that about 40% of the full lifetime costs of a standard offshore wind project
have significant synergies with the offshore oil and gas sector. That translates into a$400 billion market opportunity in Europe and China in the Stated Policies Scenario, andabout a $550 billion opportunity in the Sustainable Development Scenario (Figure 33).
While turbine manufacturing is specific to wind power, the construction of the foundations
and subsea structures provides scope for significant learning from the oil and gas industry,
especially in terms of how best to utilise vessels during installation and operation. There is
likely to be much to learn from the oil and gas industry in developing floating platforms foroffshore wind. Last but not least, work on the offshore substations required for large
offshore wind projects and internal wiring in turbines could benefit from collaboration withthe oil and gas industry.
In addition, there are a variety of equipment and support services with cross-over potential
after the installation phase. Maintenance and inspection of oil and gas platforms is one
area where oil and gas practices and safety standards are highly transferable.
On the other side, many processes in the offshore oil and gas platforms require electricity
that is often supplied by (not very efficient) gas turbines or diesel engines that emit CO2
and air pollutants. Nearby wind farms could supply oil and gas platforms with low-carbon
electricity, reducing emissions and costs. Variable output from offshore wind could be achallenge, but batteries could help match patterns of electricity demand and supply, andlimit the use of fossil fuel combustion engines.
Linkage with carbon capture, utilisation and storage would involve depleted oil and gas
fields being used to store CO2, which could be brought to the platforms using existing
pipeline infrastructure. If the platforms are already electrified, they could housecompression facilities that could be powered by nearby offshore wind farms.

Enhanced energy security and affordability

IEA. All rights reserved.

Within the power sector, the characteristics of offshore wind enable it to contribute tosystem adequacy in a way that is unique among variable renewables. As a result it can be a
key contributor to ensuring electricity security in clean energy transitions.
Offshore wind can improve energy security in regions that rely on imported fuels for power
generation by enhancing self-sufficiency and energy affordability. For example, a
1 GW offshore wind farm could replace 0.8 billion cubic metres of gas imports to produce
the same amount of electricity in an efficient gas-fired power plant. At average spot prices
for liquefied natural gas in 2018, such an offshore wind project would reduce annual importfuel bills by over $300 million in Japan and $220 million in Europe. On the other hand, if allelectricity production from offshore wind in the Stated Policies Scenario instead weregenerated with the use of efficient gas-fired power generation, additional gas import bills
would be over $400 million per year in Japan, close to $1.9 billion in Korea and nearly$15 billion in the European Union.

64

Offshore Wind Outlook 2019 | Special Report

IEA. All rights reserved.

The competitiveness of offshore wind enables low-carbon electricity and hydrogen to be
produced at a cost lower than otherwise would be possible. Both of these are critical to theachievement of environmental goals. Without the development of offshore wind, efforts todecarbonise electricity in the European Union, China and United States would need todepend more heavily on onshore wind and solar PV. Overall, offshore wind makes energy
transitions more affordable, limits the challenges of rising flexibility needs and could,
ultimately, accelerate progress towards decarbonisation.

Special Report | Implications

65

Explore the data behind

Offshore Wind Outlook 2019

iea.org/offshorewind2019
This new World Energy Outlook special report provides the most comprehensive
analysis to date of the global outlook for offshore wind, its contributions to electricity
systems and its role in clean energy transitions. We have also developed an interactive
map showing offshore wind’s technical potential, based on the geospatial analysis
conducted for this report and other data such as existing offshore wind projects andpopulation density. You can explore the map online at iea.org/offshorewind2019.

Annex A
Tables for scenario projections & technical potential
General note to the tables
Tables A.1 and A.2 provide an overview of offshore wind by region and scenario covering
electricity generation, share of total generation, installed capacity, capacity additions; andaverage annual investments. Electricity generation is expressed in terawatt-hours (TWh),and installed capacity data and capacity additions are both expressed in gigawatts (GW).
Electrical data are provided on a gross basis (i.e. includes own use by the generator). Total
investment considers the annual capital spending estimated during a plant’s construction
time. Investment data are presented in real terms in year-2018 US dollars.
Table A.3 details results of the offshore wind technical potential geospatial analysis thatwas undertaken in collaboration with Imperial College London specifically for this report.
The technical potential is expressed in terawatt-hours per year and categorised based on
the location of the potential, i.e. distance from shore and water depth.
The definitions for regions are outlined in Annex C. Both in the text of this report and in thetables, rounding may lead to minor differences between totals and the sum of theirindividual components. Growth rates are calculated on a compound average annual basis
and are marked “n.a.” when the base year is zero or the value exceeds 200%. Nil values aremarked “-”.

Data sources
The World Energy Model (WEM) is a very data-intensive model covering the whole global
energy system. Much of the data are obtained from the IEA’s own databases of energy andeconomic statistics (www.iea.org/statistics/).

IEA. All rights reserved.

Additional data from a wide range of external sources are also used. Historical data forgross power generation capacity are drawn from the S&P Global Market Intelligence WorldElectric Power Plants Database (March 2019 version) and the International Atomic Energy
Agency PRIS database (www.iaea.org/pris).
The formal base year for the projections is 2017, as this is the last year for which acomplete picture of energy demand and production is in place. However, we have used
more recent data wherever available, and include our 2018 estimates for energy
production in this annex (Tables A.1 and A.2). Estimates for 2018 are based on the recent
IEA’s Global Energy and CO2 Status Report (iea.org/geco/) which is derived from a numberof sources, including the latest monthly data submissions to the IEA’s Energy Data Centre,
other statistical releases from national administrations, and recent market data from the
IEA Market Report Series that cover coal, oil, natural gas, renewables and power.
Investment estimates include the year 2018, based on the IEA’s World Energy Investment
2019 (iea.org/wei2019/).

