# Gone With the Wind: Turbine Additions Still Fall Short

An episode of [Switched On](https://invisiblenetwork.ai/podcast/1469286286), 13 Nov 2024, 40 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/01a10738-3608-4dec-883c-ae3c00026b36/62427207-c18f-4da4-9a7b-b22700a8c79b/audio.mp3?utm_source=Podcast&in_playlist=6d114f63-833d-4b78-bbf5-ae3c00026b44

Wind is key to tripling global clean energy capacity by 2030, but in recent years both onshore and offshore additions have been blowing cold. The landscape improves as we look ahead to 2030, when BloombergNEF expects annual installations of wind to have risen by a massive 70%. China, which is currently responsible for over a half of all global wind additions, is leading the charge. But now that its massive turbine manufacturing base is looking outside its borders, the picture for equipment exports is about to be shaken up. On today’s show, Tom Rowlands-Rees speaks with BNEF’s head of Wind Research, Oliver Metcalfe, about key findings from three recent reports: Unlocking Investment to Triple Renewables by 2030, 3Q 2024 Wind Turbine Order Dataset: Volume Surges, and Floating Offshore Wind: Big Potential But Big Price Tag. Together they discuss what it’ll take for wind to grow at the pace required to meet net-zero goals, the threat to western turbine manufacturers posed by rising Chinese exports, and the impact floating wind could have on the offshore market. Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal or on bnef.com Links to research notes from this episode: Unlocking Investment to Triple Renewables by 2030 - https://www.bnef.com/insights/34887/view 3Q 2024 Wind Turbine Order Dataset: Volume Surges - https://www.bnef.com/insights/35179/view Floating Offshore Wind: Big Potential But Big Price Tag - https://www.bnef.com/insights/34913 See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: This is Dana Perkins, and you're listening to Switched on
[0:03] Speaker 1: the B and EF podcast, and today we're talking about
[0:07] Speaker 1: the state of the global wind industry. Now, one could
[0:10] Speaker 1: say that wind has been stuck in the doldrums. For
[0:13] Speaker 1: those of you who are not familiar with this term,
[0:16] Speaker 1: the doldrums is actually a nautical term referring to parts
[0:19] Speaker 1: of the ocean where sailing ships could get stuck for
[0:22] Speaker 1: long periods because of a lack of wind. Apart from
[0:26] Speaker 1: it being a clever pun, maybe this is an apt
[0:28] Speaker 1: description of where the wind industry has been for the
[0:31] Speaker 1: past few years.
[0:32] Speaker 2: To put this.
[0:33] Speaker 1: Idea into numbers, year on year wind capacity installations grew
[0:37] Speaker 1: by six percent in twenty twenty four. This is far
[0:40] Speaker 1: short of the average annual growth rate of twenty five
[0:43] Speaker 1: percent that is needed between now and twenty thirty to
[0:47] Speaker 1: stay on track with net zero goals. Wind is simply
[0:50] Speaker 1: not moving fast enough. But on the other hand, the
[0:53] Speaker 1: one hundred and twenty four gigawatts of wind that we
[0:56] Speaker 1: expect to see installed by the end of this year
[0:59] Speaker 1: represents an annual record, So arguably, if wind has been
[1:03] Speaker 1: in the doldrums, maybe now it's coming out of them.
[1:06] Speaker 1: The answer to this question really lies and what has
[1:09] Speaker 1: been done by policymakers to accelerate the market and how
[1:13] Speaker 1: the wind industry is evolving, and then what role technology
[1:16] Speaker 1: can play and unlocking new opportunities so that record breaking
[1:20] Speaker 1: years are also aligned with net zero goals on policy.
[1:24] Speaker 1: Certain countries are beginning to figure out the puzzle of
[1:27] Speaker 1: how to scale wind and overcome barriers such as permitting
[1:30] Speaker 1: that has held many markets back. On the topic of
[1:33] Speaker 1: evolution of the industry, we look to China which is
[1:36] Speaker 1: not only pioneering onshore wind it previously unheard of scales.
[1:41] Speaker 1: Their turbine manufacturers are also increasingly becoming a factor in
[1:45] Speaker 1: the global market, and in India, wind manufacturers are beginning
[1:49] Speaker 1: to achieve traction on a significant scale. When it comes
[1:52] Speaker 1: to technology, the prospect of floating wind could unlock opportunities
[1:56] Speaker 1: to expand capacity in previously inaccessible location. So on today's show,
[2:01] Speaker 1: Tom Rowland's Reese takes over hosting duties where he is
[2:04] Speaker 1: joined by bnaf's head of Wind Oliver Metcalf. Oliver talks
[2:08] Speaker 1: about some of the work his team has been doing,
[2:11] Speaker 1: particularly in recent reports titled Unlocking Investment to triple renewables
[2:16] Speaker 1: by twenty thirty, alongside the third quarter twenty twenty four
[2:19] Speaker 1: wind turbine ordered data set, volume surges and floating offshore
[2:24] Speaker 1: wind Big Potential but Big Price tag. BNF subscribers can
[2:28] Speaker 1: access these reports at BNAF go on the Bloomberg terminal,
[2:32] Speaker 1: or at BNF dot com. Right now, let's hear Tom
[2:35] Speaker 1: and Oliver's conversation about wind. Where we are now and
[2:38] Speaker 1: where the wind is blowing.
[2:50] Speaker 2: Ollie, Hi, Hi Tom. So I'm going to start by
[2:54] Speaker 2: maybe putting a little bit of pressure on you as
[2:58] Speaker 2: the head of wind. And so I was looking at
[3:01] Speaker 2: some of the output from our new energy outlook, which
[3:05] Speaker 2: of course is not a forecast, it's a scenario modeling exercise.
[3:08] Speaker 2: And we have two main scenarios. One is the economic
[3:11] Speaker 2: transition scenario, where if there's no new policies and economics
[3:15] Speaker 2: plays out what happens. And then there's our net zero scenario,
[3:19] Speaker 2: where we add this constraint that the world has to
[3:22] Speaker 2: get to net zero by twenty fifty, consistent with heating
[3:27] Speaker 2: of one point seventy five degrees. So I looked at
[3:30] Speaker 2: the role of solar and wind, and this is important
[3:33] Speaker 2: because I know that often the conclusion of these kinds
[3:35] Speaker 2: of studies is like, oh, there's no silver bullet to
[3:37] Speaker 2: climate change. It's an all of the above solution. And
[3:40] Speaker 2: I think it's not that that's wrong, but everything relies
[3:43] Speaker 2: on the decarbonization of the power sector because so much
[3:46] Speaker 2: of the other stuff requires clean electricity. And clean electricity
[3:51] Speaker 2: the bulk of the heavy lifting is that's going to
[3:53] Speaker 2: be done. There is going to be done by two technologies,
[3:55] Speaker 2: wind and solar. This is I don't think this is controversial.
[3:58] Speaker 2: So wind and solar, it is an all of above world.