Annex A | Tables for scenario projections & technical potential

67

Table A.1: Stated Policies Scenario
Shares(%)

Offshore wind overview

CAAGR
(%)

2010

2018

2025

2030

2035

2040

2018

2040

2018-40

7
0
0
8

0
60
6
0
0
67

11
168
49
0
4
6
253

60
306
117
11
8
34
567

112
462
219
30
12
60
948

146
568
339
50
15
78
1 281

0
91
8
0
0
100

11
44
26
4
1
6
100

39.1
10.7
20.4
n.a.
21.9
36.1
14.4

0.2%
0.0%
0.0%
0.0%

0.0%
1.8%
0.1%
0.0%
0.0%
0.3%

0.2%
5.0%
0.5%
0.0%
0.3%
0.9%
0.8%

1.3%
9.0%
1.1%
0.4%
0.7%
5.1%
1.7%

2.3%
13.3%
2.0%
0.8%
1.1%
8.6%
2.5%

2.9%
15.9%
2.8%
1.1%
1.4%
10.9%
3.1%

3
0
0
3

0
19
4
0
0
23

4
46
19
0
1
3
77

17
77
42
4
2
12
165

30
109
74
10
3
20
262

38
127
107
16
4
25
342

0
83
16
0
0
100

11
37
31
5
1
7
100

38.3
9.1
16.6
n.a.
20.8
35.8
13.2

1
0
0
1

3
2
5

1
6
3
0
1
12

3
8
6
1
0
2
21

2
7
7
1
0
1
19

2
5
7
1
0
1
19

67
33
100

8
29
40
6
1
5
100

n.a.
2.4
7.2
n.a.
n.a.
n.a.
6.3

Cumulative

CAAGR
(%)

Electricity generation (TWh)United States
European Union
China
India
Japan
Korea
World
Share of total generation
United States
European Union
China
India
Japan
Korea
World
Installed capacity (GW)
United States
European Union
China
India
Japan
Korea
World
Capacity additions (GW)
United States
European Union
China
India
Japan
Korea
World

Average annual investments($2018 billion)
United States
European Union
China
India
Japan
Korea
World

38.4
10.3
17.6
n.a.
21.9
34.9
12.1

2010-20182019-2030

2031-2040

2019-2040

2018-40

0
11
2
0
0
0
14

5
19
8
1
1
4
39

4
15
10
2
0
3
37

98
376
196
34
11
70
842

16.9
-0.7
2.9
43.8
5.3
1.7
2.2

IEA. All rights reserved.

Note: CAAGR = compound average annual growth rate; TWh = terawatt-hours; GW = gigawatts.

68

Offshore Wind Outlook 2019 | Special ReportTable A.2: Sustainable Development Scenario
Shares(%)

Offshore wind overview

CAAGR
(%)

2018

2025

2030

2035

2040

2018

2040

2018-40

0
60
6
0
0
67

14
209
62
3
6
10
329

72
370
179
14
21
41
764

157
559
344
39
41
69
1 362

260
777
546
70
67
88
2 072

0
91
8
0
0
100

13
37
26
3
3
4
100

42.8
12.3
23.1
n.a.
30.5
36.9
16.9

0.0%
1.8%
0.1%
0.0%
0.0%
0.3%

0.3%
6.2%
0.7%
0.1%
0.6%
1.7%
1.1%

1.6%
10.8%
1.9%
0.5%
2.1%
6.6%
2.4%

3.3%
15.1%
3.4%
1.2%
4.2%
10.5%
3.9%

5.3%
19.3%
5.0%
1.8%
6.7%
13.0%
5.4%

0
19
4
0
0
23

5
56
25
1
2
4
101

21
92
65
5
6
15
225

42
132
115
13
12
23
385

68
175
173
23
18
29
562

0
83
16
0
0
100

12
31
31
4
3
5
100

42.0
10.7
19.1
n.a.
29.3
36.7
15.7

3
2
5

2
7
6
0
1
2
18

4
8
9
1
1
2
29

5
9
11
2
1
1
35

5
12
12
2
1
1
40

67
33
100

13
29
31
5
3
3
100

n.a.
6.0
9.7
n.a.
n.a.
n.a.
10.1

Average annual investments($2018 billion)

Cumulative

CAAGR
(%)

2019-2030

2031-2040

2019-2040

2018-40

6
22
11
1
2
4
52

10
23
16
3
2
3
66

163
498
295
46
42
75
1 279

23.1
1.6
3.9
16.9
13.4
1.3
4.4

Electricity generation (TWh)United States
European Union
China
India
Japan
Korea
World
Share of total generation
United States
European Union
China
India
Japan
Korea
World
Installed capacity (GW)
United States
European Union
China
India
Japan
Korea
World
Capacity additions (GW)
United States
European Union
China
India
Japan
Korea
World

United States
European Union
China
India
Japan
Korea
World

42.1
11.3
20.8
n.a.
30.8
36.0
14.9

IEA. All rights reserved.

Note: CAAGR = compound average annual growth rate; TWh = terawatt-hours; GW = gigawatts.

A
Annex A | Tables for scenario projections & technical potential

69

Table A.3: Offshore wind technical potential (TWh per year)
Shallow water

Deep water

Far from shore

Near shore

North America

9 907

13 23822 81958 937

104 901

Canada

3 033

1 172

15 95232 31252 469Mexico

542

903

1 021

3 239

5 705

6 333

11 1635 846

23 38646 727

3 847

4 438

6 439

37 14451 869Brazil

1 692

1 622

1 011

6 123

10 448Europe

2 629

2 390

14 81752 00971 845

2 266

1 077

7 541

25 84436 728

1 123

572

7 699

17 10726 502

478

673

600

1 791

3 543

123

114

63

648

948

Eurasia

9 382

17 4029 943

48 73585 462

Russia8 931

17 2649 429

47 79083 413

Asia Pacific

8 508

12 45114 44041 35776 757Australia

4 093

3 317

4 319

4 404

16 132

China

1 822

2 869

142

3 489

8 323

India

683

280

903

4 130

5 996

Japan

30

13

2 223

6 808

9 074

United States*
Central and South America

European Union**
AfricaMiddle East
Saudi Arabia

Korea
Southeast Asia
World

Far from shore

Total
potential

Near shore

27

586

366

2 068

3 048

1 318

4 351

1 631

7 832

15 13335 87551 16676 757257 081420 878* Potential available including Alaska and Hawaii. ** Potential available excluding Greenland.

IEA. All rights reserved.

Source: IEA analysis developed in collaboration with Imperial College London.

70

Offshore Wind Outlook 2019 | Special ReportAnnex B
Assessing the technical potential of offshore wind
Introduction
In collaboration with Imperial College London, a detailed geospatial analysis wasundertaken to assess the technical potential for offshore wind worldwide. This annex
provides a description of the considerations and approach.

Scope of study
As part of this study, a number of considerations were taken into account including:Turbine designs for different wind speeds.

Wind farm designs.

Distance from shore.

Water depth.

Exclusion of regions with low wind speeds (less than 5 metres per second [m/s]),maritime protection areas, buffer zones for submarine cables, major shipping lanes,
earthquake fault lines and competing uses such as existing offshore oil and gas
installations.

Data
The availability of high-resolution satellite data and computing gains has significantly
improved the granularity and accuracy of wind resource assessments in recent years.
Emerging wind turbine designs are also cause to update potential assessments, as they
increase performance in well-established areas and make lower quality resources moresuitable for energy production.
This study is among the first to use the “ERA-5” reanalysis, which provides four decades ofhistoric global weather data. “Renewables.ninja” extrapolates wind speeds to the desired
hub height and converts them to output using manufacturers’ power curves for 150 turbine
models (Pfenninger and Staffell, 2016).

Tool for assessing annual capacity factors of offshore wind

IEA. All rights reserved.

The assessment of technical potential for offshore wind was conducted using theRenewables.ninja model. This tool simulates the annual capacity factors (and hourly power
output) from wind and solar power plants located anywhere in the world by combining
scientific-quality weather data with physics-based models of wind and solar farms. It is a
publicly available tool, validated and calibrated against real-world output in 70 countries,
and is available through a Creative Commons licence at www.renewables.ninja.

Annex B | Assessing the technical potential of offshore wind71

Exclusions
Commercially available offshore wind turbines are currently designed for wind speeds ofmore than 6 m/s. Some companies are also looking into turbine designs for lower windspeeds. For the purpose of this study, we have excluded regions of less than 5 m/s. But thisdoes not limit the industry from developing technology and designs that can be suited forlower wind speeds.
Following the International Union for Conservation of Nature’s (IUCN) classification ofmaritime protection areas, those categorised as Ia, Ib, II and III were excluded from thestudy (IUCN, 2013). However, at each project level other environmental considerations
must also be taken into account and a full environmental impact assessment conducted as
mandated by public authorities. Measures to protect biodiversity should also be taken
throughout the lifetime of the wind farm i.e. before, during and after construction.
As part of this analysis, buffer zones for existing submarine cables (1 kilometre [km]), major
shipping lanes (20 km), earthquake fault lines (20 km) and competing uses such as existing
offshore oil and gas installations and fisheries were also considered.

Turbine designs
The power curve of a wind turbine is a graph that indicates the profile of the electrical
output corresponding to different wind speeds (Figure B.1). At very low wind speeds, there
insufficient torque is exerted by the wind to make the turbine blades rotate. As the windspeed increases, the blades will begin to rotate and generate electrical power. The
corresponding wind speed is called the “cut-in speed” and is typically 3-4 m/s.

Output (MW)Figure B.1 ⊳Illustrative power curve for a 7 MW wind turbine

8

Rated output speed

Cut-out speed

6

4

2

Cut-in speed
5

IEA. All rights reserved.

0

10

15

20

25
30
Wind speed (m/s)

Electrical output of a wind turbine depends on the wind speed andvaries across different wind turbine models
Note: MW = megawatt.

72

Offshore Wind Outlook 2019 | Special ReportAs the wind speed increases above the cut-in speed, the electrical output typically rises
rapidly until the power output reaches the limit for which the generator is designed,
usually when the wind speed is somewhere between 12-17 m/s. This generator output limit
is called the “rated power output” and the wind speed needed to reach it is called the“rated output wind speed”.
At even higher wind speeds, strong winds would exert high forces to the turbine structure,
which at some point poses a risk of damage to the rotor. As such, a braking system is
employed to bring the rotor to a standstill. This wind speed is called the “cut-out speed”
and is usually around 25 m/s.
The electrical output that a turbine can generate is determined by the equation:
𝑃𝑃 =1𝜌𝜌𝐴𝐴𝑣𝑣 3 𝐶𝐶𝑝𝑝
2

Where P = power output, ρ = air density (kg/m3), A = swept area (m2), v = wind speed (m/s)
and Cp = power coefficient
As shown in the equation, a higher swept area, A, i.e. the area through which the turbine
blades spin, the higher the power output. This is because a higher swept area means that
more wind can be captured by the blades.
In 1919, German physicist Albert Betz concluded that no wind turbine could convert morethan 59.3% of the kinetic energy of the wind into mechanical energy turning a rotor, i.e.
Betz limit. If a wind turbine was 100% efficient, all the wind would have to stop completely
upon the contact with the turbine. This factor is called “power coefficient” and is definedas:𝐶𝐶𝑝𝑝𝑚𝑚𝑚𝑚𝑚𝑚 = 0.59

The Cp is dependent on various engineering requirements of a wind turbine, such as
strength and durability, and the real-world power coefficient is in the range of 0.35 to 0.45.
Different wind turbines can be classified by their specific power (SP), which is defined as
the turbine’s specific rated power capacity per swept area:

IEA. All rights reserved.

1𝜌𝜌𝜌𝜌𝑣𝑣 3 𝐶𝐶𝑝𝑝
𝑃𝑃
1
𝑆𝑆𝑆𝑆 = = 2= 𝜌𝜌𝑣𝑣 3 𝐶𝐶𝑝𝑝
𝐴𝐴
𝐴𝐴
2

In order to assess the global technical potential, best-in-class turbines were chosen withspecific power of 250, 300 and 350 watt per square metre (W/m2) that corresponds to lowmedium, medium and high wind speeds. The power curves of these turbines were used inconjunction with the global capacity factors of each 5km x 5km cell selected for the analysis(See section on “Global technical potential for offshore wind”) to derive the technicalpotential of offshore wind in terms of capacity and generation. New power curves weresynthesised for next-generation turbines with rated capacity of up to 20 megawatts (MW),for which data are not yet available (Figure B.2) (Saint-Drenan et al., 2019).
Annex B | Assessing the technical potential of offshore wind73

B

Output (MW)Figure B.2 ⊳Illustrative power curves for 20 MW wind turbines

20

Turbine type
250 W/m²

15300 W/m²
350 W/m²

10
5

0

5

10

15

20

25

30

Wind speed (m/s)
Power curves for three turbine types by specific power were synthesised for this study,
which correspond to low-medium, medium and high wind speeds.
Source: Saint-Drenan et al. (2019).