[4:01] Speaker 2: But wind and solar are like lynch pins to the
[4:03] Speaker 2: whole things. If they don't deliver what they need to deliver,
[4:05] Speaker 2: then the whole pack of cards falls down. So I
[4:08] Speaker 2: looked at the neo net zero scenario and it says
[4:12] Speaker 2: that in that world of net zero, by twenty to
[4:14] Speaker 2: fifty on an annual basis, we should be generating twenty
[4:18] Speaker 2: nine percent of our electricity from solar, and in our
[4:22] Speaker 2: economic transition scenario, actually twenty eight percent of our electricity
[4:26] Speaker 2: will be getting generated by solar. So this is if
[4:28] Speaker 2: the economic transition scenario is saying that's the track we're on,
[4:31] Speaker 2: and we're almost on the right track for solar. Solar
[4:34] Speaker 2: is doing its bit wind net zero scenario forty four
[4:37] Speaker 2: percent of our electricity generated by wind, so a bigger
[4:40] Speaker 2: role than solar, but in our economic transition scenario only
[4:43] Speaker 2: thirty one percent. That's telling us that we're not on
[4:46] Speaker 2: track for wind. So it would seem that wind, on
[4:49] Speaker 2: the trajectory we're on, is the weak link in the
[4:52] Speaker 2: energy transition. I suppose my first question to you with
[4:56] Speaker 2: that framing is where is the wind industry today and
[4:59] Speaker 2: the wind market today, And with this kind of thought
[5:02] Speaker 2: in mind, that it's not on track, what needs to change?
[5:06] Speaker 3: We've seen a difficult couple of years for the wind industry.
[5:10] Speaker 3: I think given the cost inflation we saw after the pandemic,
[5:14] Speaker 3: high interest rates and supply chain bottlenecks that slowed down
[5:17] Speaker 3: the growth of the wind sector on shore and offshore.
[5:21] Speaker 3: It's still having effect today. So equipment costs are still
[5:25] Speaker 3: much higher for wind turbines, for example, when you compare
[5:28] Speaker 3: it to solar or battery technology, where we've seen costs
[5:32] Speaker 3: start to fall again after the cost inflation we saw
[5:34] Speaker 3: after the pandemic. So the wind sector is still stumbling
[5:38] Speaker 3: through this period of higher costs there are some kind
[5:40] Speaker 3: of non economic factors that are really hitting the sector hard.
[5:43] Speaker 3: So some grid connection constraints, permitting constraints tend to affect
[5:47] Speaker 3: wind more than it affects solar. So that means that
[5:51] Speaker 3: we've seen more sluggish growth for wind technology compared with solar,
[5:55] Speaker 3: where we're seeing this boom and like you say, solar
[5:57] Speaker 3: is roughly on track for net zero. We did a
[6:00] Speaker 3: bit of modeling recently looking at the tripling renewables pledge
[6:03] Speaker 3: that was outlined at the end of the COP twenty
[6:04] Speaker 3: eight summit in twenty twenty three. The result of that analysis,
[6:08] Speaker 3: where we were contextualizing that goal and then benchmarking progress,
[6:11] Speaker 3: was that if we do manage to triple renewables by
[6:14] Speaker 3: twenty thirty, that puts us roughly in line with our
[6:17] Speaker 3: net zero scenario from our New Energy Outlook analysis. Or
[6:20] Speaker 3: tripling renewables by twenty thirty would put us on a
[6:22] Speaker 3: path to net zero by twenty fifty.
[6:25] Speaker 2: So that's the right goal.
[6:26] Speaker 3: Solars on track for that tripling renewables, and we're predicting
[6:31] Speaker 3: that the wind sectors only just going to just of
[6:33] Speaker 3: a double by twenty thirty, and that speaks to those
[6:37] Speaker 3: economic constraints that we're seeing those continued high costs, but
[6:40] Speaker 3: also some of those non economic factors that in some
[6:43] Speaker 3: markets with significant support that's available to wind, it's not
[6:46] Speaker 3: the economic stuff that's this holding the sector back, it's
[6:49] Speaker 3: these non economic factors like grid connections and permitting. They're
[6:52] Speaker 3: kind of boring regulatory stuff that needs to get sorted
[6:55] Speaker 3: from a policy perspective to see the kind of growth
[6:57] Speaker 3: that would be required for the wind sector.
[7:00] Speaker 2: Like your answer, because you know, I was talking about
[7:03] Speaker 2: a twenty fifty horizon and actually you've bought it much
[7:06] Speaker 2: closer with this tripling renewables and twenty thirty, so expecting
[7:10] Speaker 2: a doubling of wind where what we need is a
[7:12] Speaker 2: tripling of wind. So these issues that you've highlighted definitely
[7:16] Speaker 2: carry through and effect the market through to twenty thirty.
[7:20] Speaker 2: Do you think they're chronic problems? Is there a way
[7:24] Speaker 2: that these might get resolved in the longer term?
[7:26] Speaker 3: I think that the good news is that we are
[7:28] Speaker 3: expecting growth in the wind market. So in terms of
[7:31] Speaker 3: annual installations by twenty thirty, we're expecting seventy percent more
[7:35] Speaker 3: annual installations of wind than we're expecting this year. At
[7:38] Speaker 3: the moment in terms of the really hot markets, we're
[7:40] Speaker 3: kind of seeing star markets rather than a growth geographically
[7:45] Speaker 3: spread around the world. The good news is that we're
[7:47] Speaker 3: seeing examples of markets that are beginning to resolve these constraints.
[7:50] Speaker 3: So looking at a market like Germany is really starting
[7:54] Speaker 3: to resolve. It's on shore wind permitting constraints that really
[7:56] Speaker 3: hit the market a few years ago, and now Germany
[7:59] Speaker 3: is permitting an increase amount of onshore wind capacity every
[8:01] Speaker 3: year and we're really seeing the result of that in
[8:04] Speaker 3: terms of the amount of projects the government is willing
[8:06] Speaker 3: to support, getting closer to their goals, and we're expecting
[8:09] Speaker 3: really strong growth over the next few years. India is
[8:12] Speaker 3: another market that was mired in many difficulties, whether that
[8:15] Speaker 3: was land use issues and fragmented land ownership in the country,
[8:19] Speaker 3: permitting constraints, under investment in the grid. There again, we've
[8:23] Speaker 3: seen regulation go in to resolve some of those constraints
[8:26] Speaker 3: and now we're expecting really strong growth in the market
[8:29] Speaker 3: over the next few years. So there are countries that
[8:32] Speaker 3: are beginning to resolve some of these issues, but it
[8:34] Speaker 3: is a chronic issue around the world because we're seeing
[8:36] Speaker 3: a lot of governments and officials announcing really high targets
[8:41] Speaker 3: plans to install more wind capacity, but the chronic issues
[8:45] Speaker 3: they're not putting in the supportive legislation that's required, the
[8:48] Speaker 3: kind of boring regulatory stuff that I was talking about
[8:50] Speaker 3: before to realize those goals. It's easy to say a number,
[8:53] Speaker 3: it's less easy to put in place that regulation to
[8:56] Speaker 3: cut the red tape that needs to be cut to
[8:58] Speaker 3: realize fast growth for the wind sector globally.
[9:01] Speaker 2: I mean, this is, by the way, just a reflection
[9:04] Speaker 2: a classic example of the dilemma when you're working in
[9:09] Speaker 2: a climate related sector of how to feel because I
[9:12] Speaker 2: don't think most industries are expecting. What did you say
[9:14] Speaker 2: it was seventy percent growth? Did I hear that right?
[9:17] Speaker 3: Was it seventeen in terms of annual installations seventy percent
[9:20] Speaker 3: higher in twenty thirty compared with twenty twenty four.