Offshore wind farm designs
The number of turbines needed per unit of generation decreases as the rated power of theturbine increases (left graph of Figure B.3).
Figure B.3 ⊳Number of turbines per TWh

km2

50

Number of turbines and space requirements

40

160

Area needed per TWh

120

30

Specific power
250 W/m2
300 W/m2
350 W/m2

80

20
40
10

IEA. All rights reserved.

6

8

10 12 14 16 18 20 MW

Onshore
wind

Solar
PV

Offshorewind

The number of turbines required per unit of electricity generated decreases with bigger
turbines, and space requirements are often less than for onshore wind or solar PV
Notes: TWh = terawatt-hour. Based on an 8 x 8 rotor diameter equivalent spacing configuration and 50%
capacity factor for offshore wind.
Sources: IEA analysis; van Zalk et al. (2018).

74

Offshore Wind Outlook 2019 | Special ReportWhile it would be intuitive to pack as many turbines in a given area, it is important to notethat after the wind passes through a turbine, the wind speed on a downstream windturbine is lowered as energy has been extracted by the turbine upstream. This wake effectcan have a significant impact on the generation output of a wind farm (“wake losses”). The
losses can be reduced by optimising the layout of wind farms (e.g. turbine orientation andspacing). Subject to site constraints, the current industry norm is to use between 7-10 rotor
diameters spacing with associated 11-13% wake losses (Table B.1). Based on simulation
models, a higher range of wake loses of around 16-17% would be expected when using alower rotor diameter spacing (NREL, 2013).
Table B.1 ⊳Wind farm configuration of selected projects

Country

Projects

Germany

Sandbank
Wikinger
ArkonaHorns Rev 1
Horns Rev 2
AnholtGunfleet Sands
Greater Gabbard
GalloperDenmark

United Kingdom

CapacityWind farm configuration(rotor diameter equivalent)

72 x 4 MW
70 x 5 MW
60 x 6 MW
80 x 2 MW
91 x 2.3 MW
111 x 3.6 MW
48 x 3.6 MW
140 x 3.6 MW
56 x 6.3 MW

8x9
6.7 x 4.5
6.4 x 4.7
8.7 x 7.0
9.3 x 7.1
9.9 x 9.2
9.3 x 5.8
10.3 x 9.8
8.6 x 6.9

Using an 8 by 8 rotor diameter equivalent spacing for offshore wind farm configuration, thearea needed per terawatt-hour of generation is lower than onshore wind and comparablewith solar photovoltaics (PV) (right graph of Figure B.3). With offshore wind turbines, aturbine with a lower specific power, means that the swept area is bigger (i.e. longer rotor
diameter) in order to capture the equivalent energy compared to those designed for higher
specific power i.e. higher wind speeds. This translates to larger space requirements per
terawatt-hour for turbines with lower specific power.
Through digitalisation, the performance of wind farms can be enhanced by deploying
sensors for real-time monitoring and utilising advanced techniques for active control of theturbines depending on the wind speed and direction to reduce the wake losses.

IEA. All rights reserved.

Distance from shore and water depth
Offshore wind installations today are moving further from shore and into deeper waters
where better quality wind resources are available (Figure B.4). For example, the 864 MW
SylWin1 in Germany and the 1 386 MW Hornsea 2 in the United Kingdom projects which
are located 160 km and 89 km from shore are among the longest offshore grid connectionin the world. In order to transmit the electricity generated to shore, the projects are
deploying different technologies; SylWin1 is using high-voltage direct current connection(HVDC) transmission cable while the Hornsea 2 project is using alternating current
Annex B | Assessing the technical potential of offshore wind

75

B

transmission cable. There are differing cost and energy savings for both options at different
lengths with HVDC offering significant cost savings over longer distances. (See section on“Offshore wind costs, value and competitiveness”)
Developers are installing turbines in deeper waters, owing to improving construction
techniques as a result of learning from earlier projects. The use of relatively low-costmonopile foundations has been the industry standard for the majority of the projects
installed in water depths of less than 50 metres (m). Projects located in deeper waters (5060 m) are pushing for the use of such foundations in favour of higher cost jacket andfloating foundations. Beyond water depths of 60 m, the industry is deploying different
floating foundation pilots (e.g. Scotland’s 30 MW Hywind Scotland Pilot Park and Japan’s
3.2 MW Hibiki) to improve the designs. Equinor received approval in June 2019 to build a
200 MW floating offshore wind farm off the coast of the Canary Islands which is expected
to be the world’s largest when it begins operations in the mid-2020s. (See Box 1 in section
on “Offshore wind technology and performance”)

Water depth (m)Figure B.4 ⊳Water depth and distance to shore for offshore wind projects

60

Permitted
Construction
Commissioned

50
40

Wind farm size

30

1 000 MW

20
10

0

50

100

150

200
250
Distance to shore (km)Projects are moving further away from shore and also into deeper waters

IEA. All rights reserved.

Source: The Wind Power (2019).

For this study of technical potential, we have limited the analysis to within 300 km from thenearest shoreline. This is assessed based on the latest technology and cost associated with
deployment, in particular the length and construction methods for submarine transmission
cables needed to bring the electricity generated to shore. However, the distance would not
be an issue if instead of being connected to electricity supply on shore, it is a standalone
facility coupled with the production of green hydrogen and exported by specialised vessels
to shore. (See section on “Increased demand for renewable hydrogen”)
As for the water depth, we have limited the analysis to less than 2 000 m depth. Thisparameter is sub-divided into two regions, the first being less than 60 m water depth
76

Offshore Wind Outlook 2019 | Special Reportsuitable for fixed-bottom foundations, and the second between 60-2 000 m that aresuitable for floating foundations. While the limit is 2 000 m for the purpose of this study,
this does not preclude floating foundation technology options for depths beyond 2 000 m
in the future.

Offshore wind costs: moving to floating structures
Costs are declining. For projects to be commissioned in mid-2020s around the world,
offshore wind farm costs are projected to fall to nearly $3 000 per kilowatt (kW), 30% lower
than today’s levels when offshore transmission assets are included. This is mostly areflection of project site specifics linked to water depths and distance to shore, but also
fixed-bottom foundation types used and the size of the turbines installed.
Meanwhile, the associated costs of the offshore transmission assets stand at over 20% of
total project costs, mostly related to the actual distance to shore, the type of cable
employed and the size of the required offshore substations. For projects located around
50 to 100 km from shore, this implies offshore wind farm costs would be over $2 000/kW
on average when considering just the cost of the offshore wind farm and not including thecosts for the offshore substation and connection (Figure B.5).

Dollars per kW (2018)

Figure B.5 ⊳Indicative capital costs for example types of offshore windprojects to be commissioned by mid-2020s

6 000
5 000
4 000
3 000
2 000
1 000
Fixed-bottom
without transmission

Fixed-bottom
with transmission(50-100 km)

Floating foundation
with transmission(50 km)Floating offshore wind capital costs are currently above those of fixed-bottom foundations.
However, technology development could reduce the difference in the future

IEA. All rights reserved.

Notes: Transmission includes the cost of associated offshore substations.

Floating offshore wind farms are gaining momentum, opening up deep water project sites.
For projects to be commissioned before 2025, costs are expected to remain quite diverseand linked to regional market developments. Floating offshore wind installations do notincur the cost associated with fixed-bottom foundations, however, floating foundations are
Annex B | Assessing the technical potential of offshore wind77Ban emerging technology with components still in an early stage of demonstration. There issignificant potential for future cost reductions. There are a few examples on the horizon
that will demonstrate floating wind developments: Equinor and its partners took Final
Investment Decision (FID) for the 88 MW Hywind Tampen floating project in the NorwegianSea, and also expressed interest to build a 200 MW floating wind farm near the CanaryIslands; the Macquarie Group has teamed with Gyeongbuk Floating Offshore Wind Powerto jointly develop a 1 gigawatt (GW) floating wind project in Korea. First experiences withfloating offshore substations have been made in Japan with the FORWARD project near tothe shore of Fukushima. Large offshore substations where the internal equipment iscapable to withstand movements from the sea waves have yet to be developed and might
have an impact on the additional costs for floating offshore wind developments.

Offshore wind technical potential
Based on the assessment, we estimate that the technical potential for offshore wind
worldwide is more than 120 000 GW, with the potential to generate more than
420 000 terawatt-hours (TWh) of electricity per year.
The technical potential can be divided between what is available in shallow water(i.e. < 60 m) and in deep water (i.e. 60-2 000 m). Broadly speaking, shallow water sites are
suitable for established fixed-bottom foundations and are easier to access, while those fordeeper water sites require floating platforms and are harder to access.
Within these two broad categories, the technical potential can be further sub-divided: sitesthat are near to shore (i.e. 20-60 km) and within 50 km of existing commissioned projects;
other potential sites that are close to shore; sites far from shore (i.e. 60-300 km); and sites
with existing restrictions or competing uses such as oil and gas installations.
The following maps (Figures B.6-B.11), illustrate the geospatial locations of the global andregional offshore wind technical potentials based on the four categories.

IEA. All rights reserved.

In addition to the location in assessing suitable sites for offshore wind deployment, otherconsiderations including the quality of wind resources (i.e. capacity factor) and associatedcosts are key factors. (See section on “Offshore wind costs, value and competitiveness”)

78

Offshore Wind Outlook 2019 | Special ReportGlobal offshore wind technical potential map

Source: IEA analysis developed in collaboration with Imperial College London

Note: Inland dots depict population density of more than 500, 2 000 and 8 000 people per km2 with darker shades of grey.

Figure B.6 ⊳IEA. All rights reserved.

Annex B | Assessing the technical potential of offshore wind

79

B

Offshore wind technical potential map for Europe

Source: IEA analysis developed in collaboration with Imperial College London

Note: Inland dots depict population density of more than 500, 2 000 and 8 000 people per km2 with darker shades of grey.

Figure B.7 ⊳IEA. All rights reserved.

80

Offshore Wind Outlook 2019 | Special ReportOffshore wind technical potential map for East Asia

Source: IEA analysis developed in collaboration with Imperial College London

Note: Inland dots depict population density of more than 500, 2 000 and 8 000 people per km2 with darker shades of grey.

Figure B.8 ⊳IEA. All rights reserved.

Annex B | Assessing the technical potential of offshore wind

81

B

Offshore wind technical potential map for North America

Source: IEA analysis developed in collaboration with Imperial College London

Note: Inland dots depict population density of more than 500, 2 000 and 8 000 people per km2 with darker shades of grey.

Figure B.9 ⊳IEA. All rights reserved.

82

Offshore Wind Outlook 2019 | Special ReportSource: IEA analysis developed in collaboration with Imperial College London

Note: Inland dots depict population density of more than 500, 2 000 and 8 000 people per km2 with darker shades of grey.

Figure B.10 ⊳ Offshore wind technical potential map for Australia and New Zealand

IEA. All rights reserved.

Annex B | Assessing the technical potential of offshore wind

83

B

Source: IEA analysis developed in collaboration with Imperial College London

Note: Inland dots depict population density of more than 500, 2 000 and 8 000 people per km2 with darker shades of grey.

Figure B.11 ⊳ Offshore wind technical potential map for India

IEA. All rights reserved.

84

Offshore Wind Outlook 2019 | Special ReportAnnex C
Definitions
This annex provides general information on terminology used throughout this publication
including: units and general conversion factors; definitions of fuels, processes and sectors;
regional and country groupings; and abbreviations and acronyms.