[9:23] Speaker 2: Yeah, I mean that's huge, and then you know, doubling.
[9:26] Speaker 2: Most industries don't get that. So on the one hand,
[9:28] Speaker 2: if you're sort of a cheerleader for the wind industry,
[9:30] Speaker 2: you'll be out celebrating, But then you have people like
[9:33] Speaker 2: me saying, oh, that's not enough. From a climate perspective,
[9:37] Speaker 2: it's really interesting to hear that there's these countries like
[9:39] Speaker 2: Germany and India who beginning to figure it out. I
[9:42] Speaker 2: know we're both based in the US, and I think
[9:44] Speaker 2: the US has had some success with wind in certain
[9:47] Speaker 2: markets and is still figuring it out in other regions.
[9:50] Speaker 2: Do we see any evidence where there's some sort of
[9:53] Speaker 2: global harmonization, like different countries are learning on what does
[9:57] Speaker 2: work and doesn't work in resolving these issues.
[9:59] Speaker 3: I think victually there is a wide consensus, and it's
[10:03] Speaker 3: what the wind industry has been saying for a long time.
[10:05] Speaker 3: But I think policymakers are beginning to notice that these
[10:08] Speaker 3: are common problems in many markets around the world, these
[10:10] Speaker 3: issues around transmission, issues around permitting. Progress has been patchy
[10:15] Speaker 3: in many cases. The EU has been encouraging member states
[10:19] Speaker 3: to resolve some of these issues, in trying to implement
[10:21] Speaker 3: some targeted changes in order to resolve some of these constraints.
[10:25] Speaker 3: I think the difference between Germany and many of the
[10:27] Speaker 3: rest of the EU countries is Germany almost immediately started
[10:30] Speaker 3: implementing some of those EU suggestions and turn that international
[10:33] Speaker 3: level policy, whereas many other markets around the EU have
[10:36] Speaker 3: been dragging their heels. Other markets like Brazil are facing
[10:39] Speaker 3: significant transmission constraints, but they've held very successful transmissional auctions,
[10:43] Speaker 3: bringing the private sector in to build really long distance,
[10:47] Speaker 3: high voltage transmission lines. So while those transmission issues are
[10:52] Speaker 3: hitting the market today, we're expecting increasing installations towards the
[10:55] Speaker 3: end of the decade as they begin to resolve. Some
[10:58] Speaker 3: of those constraints are very well understood, and we're beginning to,
[11:02] Speaker 3: like I say, see some markets resolve some of those issues,
[11:04] Speaker 3: but it really takes active policy making because these issues
[11:09] Speaker 3: just don't fix themselves on their own. And so I
[11:11] Speaker 3: think those markets where we're really seeing that growth are
[11:13] Speaker 3: the ones that have set those targets, but now they're
[11:16] Speaker 3: really doing the additional work to build the regulation so
[11:21] Speaker 3: that those targets turn into reality, rather than arriving at
[11:24] Speaker 3: twenty thirty way off that goal.
[11:26] Speaker 2: What's really interesting here as well, is there's this perception
[11:30] Speaker 2: that pushing renewables, pushing a cleaner agenda is all about subsidies.
[11:34] Speaker 2: This is a problem that has nothing to do with subsidies.
[11:36] Speaker 2: You can't subsidize your way out of this issue. It's
[11:39] Speaker 2: a non economic factor. It's to do with untangling a
[11:43] Speaker 2: lot of local regulations and laws and having to do
[11:47] Speaker 2: it over and over again in not just different countries,
[11:49] Speaker 2: but even within the same country. Probably a lot of
[11:51] Speaker 2: those laws are different.
[11:52] Speaker 3: Yeah, a really good example is the US, which has
[11:56] Speaker 3: very generous subsidies in the Inflation Reduction Actor extended those
[12:00] Speaker 3: subsidies until at least the end of the decade. The
[12:02] Speaker 3: problem in the US isn't an economic one for wind projects.
[12:06] Speaker 3: It's around project supply, so it's getting more expensive and
[12:10] Speaker 3: you have to wait longer for a grid connection agreement.
[12:13] Speaker 3: In many US markets, permitting is incredibly fragmented, so some
[12:17] Speaker 3: permitting is done on a federal basis, some permitting rules
[12:20] Speaker 3: are on a state level, and in some cases it
[12:22] Speaker 3: goes right down to the county level, and there's different
[12:24] Speaker 3: permitting requirements depending on which county the wind project is
[12:27] Speaker 3: getting built in. That's really difficult if you're a developer
[12:30] Speaker 3: trying to navigate all of these different systems, some of
[12:33] Speaker 3: which are stricter than others. In some there may be
[12:36] Speaker 3: moratoria against new wind development, and in a county next
[12:40] Speaker 3: door that might not be the case. And so yeah,
[12:42] Speaker 3: those things are non economic. They're these really general federal
[12:45] Speaker 3: subsidies available, but they make no difference if there aren't
[12:48] Speaker 3: projects coming through the pipeline to use those subsidies.
[12:50] Speaker 2: It's really interesting hearing about, you know, some of the
[12:53] Speaker 2: developments in Europe, some of the developments in India and
[12:55] Speaker 2: the US. Of course, we can't really talk about the
[12:58] Speaker 2: global picture without talking about what's happening in China with
[13:02] Speaker 2: regards wind, So how are things developing there?
[13:05] Speaker 3: So China is by far the largest wind market globally.
[13:09] Speaker 3: For onshore wind, it represents over half of global annual
[13:12] Speaker 3: additions every year. Wow, offshore wind, it's almost that kind
[13:16] Speaker 3: of depends on the year, but it's a really really
[13:18] Speaker 3: big chunk of the market. So yeah, we can't talk
[13:20] Speaker 3: about the global wind industry without talking about China. The
[13:23] Speaker 3: sectors moving really fast there. So we forecast that China
[13:26] Speaker 3: will add seventy one gigawatts of onshore wind capacity in
[13:30] Speaker 3: twenty twenty four, seventy nine gigawats in twenty twenty five,
[13:34] Speaker 3: but really really rapid growth in China compared with where
[13:36] Speaker 3: we were just a few years ago. Part of the
[13:39] Speaker 3: story in China is they're building these mega projects, they
[13:42] Speaker 3: call them megabases, So that's really large scale projects built
[13:46] Speaker 3: in the north of the country, typically for wind where
[13:49] Speaker 3: it's really windy in desert areas. We're talking about projects
[13:52] Speaker 3: at the gigawatts scale. Typically, projects we only really see
[13:55] Speaker 3: offshore in other markets using really large turbines, so they
[14:00] Speaker 3: getting scale not only on the project side, but also
[14:03] Speaker 3: the kind of technology scale as well. We recently saw
[14:06] Speaker 3: a Chinese turbine manufacturer now so fifteen megawatt turbine for
[14:09] Speaker 3: use onshore in northern China. Now, it's really difficult to
[14:12] Speaker 3: install turbines that big on shore usually because they're logistical constraints.
[14:16] Speaker 3: You've got to ship these really long blades for a
[14:19] Speaker 3: turbine that size, they might be over one hundred meters
[14:21] Speaker 3: through small towns, up mountains and things like that. They're
[14:25] Speaker 3: building these projects in deserts, so there are a few
[14:27] Speaker 3: of those logistical constraints, so they can use those larger
[14:30] Speaker 3: turbines that when you're using a higher capacity turbines, it
[14:33] Speaker 3: means you need fewer of them for a project of
[14:35] Speaker 3: the same capacity. Basically, that means that using a bigger
[14:38] Speaker 3: turbine cuts costs because you also need fewer foundations, fewer cables,
[14:42] Speaker 3: fewer days hiring a crane to install the things. So
[14:45] Speaker 3: China's kind of realizing this scale in terms of project
[14:49] Speaker 3: and turbines that are driving down the costs. That's really
[14:52] Speaker 3: helping to drive growth across the market. But also there
[14:56] Speaker 3: they've really pushed down the price of wind to a
[14:59] Speaker 3: stop levels. So last time we did an analysis of
[15:03] Speaker 3: wind turbine prices, the average price of a turbine delivered
[15:06] Speaker 3: in China in the first half of twenty twenty four
[15:08] Speaker 3: was three hundred thousand dollars per megawatt. That's around a
[15:11] Speaker 3: third of the cost of the average turbine price delivered
[15:15] Speaker 3: in other markets around the world. That's partly due to
[15:18] Speaker 3: those impacts around scale that I was talking about before,
[15:20] Speaker 3: but also the Chinese market is very fragmented. There are
[15:25] Speaker 3: around twelve major turbine suppliers there and over the past
[15:28] Speaker 3: few years they built up a huge over manufacturing capacity
[15:32] Speaker 3: for wind turbines. For the the selles of wind turbines
[15:35] Speaker 3: during this fragmented market, they've got an over capacity and
[15:38] Speaker 3: these turbine makers are fighting for market share rather than
[15:42] Speaker 3: necessarily focusing on the profitability of the contracts they're signing.
[15:46] Speaker 3: So it means that the profitability of some of these
[15:47] Speaker 3: Chinese suppliers have really suffered over the last couple of
[15:50] Speaker 3: years as we've seen this astonishing reduction in price. So
[15:53] Speaker 3: that is great news if you're a developer of a
[15:55] Speaker 3: wind project in China. But for the Chinese turbine makers themselves,
[15:58] Speaker 3: they're now looking at ways to boost profitability, and one
[16:01] Speaker 3: way they're doing that is looking to export market.
[16:04] Speaker 2: We're going to come back to the export markets. I
[16:06] Speaker 2: had so many questions to ask along the way there. Firstly,
[16:10] Speaker 2: I just want to dive into understand these like mega
[16:13] Speaker 2: projects a little bit better. What you're describing is almost
[16:16] Speaker 2: like onore offshore wind in that they're qualitatively different from
[16:20] Speaker 2: your typical onshore wind, and they're I mean quantitatively as
[16:23] Speaker 2: well in terms of the scale of the projects. Presumably
[16:26] Speaker 2: there's a reliance on HVDC infrastructure, which is high voltage
[16:31] Speaker 2: direct current transmission. Is this a new frontier for wind,
[16:36] Speaker 2: not just in terms of scale, but because it's suddenly
[16:39] Speaker 2: qualitatively different. Now you can almost describe this as a
[16:41] Speaker 2: different category in the same way that your typical onshore
[16:43] Speaker 2: wind is different from offshore wind. This sounds like something
[16:47] Speaker 2: else again, this model that is being developed in China
[16:50] Speaker 2: in the same way that certain markets were pioneers for
[16:53] Speaker 2: offshore wind. Do you think that they are pioneering a
[16:55] Speaker 2: model that could be replicated elsewhere.
[16:58] Speaker 3: Potentially, and these mega based projects are becoming a crucial
[17:01] Speaker 3: growth driver in the way we see it for the
[17:04] Speaker 3: overall Chinese wind sector. We're expecting four tyike gig whats
[17:07] Speaker 3: of these wind projects to come online in twenty twenty
[17:09] Speaker 3: four and twenty twenty five, but we're expecting a further
[17:12] Speaker 3: one hundred and six gig what's of these projects to
[17:14] Speaker 3: come online from twenty twenty six to the end of
[17:16] Speaker 3: the decade. Part of the reason that China can deliver
[17:19] Speaker 3: these large projects is that they're building these projects where
[17:22] Speaker 3: land is ample and there are a few permitting restrictions.
[17:25] Speaker 3: Usually these are being built by big state owned developers
[17:28] Speaker 3: as well, so there are kind of fewer of these
[17:30] Speaker 3: regulatory barriers to building these projects those kind of areas,
[17:35] Speaker 3: and that situation is harder to come by in other market.
[17:37] Speaker 3: So we are seeing some really large projects under construction
[17:41] Speaker 3: in the US. So there's a couple of projects being
[17:45] Speaker 3: built in the US, one in Wyoming, one in Arizona.
[17:49] Speaker 3: At the moment that are a similar scale to these
[17:51] Speaker 3: megabased projects we're seeing in China, And while the turbine
[17:54] Speaker 3: capacity aren't as large as the project's examples we're seeing
[17:56] Speaker 3: in China, they're still realizing those economic benefits you get
[17:59] Speaker 3: from pure project scale. But in other markets, it's hard
[18:02] Speaker 3: to find those locations in those situations where you can
[18:05] Speaker 3: build projects of that kind of scale.
[18:07] Speaker 2: Got it. I mean that's super interesting, and I do
[18:09] Speaker 2: wonder if if over time there might be other opportunities uncovered,
[18:14] Speaker 2: you know, because it's it's not maybe as easy to search.
[18:16] Speaker 2: When you're thinking about offshore wind. You look at coastline,
[18:19] Speaker 2: you look at water depth, you look at wind speed,
[18:21] Speaker 2: and you can already, like without too much research, identify
[18:25] Speaker 2: all of the places where there's decent offshore wind potential.
[18:28] Speaker 2: We are going to come back to offshore wind as well,
[18:30] Speaker 2: actually in a moment. But you said made this point
[18:32] Speaker 2: about Chinese turbine manufacturers. So if I understand correctly, the
[18:36] Speaker 2: picture painted is the Chinese market is big. It's growing,
[18:41] Speaker 2: I believe, Or is it always that big?
[18:44] Speaker 3: No, it's big, it has grown and it will continue
[18:46] Speaker 3: to grow for this.
[18:47] Speaker 2: Rest Okay, So it's always been big, it's getting bigger,
[18:50] Speaker 2: and it's going to get even bigger than that. But
[18:52] Speaker 2: Chinese turbine manufacturers have maybe got too big too fast,
[18:56] Speaker 2: and now there's overcapacity. And I remember, whenever I've looked
[19:00] Speaker 2: at this, it's always seemed like there's two separate worlds.
[19:03] Speaker 2: There's Chinese wind, which is a Chinese market served by
[19:06] Speaker 2: Chinese manufacturers, and that's about half the global market. And
[19:10] Speaker 2: then there's the rest of the world, served by a
[19:13] Speaker 2: number of international companies, none of which are Chinese. So
[19:16] Speaker 2: it's kind of been China and everyone else, both as
[19:19] Speaker 2: a market and an industry. But you mentioned now that
[19:21] Speaker 2: Chinese manufacturers are starting to make inroads into other markets
[19:25] Speaker 2: around the world, So tell us a bit more about
[19:27] Speaker 2: what that looks like and what's actually happening at the moment.