Units
Area

km2

square kilometre

Emissionsg CO2/kWhgrammes of carbon dioxide per kilowatt-hour

Energy

toe
ktoe
Mtoe
MBtu
Gcal
TJ
kWh
MWh
GWh
TWh

tonne of oil equivalent
thousand tonnes of oil equivalentmillion tonnes of oil equivalentmillion British thermal units
gigacalorie (1 calorie x 109)
terajoule (1 joule x 1012)
kilowatt-hour
megawatt-hour
gigawatt-hour
terawatt-hour

Mass

kg
kt
Mt
Gt

kilogramme (1 000 kg = 1 tonne)
kilotonnes (1 tonne x 103)
million tonnes (1 tonne x 106)
gigatonnes (1 tonne x 109)

Monetary$ million$ billion$ trillion

1 US dollar x 106
1 US dollar x 109
1 US dollar x 1012

Power

W
kW
MW
GW
TW

watt (1 joule per second)kilowatt (1 watt x 103)
megawatt (1 watt x 106)
gigawatt (1 watt x 109)
terawatt (1 watt x 1012)

IEA. All rights reserved.

General conversion factors for energy
Convert to:
From:
TJ
Gcal
Mtoe
MBtu
GWh

TJ
multiply by:
1
4.1868 x 10-3
4.1868 x 104
1.0551 x 10-3
3.6

Annex C | Definitions

Gcal

Mtoe

MBtu

GWh

238.8
1
107
0.252
860

2.388 x 10-5
10-7
1
2.52 x 10-8
8.6 x 10-5

947.8
3.968
3.968 x 107
1
3 412

0.27781.163 x 10-3
11 6302.931 x 10-4
185

Currency conversions
Exchange rates (2018 annual average)

1 US Dollar equals:

British Pound

0.75

Chinese Yuan Renminbi

6.62

Euro

0.85

Indian Rupee
Indonesian Rupiah

68.39
14 236.94

Japanese Yen

110.42

Russian Ruble

62.67

South African Rand

13.24

Source: OECD National Accounts Statistics: purchasing power parity and exchange rates, September 2019.

Definitions
Capacity credit: Proportion of the capacity that can be reliably expected to generate
electricity during times of peak demand in the grid to which it is connected.
Capacity factor: Describes the average output over the year relative to the maximum rated
power capacity.
Coal: Includes both primary coal (including lignite, coking and steam coal) and derived fuels(including patent fuel, brown-coal briquettes, coke-oven coke, gas coke, gas-works gas,coke-oven gas, blast-furnace gas and oxygen steel furnace gas). Peat is also included.
Decomposition analysis: Statistical approach that decomposes an aggregate indicator toquantify the relative contribution of a set of pre-defined factors leading to a change in theaggregate indicator. The World Energy Outlook uses an additive index decomposition of thetype Logarithmic Mean Divisia Index I (LMDI).
Dispatchable: Dispatchable generation refers to technologies whose power output can bereadily controlled - increased to maximum rated capacity or decreased to zero - in order tomatch supply with demand.
Electricity demand: Defined as total gross electricity generation less own use generation,plus net trade (imports less exports), less transmissions and distribution losses.

IEA. All rights reserved.

Electricity generation: Defined as the total amount of electricity generated by power onlyor combined heat and power plants including generation required for own use. This is also
referred to as gross generation.
Gas (also referred to as natural gas): Comprises gases occurring in deposits, whetherliquefied or gaseous, consisting mainly of methane. It includes both “non-associated” gasoriginating from fields producing hydrocarbons only in gaseous form, and “associated” gas
produced in association with crude oil as well as methane recovered from coal mines(colliery gas). Natural gas liquids (NGLs), manufactured gas (produced from municipal or
86

Offshore Wind Outlook 2019 | Special Reportindustrial waste, or sewage) and quantities vented or flared are not included. Gas data incubic metres are expressed on a “gross” calorific value basis and are measured at 15 °C andat 760 mm Hg (“Standard Conditions”). Gas data expressed in tonnes of oil equivalent,
mainly for comparison reasons with other fuels, are on a “net” calorific basis. The
difference between the “net” and the “gross” calorific value is the latent heat ofvaporisation of the water vapour produced during combustion of the fuel (for gas the net
calorific value is 10% lower than the gross calorific value).
Hydrogen: Defined as an energy carrier, which can be produced by various energy sources
and technologies, similar to electricity.
Hydropower: The energy content of the electricity produced in hydropower plants,
assuming 100% efficiency. It excludes output from pumped storage and marine (tide andwave) plants.
Industry: The sector includes fuel used within the manufacturing and constructionindustries. Key industry branches include iron and steel, chemical and petrochemical,
cement, and pulp and paper. Use by industries for the transformation of energy intoanother form or for the production of fuels is excluded and reported separately under“other energy”. Consumption of fuels for the transport of goods is reported as part of thetransport sector, while consumption by off-road vehicles is reported under industry.
Investment: All investment data and projections reflect spending across the lifecycle of a
project, i.e. the capital spent is assigned to the year when it is incurred. Investments for oil,gas and coal include production, transformation and transportation; those for the power
sector include refurbishments, uprates, new builds and replacements for all fuels andtechnologies for on-grid, mini-grid and off-grid generation, as well as investment intransmission and distribution, and battery storage. Investment data are presented in realterms in year-2018 US dollars unless otherwise stated.
Note that this investment definition is new and our methodology to assess investment haschanged from the previous editions of the World Energy Outlook. Previously, theinvestment data reflected “overnight investment”, i.e. the capital spent is generally
assigned to the year production (or trade) is started, rather than the year when it isincurred.
Nuclear: Refers to the primary energy equivalent of the electricity produced by a nuclear
plant, assuming an average conversion efficiency of 33%.

IEA. All rights reserved.

Offshore wind: Refers to the primary energy equivalent of the electricity produced by windturbines that are installed in near-shore or farther from shore, usually in the ocean.
Oil: Oil production includes both conventional and unconventional oil. Petroleum products
include refinery gas, ethane, liquid petroleum gas, aviation gasoline, motor gasoline, jet
fuels, kerosene, gas/diesel oil, heavy fuel oil, naphtha, white spirit, lubricants, bitumen,paraffin, waxes and petroleum coke.