[19:30] Speaker 3: Yeah, So the Chinese tab i maker's home market has
[19:33] Speaker 3: historically been huge. It's meant that there was less of
[19:36] Speaker 3: a drive for them to really target export aggressively. So
[19:41] Speaker 3: there has historically been some progress that they've made, but
[19:44] Speaker 3: that's really rapidly started to change over the last couple
[19:47] Speaker 3: of years as pricing pressure has been so intense at
[19:50] Speaker 3: home that they're now looking to export markets, where they're
[19:52] Speaker 3: typically able to sell turbines at a much higher rate
[19:56] Speaker 3: and earn a higher profit margin on those sales. Still,
[19:59] Speaker 3: by our calculations, a turbine delivered outside of China, if
[20:03] Speaker 3: it's supplied by a Chinese turbine maker, that's around twenty
[20:05] Speaker 3: eight percent cheaper than an equivalent turbine supplied by a
[20:08] Speaker 3: US or European manufacturer, And in many markets around the world,
[20:12] Speaker 3: that price difference is very attractive, and particularly in emerging
[20:15] Speaker 3: markets that are just kind of looking at wind more seriously.
[20:18] Speaker 3: At the moment, we're seeing the influx of Chinese turbine
[20:21] Speaker 3: technology and those cheaper turbines begin to drive up installations
[20:25] Speaker 3: and increase the pace of wind market growth in those markets.
[20:28] Speaker 3: So Chinese turbine makers are having more success in places
[20:31] Speaker 3: like Central Asia, Southeast Asian countries like Vietnam, they started
[20:34] Speaker 3: selling a lot of turbines. Some markets in the Middle
[20:37] Speaker 3: East and Africa as well are starting to move from
[20:40] Speaker 3: a situation where the market was completely dominated by US
[20:43] Speaker 3: and European turbine manufacturers are now pretty much exclusively purchasing
[20:47] Speaker 3: Chinese turbines in some cases, but there are also some
[20:51] Speaker 3: kind of more established markets that are now making a
[20:53] Speaker 3: similar switch. So I was talking about the Indian market before.
[20:56] Speaker 2: Yeah, I was just going to ask.
[20:57] Speaker 3: So the Indian market is a really exciting one for
[21:00] Speaker 3: the wind industry at the moment. It's one of those
[21:02] Speaker 3: markets with the highest rates of growth. But it's moving
[21:05] Speaker 3: from a place where back in twenty twenty one, the
[21:08] Speaker 3: vast majority of turbines commissioned were being manufactured by European
[21:13] Speaker 3: and US manufacturers like Siemens Gamesa. Now it's local Indian
[21:17] Speaker 3: manufacturers that were in real dire financial straits a few
[21:20] Speaker 3: years ago, and now they've kind of turned that situation
[21:22] Speaker 3: around and those domestic players are winning a lot of orders,
[21:25] Speaker 3: but also Chinese turbine makers are making serious inroads there
[21:28] Speaker 3: as well. Indian has some local content requirements which really
[21:31] Speaker 3: favor companies that have local manufacturing capacity in the Indian market,
[21:36] Speaker 3: and Envision, which is a Chinese turby maker, has set
[21:39] Speaker 3: up a factory in the market and is really benefiting
[21:41] Speaker 3: from securing.
[21:42] Speaker 2: A lot of orders there over the last few years.
[21:44] Speaker 3: So we track turbine orders secured by turbi makers around
[21:48] Speaker 3: the world outside of China every quarter, and we've really
[21:51] Speaker 3: seen over the last three years, that complete switch in
[21:53] Speaker 3: the Indian market from being dominated by EU and US
[21:57] Speaker 3: players to in twenty twenty four, almost all all of
[22:00] Speaker 3: the orders we tracked have been for Chinese or Indian
[22:02] Speaker 3: manufactured turbines.
[22:04] Speaker 2: That's super interesting, and I guess there's two factors at
[22:06] Speaker 2: play there. One is that Chinese manufacturers having to look
[22:11] Speaker 2: beyond China because their domestic market, although huge, was not
[22:15] Speaker 2: quite huge enough of them. And then also India's wind
[22:18] Speaker 2: industry beginning to pick up. And I'm really interesting because
[22:21] Speaker 2: I mean, you've identified India is this exciting place for
[22:24] Speaker 2: wind right now, a growth market, and given the local
[22:27] Speaker 2: content requirements, we know that a certain part of that
[22:30] Speaker 2: is going to be going to Indian manufacturers. Can you
[22:33] Speaker 2: ever see a scenario or a pathway forward where we
[22:36] Speaker 2: might start seeing Indian wind manufacturers exporting, competing with Chinese manufacturers,
[22:42] Speaker 2: competing with the US and European manufacturers potentially.
[22:45] Speaker 3: I think some of those Indian manufacturers I was talking
[22:47] Speaker 3: about before have been in real financial difficulty a few
[22:51] Speaker 3: years ago, and so they've been getting back on their
[22:53] Speaker 3: feet in their home market. But speaking to some of them,
[22:56] Speaker 3: they've definitely got plans in the future to export more
[22:59] Speaker 3: of their turbines. So yeah, there's definitely potential in the
[23:02] Speaker 3: market to see this slight diversification of the global turbine
[23:06] Speaker 3: supply market rather than this in India specific story that
[23:10] Speaker 3: we've we've been noticing. So far, we haven't seen much
[23:14] Speaker 3: progress in terms of actual turbine sales or orders come
[23:16] Speaker 3: in for those Indian turbine manufacturers, so it's kind of
[23:19] Speaker 3: plans rather than evidence that we're seeing so far. But yeah,
[23:22] Speaker 3: there's definite potential there.
[23:24] Speaker 2: It makes me think of another question that springs to mind,
[23:27] Speaker 2: a related question, because if you're looking at any country
[23:30] Speaker 2: to develop their industry, whether through economic planning or you know,
[23:36] Speaker 2: industrial planning or any other means, you want to look
[23:39] Speaker 2: at like what is the global capacity. So, for example,
[23:42] Speaker 2: it is very well known that solar at the moment,
[23:45] Speaker 2: there's global overcapacity of manufacturing. So I have often said,
[23:48] Speaker 2: I don't think it makes that much sense for the
[23:50] Speaker 2: US to be trying to develop its own solar supply chains,
[23:53] Speaker 2: even with all the geopolitical considerations there, because fundamentally that's
[23:58] Speaker 2: never going to be something you can export from. And
[24:00] Speaker 2: I'm kind of thinking I was thinking the same thing
[24:02] Speaker 2: in relation to you know, as I asked the question
[24:05] Speaker 2: about India, is would it make sense for them to
[24:07] Speaker 2: do that if there's global oversupply. Now you mentioned that
[24:10] Speaker 2: there's overcapacity in China, which is half the market, So
[24:15] Speaker 2: would you say that there is a global overcapacity in
[24:18] Speaker 2: wind manufacturing at the moment.