Annex C | Definitions

87

C

Other energy sector: Covers the use of energy by transformation industries and the energy
losses in converting primary energy into a form that can be used in the final consuming
sectors. It includes losses by gas works, petroleum refineries, blast furnaces, coke ovens,
coal and gas transformation and liquefaction. It also includes energy used in coal mines, inoil and gas extraction and in electricity and heat production. Transfers and statisticaldifferences are also included in this category.
Power generation: Refers to fuel use to produce electricity at power stations, heat plants
and combined heat and power (CHP) plants. Both main activity producer plants and small
plants that produce fuel for their own use (auto-producers) are included.
Renewables: Includes bioenergy, geothermal, hydropower, solar photovoltaics (PV),concentrating solar power (CSP), onshore and offshore wind and marine (tide and wave)
energy for electricity and heat generation.
Total final consumption (TFC): Is the sum of consumption by the various end-use sectors.
TFC is broken down into energy demand in the following sectors: industry (including
manufacturing and mining), transport, buildings (including residential and services) andother (including agriculture and non-energy use). It excludes international marine andaviation bunkers, except at world level where it is included in the transport sector.
Total final energy consumption (TFEC): Is a variable defined primarily for tracking progress
towards target 7.2 of the Sustainable Development Goals. It incorporates total final
consumption (TFC) by end-use sectors but excludes non-energy use. It excludes
international marine and aviation bunkers, except at world level. Typically this is used in
the context of calculating the renewable energy share in total final energy consumption(Indicator 7.2.1 of the Sustainable Development Goals), where TFEC is the denominator.
Total primary energy demand (TPED): Represents domestic demand only and is broken
down into power generation, other energy sector and total final consumption.

IEA. All rights reserved.

Transport: Fuels and electricity used in the transport of goods or persons within thenational territory irrespective of the economic sector within which the activity occurs. This
includes fuel and electricity delivered to vehicles using public roads or for use in rail
vehicles; fuel delivered to vessels for domestic navigation; fuel delivered to aircraft fordomestic aviation; and energy consumed in the delivery of fuels through pipelines. Fueldelivered to international marine and aviation bunkers is presented only at the world level
and is excluded from the transport sector at a domestic level.
Variable renewable energy: Refers to technologies whose maximum output at any timedepends on the availability of fluctuating renewable energy resources. VRE includes abroad array of technologies such as wind power, solar PV, run-of-river hydro, concentrating
solar power (where no thermal storage is included) and marine (tidal and wave).
Wake losses: The effect on the space behind a turbine that is marked by decreased windspeed on a downstream wind turbine due to the fact that the turbine itself used the energy
in turning the blades.
88

Offshore Wind Outlook 2019 | Special Report

Regional and country groupings
Figure C.1 ⊳World Energy Outlook main country groupings

Advanced economies: OECD regional grouping and Bulgaria, Croatia, Cyprus,1,2 Malta andRomania.
Africa: North Africa and sub-Saharan Africa regional groupings.
Asia Pacific: Southeast Asia regional grouping and Australia, Bangladesh, China, India,
Japan, Korea, Democratic People’s Republic of Korea, Mongolia, Nepal, New Zealand,
Pakistan, Sri Lanka, Chinese Taipei, and other Asia Pacific countries and territories.3
Caspian: Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan
and Uzbekistan.
Central and South America: Argentina, Plurinational State of Bolivia (Bolivia), Brazil, Chile,
Colombia, Costa Rica, Cuba, Curaçao, Dominican Republic, Ecuador, El Salvador, Guatemala,Haiti, Honduras, Jamaica, Nicaragua, Panama, Paraguay, Peru, Suriname, Trinidad andTobago, Uruguay, Bolivarian Republic of Venezuela (Venezuela), and other Central andSouth American countries and territories.4
China: Includes the (People's Republic of) China and Hong Kong, China.

IEA. All rights reserved.

Developing Asia: Asia Pacific regional grouping excluding Australia, Japan, Korea and
New Zealand.
Developing economies: All other countries not included in the “advanced economies”
regional grouping.

Annex C | Definitions

89

C

Eurasia: Caspian regional grouping and the Russian Federation (Russia).
Europe: European Union regional grouping and Albania, Belarus, Bosnia and Herzegovina,
Republic of North Macedonia, Gibraltar, Iceland, Israel,5 Kosovo, Montenegro, Norway,
Serbia, Switzerland, Republic of Moldova, Turkey and Ukraine.
European Union: Austria, Belgium, Bulgaria, Croatia, Cyprus,1,2 Czech Republic, Denmark,Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania,
Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia,
Spain, Sweden and United Kingdom.
IEA (International Energy Agency): OECD regional grouping excluding Chile, Iceland, Israel,
Latvia, Lithuania and Slovenia.
Latin America: Central and South America regional grouping and Mexico.
Middle East: Bahrain, Islamic Republic of Iran (Iran), Iraq, Jordan, Kuwait, Lebanon, Oman,
Qatar, Saudi Arabia, Syrian Arab Republic (Syria), United Arab Emirates and Yemen.
Non-OECD: All other countries not included in the OECD regional grouping.
Non-OPEC: All other countries not included in the OPEC regional grouping.
North Africa: Algeria, Egypt, Libya, Morocco and Tunisia.
North America: Canada, Mexico and United States.
OECD (Organisation for Economic Co-operation and Development): Australia, Austria,
Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg,
Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia,
Spain, Sweden, Switzerland, Turkey, United Kingdom and United States.
OPEC (Organisation of the Petroleum Exporting Countries): Algeria, Angola, Republic of theCongo (Congo), Ecuador, Equatorial Guinea, Gabon, Islamic Republic of Iran (Iran), Iraq,
Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates and Bolivarian Republic ofVenezuela (Venezuela).

IEA. All rights reserved.

Southeast Asia: Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic
Republic (Lao PDR), Malaysia, Myanmar, Philippines, Singapore, Thailand and Viet Nam.
These countries are all members of the Association of Southeast Asian Nations (ASEAN).
Sub-Saharan Africa: Angola, Benin, Botswana, Cameroon, Republic of the Congo (Congo),
Côte d’Ivoire, Democratic Republic of the Congo, Eritrea, Ethiopia, Gabon, Ghana, Kenya,
Mauritius, Mozambique, Namibia, Niger, Nigeria, Senegal, South Africa, South Sudan,
Sudan, United Republic of Tanzania (Tanzania), Togo, Zambia, Zimbabwe and other Africancountries and territories.6

90

Offshore Wind Outlook 2019 | Special ReportCountry Notes
1 Note by Turkey: The information in this document with reference to “Cyprus” relates to the southern partof the Island. There is no single authority representing both Turkish and Greek Cypriot people on the Island.
Turkey recognises the Turkish Republic of Northern Cyprus (TRNC). Until a lasting and equitable solution isfound within the context of the United Nations, Turkey shall preserve its position concerning the “Cyprus
issue”.
2 Note by all the European Union Member States of the OECD and the European Union: The Republic of

Cyprus is recognised by all members of the United Nations with the exception of Turkey. The information inthis document relates to the area under the effective control of the Government of the Republic of Cyprus.
3 Individual data are not available and are estimated in aggregate for: Afghanistan, Bhutan, Cook Islands, Fiji,

French Polynesia, Kiribati, Lao People’s Democratic Republic (Lao PDR), Macau (China), Maldives,
New Caledonia, Palau, Papua New Guinea, Samoa, Solomon Islands, Timor-Leste and Tonga and Vanuatu.
4 Individual data are not available and are estimated in aggregate for: Anguilla, Antigua and Barbuda, Aruba,
Bahamas, Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Dominica, Falkland
Islands (Malvinas), French Guiana, Grenada, Guadeloupe, Guyana, Martinique, Montserrat, Saba,
Saint Eustatius, Saint Kitts and Nevis, Saint Lucia, Saint Pierre and Miquelon, Saint Vincent and Grenadines,
Saint Maarten, Turks and Caicos Islands.
5 The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities.

The use of such data by the OECD and/or the IEA is without prejudice to the status of the Golan Heights,
East Jerusalem and Israeli settlements in the West Bank under the terms of international law.
6 Individual data are not available and are estimated in aggregate for: Burkina Faso, Burundi, Cabo Verde,Central African Republic, Chad, Comoros, Djibouti, Equatorial Guinea, Kingdom of Eswatini, Gambia, Guinea,
Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Réunion, Rwanda, Sao Tome andPrincipe, Seychelles, Sierra Leone, Somalia and Uganda.

IEA. All rights reserved.

Abbreviations and Acronyms
AC
BNEF
CAAGR
CCGT
CCUS
CO2
CO2-eq
COD
COP
CPS
CSP
DC
ECMWF
EU
ENTSO-E
GDP
GHG
HVDC
IEA
IJGLOBAL

alternating current
Bloomberg New Energy Financecompound average annual growth rate
combined-cycle gas turbine
carbon capture, utilisation and storage
carbon dioxidecarbon-dioxide equivalent
Commercial operation dateConference of Parties (UNFCCC)
Current Policies Scenario
concentrating solar power
direct current
European Centre for Medium-Range Weather Forecasts
European Union
European Network of Transmission System Operators for Electricity
gross domestic productgreenhouse gases
high-voltage direct current
International Energy Agency
Infrastructure Journal and Project Finance Magazine

Annex C | Definitions

C91

IEA. All rights reserved.

IRENA
ITC
IUCN
LCOE
LNG
MER
NDCs
NDRC
NREL
OECD
O&M
OPEC
PBL
PTC
PV
SDS
STEPS
T&D
TFC
TFEC
TPED
TSO
UK
UN
UNEP
UNFCCCUSUS DOEVALCOE
VRE
WACC
WEO
WEM
WWF

92

International Renewables Energy Agency
Investment Tax Credit
International Union for Conservation of Naturelevelised cost of electricity
liquefied natural gas
market exchange rate
Nationally Determined Contributions
National Development and Reform Commission
US National Renewables Energy Laboratory
Organisation for Economic Co-operation and Development
operation and maintenance
Organization of Petroleum Exporting Countries
PBL Netherlands Environmental Assessment Agency
Production Tax Credit
photovoltaics
Sustainable Development Scenario
Stated Policies Scenariotransmission and distribution
total final consumption
total final energy consumption
total primary energy demand
Transmission system operator
United Kingdom
United Nations
United Nations Environment Programme
United Nations Framework Convention on Climate Change
United States
United States Department of Energy
value-adjusted levelised cost of electricity
variable renewable energy
weighted average cost of capital
World Energy Outlook
World Energy Model
World Wide Fund for Nature

Offshore Wind Outlook 2019 | Special ReportAnnex D
References
Bloomberg (2019), Bloomberg terminal, accessed 16 September 2019.
BNEF (Bloomberg New Energy Finance) (2019), Offshore Wind Projects June 2019, BNEF,
London.
Carbon Trust (2015), Floating Offshore Wind: Market and Technology Review, The Carbon
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D
Annex D | References

95Offshore Wind Outlook 2019
World Energy Outlook Special Report

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Offshore Wind Outlook 2019 | Special ReportOffshore Wind Outlook 2019
World Energy Outlook Special Report
Offshore wind is a rapidly maturing renewable energy
technology that is poised to play an important role infuture energy systems. In 2018, offshore wind provided
a tiny fraction of global electricity supply, but it is
set to expand strongly in the coming decades into a$1 trillion business. Turbines are growing in size andin terms of the power capacity they can provide,
which in turn is delivering major performance andcost improvements for offshore wind farms.
This new World Energy Outlook special report provides
the most comprehensive analysis to date of the global
outlook for offshore wind, its contributions to electricity
systems and its role in clean energy transitions. The
report is a deep dive into offshore wind, giving asnapshot of where the market, technology and policies
stand today – and mapping out how they may develop
over the next two decades. It draws on a state-of-the-art
geospatial analysis of the world’s offshore windresources and explores the implications of thetechnology’s growth for global environmental goals
and energy security.