[24:19] Speaker 3: So wind of really complex machines. They're made up of
[24:22] Speaker 3: loads of different components, and it's really a component by
[24:25] Speaker 3: component story we're looking at is whether there's overcapacity where
[24:28] Speaker 3: there needs to be more supply chain investment. So when
[24:31] Speaker 3: we talk about there being overcapacity in China, that's definitely
[24:34] Speaker 3: the case for mis cells, for example, so those boxes
[24:37] Speaker 3: that sit on top of a wind turbine tower that
[24:40] Speaker 3: house the generator, the gearbox, the main bearing, and all
[24:44] Speaker 3: of those important subcomponents. But the other thing I'd say,
[24:47] Speaker 3: when we're talking about an overcapacity for Nicell manufacturing in China,
[24:51] Speaker 3: wind components are so large that once a market reaches
[24:54] Speaker 3: a certain level of scale, it doesn't necessarily make sense
[24:57] Speaker 3: to build those nes cells in China and ship them
[24:59] Speaker 3: all over the world to manufacturer blades which are eighty
[25:03] Speaker 3: one hundred meters long, and ship them from China everywhere else,
[25:06] Speaker 3: like it might make sense for solar or battery equipment.
[25:10] Speaker 2: Right, it's not as modular I suppose.
[25:13] Speaker 3: Exactly, and the components are just just bigger. So it
[25:16] Speaker 3: means that actually we're seeing some Chinese turbine manufacturers that
[25:19] Speaker 3: are targeting specific markets are setting up local facilities despite
[25:24] Speaker 3: the fact that they've got this over capacity at home.
[25:26] Speaker 3: So Goldwyn, the largest Chinese turbine manufacturing actually the largest
[25:30] Speaker 3: turbine maker in the world in terms of commissioned capacity
[25:32] Speaker 3: last year according to our Wind Turby Market Shares report,
[25:35] Speaker 3: just opened manufacturing facility in Brazil for example. I mentioned
[25:40] Speaker 3: Envision has its factory in India, and we've seen some
[25:43] Speaker 3: Chinese turby makers talk about opening manufacturing facilities in Europe.
[25:46] Speaker 3: So even though we've got this over capacity in China itself,
[25:49] Speaker 3: it doesn't necessarily mean that that capacity will or can
[25:52] Speaker 3: be used to service the global market, got it.
[25:55] Speaker 2: So it's not with wind, It's not as simple as
[25:58] Speaker 2: adding up all the capacity in the world and then
[26:00] Speaker 2: comparing it to the needs it's always going to be.
[26:02] Speaker 2: It's inherently more local.
[26:04] Speaker 3: Yes, yeah, that's true, And like I said before, it's
[26:08] Speaker 3: inherently kind of component based as well. Right, So there
[26:12] Speaker 3: are some parts of the supply chain that are in
[26:15] Speaker 3: significant under supplies. So if you look to offshore wind,
[26:18] Speaker 3: for example, if you speak to the developer today, if
[26:21] Speaker 3: you want to secure an installation vessel that can install
[26:23] Speaker 3: the really heavy foundations or the turbines offshore, these are
[26:27] Speaker 3: really specialized vessels, and as turbines get bigger, the number
[26:30] Speaker 3: of vessels in the fleet that can install these heavy components,
[26:33] Speaker 3: these tall components is shrinking. So if you speak to
[26:35] Speaker 3: a developer today, you're looking much later in the decade
[26:38] Speaker 3: if you're looking to book one of these vessels to
[26:40] Speaker 3: install turbines or foundations at your project. So we're looking
[26:44] Speaker 3: at a situation where there's massive overcapacity for some components
[26:47] Speaker 3: in the market, but for other supply chain services, we're
[26:49] Speaker 3: looking at a really really tight market. So it's really
[26:52] Speaker 3: component by component when you look at the wind supply chain.
[26:55] Speaker 2: Speaking of offshore wind, this whole framing i've given of
[26:58] Speaker 2: wind in a way needing to step up so that
[27:00] Speaker 2: it isn't the weakest link. And you've provided lots of
[27:02] Speaker 2: examples of, you know, reasons to be optimistic, things that
[27:06] Speaker 2: are exciting, that are happening. We haven't talked about new
[27:09] Speaker 2: technologies at all, and I know that your team has
[27:12] Speaker 2: been looking a little bit at floating offshore wind. So
[27:16] Speaker 2: just tell us a little bit more about what the
[27:18] Speaker 2: role of floating offshore wind could be and where it's
[27:22] Speaker 2: at right now as a technology.
[27:24] Speaker 3: Yes, so floating off your wind could be a really
[27:26] Speaker 3: exciting new avenue of growth for the wind sector. It's
[27:29] Speaker 3: a much more nascent technology. So whereas the vast majority
[27:32] Speaker 3: of projects up until now, turbines have been installed on
[27:35] Speaker 3: foundations that are fixed to the seabed, and we're seeing
[27:38] Speaker 3: some demonstrator projects, much smaller projects so far of turbines
[27:43] Speaker 3: that are installed on floating platforms that are then more
[27:45] Speaker 3: than anchored to the seabed. At the moment, this is
[27:48] Speaker 3: a much newer technology, it's much more expensive, and it's
[27:51] Speaker 3: just at a demonstrator scale.
[27:52] Speaker 2: So when you say it's much more expensive, can we
[27:54] Speaker 2: put a number on that? I think you said that
[27:56] Speaker 2: an onshore wind turbine from China is a three hundred
[28:00] Speaker 2: one thousand dollars per megawatt. So what are we looking
[28:02] Speaker 2: at for the kind of state of the art floating
[28:05] Speaker 2: wind turbine?
[28:06] Speaker 3: I think rather than looking at just the cost of
[28:08] Speaker 3: the turbine, it's you sort of look at the project
[28:10] Speaker 3: as a whole. Today, floating wind is well over two
[28:14] Speaker 3: times as expensive for one of those kind of early
[28:16] Speaker 3: demonstrated projects than an equivalent bottom fix off your wind
[28:19] Speaker 3: project that we're seeing being installed at the industrial scale.
[28:22] Speaker 3: So the largest project on the construction at the moment
[28:25] Speaker 3: around the world is in UK waters so at bottom
[28:28] Speaker 3: fixed project, and that's three point seven gigawatts. We're expecting
[28:31] Speaker 3: that to come online over the next couple of years.
[28:33] Speaker 3: If you compared that to the largest operational floating wind
[28:36] Speaker 3: project today, that's eighty eight megawatts or less than nine
[28:40] Speaker 3: point one gigawatt. So the sectors are at completely different
[28:43] Speaker 3: stages at the moment. So floating wind projects at the
[28:46] Speaker 3: moment today, those early demonstrator scale projects are coming in
[28:49] Speaker 3: markets that are willing to pay the cost premium needed
[28:52] Speaker 3: to bring the cost of this new technology down. So
[28:55] Speaker 3: that's markets in Europe. We've had seen some early demonstrators
[28:59] Speaker 3: in Japan, but beginning to see the sector look to
[29:01] Speaker 3: make that next step up in scale. So I mentioned
[29:04] Speaker 3: the largest project so far, it's off the coast of Norway.
[29:07] Speaker 3: It's it's eighty eight megawats owned by Equanor called the
[29:10] Speaker 3: High Wind Tampon project. This year we've seen France hand
[29:14] Speaker 3: out a revenue support contract to a floating wind project
[29:17] Speaker 3: or will be just over two hundred and fifty megawatts.
[29:19] Speaker 3: The UK has handed out a subsidy contract a couple
[29:22] Speaker 3: of months ago to a project that will be four
[29:24] Speaker 3: hundred megawatts.
[29:25] Speaker 2: So beginning to see these.
[29:27] Speaker 3: Projects just beginning to reach that stage of commercial scale,
[29:30] Speaker 3: and reaching that scale is going to be crucial for
[29:32] Speaker 3: the sector to make those learnings to bring down the
[29:35] Speaker 3: cost of the technology and to learn how to go
[29:38] Speaker 3: from the very specialized process of manufacturing one of these
[29:42] Speaker 3: floating platforms to the serial manufacturer of lots of these
[29:45] Speaker 3: things to build a large scale project. So the sectors
[29:48] Speaker 3: going through that process today, which means that we forecast
[29:52] Speaker 3: the overall capex for a floating wind project from between
[29:56] Speaker 3: kind of six to eight million dollars for megawat today
[29:59] Speaker 3: to decrease to four point four million to five million
[30:02] Speaker 3: dollars from megawatt by twenty thirty. A lot depends on
[30:05] Speaker 3: the characteristics of the project site. So floating wind is
[30:08] Speaker 3: built in deep waters usually above seventy meters water depth,
[30:11] Speaker 3: but we're seeing some projects going at around seventy to
[30:14] Speaker 3: one hundred meters. If you're looking off the coast of California,
[30:16] Speaker 3: you're looking at projects that will be installed in waters
[30:19] Speaker 3: over one thousand meters water depth. So there's a big
[30:22] Speaker 3: range in costs depending on the site specific characteristics. But
[30:25] Speaker 3: we are expecting to see costs come down, which is
[30:27] Speaker 3: going to be crucial if the floating wind sector is
[30:29] Speaker 3: going to go from a really subsidy driven phase today
[30:33] Speaker 3: to being at all competitive with other technologies.
[30:36] Speaker 2: I suppose there's a more fundamental question I have to
[30:39] Speaker 2: ask about floating offshore wind is why you know you
[30:43] Speaker 2: mentioned it's it's way more expensive than fixed bottom off
[30:46] Speaker 2: offshore wind, which is in turn more expensive than onshore wind.
[30:49] Speaker 2: So yes, these costs can come down, you know, and
[30:52] Speaker 2: that would be driven by subsidies together get that scale.
[30:54] Speaker 2: But why is anyone talking about floating offshore wind.
[30:57] Speaker 3: So there are a lot of markets around the world
[30:59] Speaker 3: that have limited seabed areas with shallow enough waters to
[31:03] Speaker 3: build bottom fixed projects. So while in many of those
[31:06] Speaker 3: markets they're building bottom fixed projects today, markets like South
[31:10] Speaker 3: Korea like Japan, we're expecting if they want to make
[31:13] Speaker 3: offshore wind a crucial part of their wider energy transition strategy,
[31:16] Speaker 3: they're going to have to start to look towards floating wind.
[31:19] Speaker 3: And another key example is the west coast of the US,
[31:22] Speaker 3: where the continental shelf drops off very quickly, so you
[31:25] Speaker 3: get very deep waters very quickly.
[31:27] Speaker 2: As you move further offshore.
[31:28] Speaker 3: It's very difficult in California, for example, to secure a
[31:31] Speaker 3: permit for an onshore wind farm, and you've got grid
[31:35] Speaker 3: today that's getting increasingly dominated by solar. Solar generation and
[31:39] Speaker 3: wind generation tends to be quite complementary. But if they
[31:42] Speaker 3: can't build an onshore wind project, and they don't have
[31:45] Speaker 3: waters shallow enough to build a bottom fixed offshore wind project,
[31:48] Speaker 3: then they're going to have to look towards floating wind.
[31:51] Speaker 3: So we see a few of these markets around the
[31:52] Speaker 3: world that need to add wind to their mix. They're
[31:55] Speaker 3: struggling to build on shore projects and so they're going
[31:57] Speaker 3: to have to look towards floating wind at some point.
[32:00] Speaker 3: I think those are the markets we're expecting to see
[32:02] Speaker 3: an increasing number of commercial scale projects, probably as we
[32:04] Speaker 3: move into the early twenty thirties and floating.
[32:07] Speaker 2: Off sure, I mean you mentioned it. It is moored
[32:09] Speaker 2: to the seabird, so I presume that rather than it
[32:12] Speaker 2: being the water depth just no longer matters. It more
[32:16] Speaker 2: opens up a range of depths. Is that a fair
[32:19] Speaker 2: way to describe it? Or is it that you could
[32:21] Speaker 2: literally build this anywhere?
[32:23] Speaker 3: I think when you get to those really deep waters
[32:26] Speaker 3: it brings its own challenges. There are certain technical gaps
[32:29] Speaker 3: at the moment for floating wind that see the still
[32:31] Speaker 3: need to get resolved so it's not just a cost issue,
[32:33] Speaker 3: and one of those is around electrical infrastructure, and for
[32:37] Speaker 3: projects in really deep waters, they still haven't really resolved
[32:40] Speaker 3: all the technical constraints around building an offshore wind substation
[32:44] Speaker 3: that collects all the generation from each of the individual
[32:48] Speaker 3: turbines and then exports it back to shore with a
[32:51] Speaker 3: really large cable. Now, many of the larger projects, even
[32:54] Speaker 3: if they use floating turbines, they've either run the cables
[32:58] Speaker 3: from each individual string of turbines all the way back
[33:01] Speaker 3: to shore, so you have multiple cables running back to shore,
[33:04] Speaker 3: or they've built a bottom fixed offshore wind substation, usually
[33:08] Speaker 3: with a kind of really deep jacket foundation or picked
[33:11] Speaker 3: a point of the site that does have slightly shallower
[33:13] Speaker 3: waters to build that bottom fixed substation, even if the
[33:16] Speaker 3: turbines are floating.
[33:17] Speaker 2: That doesn't become possible.
[33:18] Speaker 3: If you're looking off the coast of California and the
[33:20] Speaker 3: waters are one thousand meters deep, you just can't build
[33:22] Speaker 3: a bottom fixed foundation for your substation there. So there
[33:25] Speaker 3: are some technical gaps for the electrical equipment that needs
[33:29] Speaker 3: to go in that in that floating substation, and those
[33:33] Speaker 3: haven't really been resolved or there hasn't been a solution.
[33:35] Speaker 3: So some companies have been proposing, for example, underwater substations,
[33:39] Speaker 3: which is just a completely wacky and new concept for
[33:41] Speaker 3: the industry. Some have been looking at floating foundations, but
[33:44] Speaker 3: some of the equipment that goes into these substations don't
[33:47] Speaker 3: deal too well with the small movements you'd get with
[33:49] Speaker 3: being on a floating platform. And also some of the
[33:52] Speaker 3: cables that will be required to run the power from
[33:54] Speaker 3: this substation down to the seabed they have to be
[33:57] Speaker 3: dynamic cables that can deal with kind of mooing loads,
[34:00] Speaker 3: and for those really high capacity cables, some of the
[34:03] Speaker 3: technical constraints still haven't been worked out. And so yeah,
[34:07] Speaker 3: there are some significant difficulties that might make delivering one
[34:10] Speaker 3: of those projects in a really deep water market like
[34:13] Speaker 3: California significantly more difficult than the early, smaller scale demonstrators
[34:17] Speaker 3: we've seen coming online in the UK, in Norway and
[34:20] Speaker 3: that we're expecting to see in East Asian markets like
[34:22] Speaker 3: South Korea.
[34:23] Speaker 2: I mean, one of the things that being in this
[34:26] Speaker 2: sector has taught me is to never bet against human
[34:29] Speaker 2: ingenuity time and time again, whether it's with the scale
[34:32] Speaker 2: of wind or whether it's with the costs of things
[34:35] Speaker 2: like batteries and photovoltaic solar. You know, things that were
[34:38] Speaker 2: problems can get solved. So if those technical problems with
[34:42] Speaker 2: floating offshore wind can be resolved, do you have a
[34:45] Speaker 2: rough view of how big an addition to the market
[34:50] Speaker 2: it could be. So you know, if we're looking at
[34:51] Speaker 2: say twenty fifty, what percentage of wind could be floating
[34:55] Speaker 2: offshore wind.
[34:57] Speaker 3: Well, we forecast the offs your wind market out to
[34:58] Speaker 3: twenty forty and our viewers that floating turbines could make
[35:02] Speaker 3: up more than ten percent of the cumulative operating offshore
[35:05] Speaker 3: wind fleet by that year. But yeah, the cost of
[35:08] Speaker 3: floating wind has to dramatically fall in order to see
[35:11] Speaker 3: that scale of installations.
[35:13] Speaker 2: And when you calculated that ten percent, do you think
[35:16] Speaker 2: that you were you know, in terms of how these
[35:19] Speaker 2: technical problems get solved. Do you think that you are
[35:21] Speaker 2: being sort of sober realists or techno optimists. Could this
[35:26] Speaker 2: be bigger or do you think that's like an upper limit.
[35:28] Speaker 3: At the moment. There's a lot of potential for floating wind,
[35:31] Speaker 3: but some of these early projects have been running into difficulties.
[35:35] Speaker 3: Costs have been spiraling for some of these early scale demonstrators.
[35:39] Speaker 3: Some of these things could be teething issues, but I
[35:41] Speaker 3: think we've always been quite pessimistic on floating wind, and
[35:46] Speaker 3: I think we're beginning to see some of our forecasts
[35:48] Speaker 3: we made a few years ago start to come true
[35:50] Speaker 3: compared with what some other market experts were saying.
[35:53] Speaker 2: So maybe I should better against human ingenuity a little
[35:56] Speaker 2: bit more often.
[35:57] Speaker 3: Yeah, I think everything's possible from engineering perspective. It's a
[36:01] Speaker 3: case of whether things make sense from a cost perspective.
[36:05] Speaker 3: The good thing is that we forecast costs are going
[36:07] Speaker 3: to come down, So by twenty thirty, we're expecting around
[36:10] Speaker 3: a forty percent cost reduction compared with those early scale
[36:13] Speaker 3: demonstrated projects we've seen to date, so that's going to
[36:16] Speaker 3: be crucial. But we're still expecting by twenty thirty and
[36:19] Speaker 3: by twenty forty for floating wind projects to be significantly
[36:22] Speaker 3: more expensive than bottom fixed So we're probably going to
[36:25] Speaker 3: see floating wind projects not necessarily compete directly on a
[36:29] Speaker 3: cost basis with bottom fixed off your wind, but like
[36:32] Speaker 3: I say, they're going to come in markets that kind
[36:33] Speaker 3: of have to look to floating wind if they want
[36:35] Speaker 3: to scale their offs your wind sector earlier. So those
[36:38] Speaker 3: are the markets where we're expecting growth, and we're still
[36:42] Speaker 3: expecting it to be a really policy subsidy driven sector
[36:46] Speaker 3: in those markets all the way out to twenty forty.
[36:48] Speaker 3: So that's the growth driver here, and significant cost reductions
[36:52] Speaker 3: could accelerate that progress, but we're not expecting to see
[36:56] Speaker 3: such quick cost reductions that floating wind is going to
[36:58] Speaker 3: be a competitive technology when we think about the other
[37:01] Speaker 3: technologies available it.
[37:02] Speaker 2: It's going to be in the mix, but it's not
[37:04] Speaker 2: going to be a game changer, I think, is what
[37:06] Speaker 2: I'm hearing.
[37:06] Speaker 3: Yeah, that's why I think that ten percent number still
[37:10] Speaker 3: assumes that we resolve some of those technical constraints. We
[37:12] Speaker 3: resolve some of those cost constraints, but it's still only
[37:15] Speaker 3: represents kind of a small proportion of the market.
[37:18] Speaker 2: So, Ollie, I started by saying that in the energy transition,
[37:23] Speaker 2: maybe wind is in danger of being the weaklink. And
[37:27] Speaker 2: I think from having talked to you, I feel less
[37:29] Speaker 2: pessimistic about wind. It seems to me that the although
[37:33] Speaker 2: it's not maybe necessarily a technology solution like floating offshore
[37:36] Speaker 2: wind that's going to resolve this, it sounds more like
[37:39] Speaker 2: it's human persistence. So some of these examples you've given
[37:42] Speaker 2: where countries are working out some of the thorny regulatory
[37:45] Speaker 2: questions to try and help wind maximize its potential. We're
[37:49] Speaker 2: also just seeing some of the scaling that's happening in China.
[37:52] Speaker 2: Are you feeling optimistic about the market? Do you think
[37:55] Speaker 2: I was unfair when I said it was in danger
[37:57] Speaker 2: of being the weaklink? Or as someone who looks at
[37:59] Speaker 2: this small clily, do you feel that maybe the neo
[38:02] Speaker 2: picture that I painted doesn't really capture the full potential
[38:06] Speaker 2: and momentum that's happening in this market.
[38:08] Speaker 3: So I think things desperately need to accelerate. If you
[38:12] Speaker 3: look at what my team forecasts for the next ten
[38:15] Speaker 3: years or so. Like I say, we're still expecting a doubling,
[38:19] Speaker 3: not a tripling, by twenty thirty and that tripling only
[38:22] Speaker 3: comes by twenty thirty five. So comparing where we stand
[38:25] Speaker 3: today to where we need to be, we need to
[38:27] Speaker 3: accelerate rapidly. But I am filled with confidence that we
[38:31] Speaker 3: are starting to see incidences of good practice. We're starting
[38:34] Speaker 3: to see countries resolve some of these constraints that are
[38:37] Speaker 3: chronic across the global industry. So if some markets can
[38:40] Speaker 3: solve these issues around permitting and grid, then there's no
[38:43] Speaker 3: reason why we can't start to see things start to
[38:46] Speaker 3: change in other markets. And hopefully my team's outlook gets
[38:48] Speaker 3: rosier and rosier as we see some of this kind
[38:51] Speaker 3: of necessary legislation start to come in place. So I
[38:54] Speaker 3: think you painted an accurate picture that WIND isn't where
[38:58] Speaker 3: it needs to be to get the world on track
[39:00] Speaker 3: for net zero. But I think if markets start to
[39:03] Speaker 3: implement some of those solutions that we're seeing in some cases,
[39:07] Speaker 3: then we might see a kind of acceleration that would
[39:10] Speaker 3: be required to get us on track.
[39:11] Speaker 2: And if this stuff was easy, would have already done it. Ollie,
[39:15] Speaker 2: thank you so much for joining today.
[39:16] Speaker 3: Thanks very much for having me on.
[39:27] Speaker 1: Today's episode of Switched On was produced by Cam Gray
[39:30] Speaker 1: with production assistance from Kamala Shelling. Bloomberg NEIF is a
[39:34] Speaker 1: service provided by Bloomberg Finance LP and its affiliates. This
[39:37] Speaker 1: recording does not constitute, nor should it be construed, as investment,
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