In-depth analysis of offshore wind power market development

Relevant data show that as of the end of last year, the cumulative installed capacity of China's offshore wind power reached 26.38 million kilowatts, surpassing the UK and ranking first in the world. At present, China's offshore wind power industry is developing rapidly and is gradually moving towards the deep sea.

Against the background of dual carbon targets and power gaps, major coastal provinces in China have strong momentum to develop offshore wind power. Below, we will conduct an in-depth review of the global development status of the offshore wind power industry, the industry chain, and the future market development trends of the offshore wind power industry.

1. Why develop offshore wind power

① In the context of carbon neutrality, wind power demand rises

In the context of global carbon neutrality, the demand for new energy continues to rise. According to IEA forecasts, based on the assumption that global warming does not exceed 1.5 degrees Celsius, by 2050, 90% of global electricity consumption will come from renewable energy sources. Among them, wind power and photovoltaics account for nearly 70% of the total power consumption, and the global demand for new energy has continued to rise. Our website has sorted out the top 10 photovoltaic battery companies in China, which can help you understand the latest development of China's photovoltaic industry.

The cumulative installed capacity of wind power has increased steadily, and the newly installed capacity has reached a new high. According to GWEC statistics, in 2020, the world will add 93GW of wind power installed capacity, a year-on-year increase of 53%, a record high growth rate. The global cumulative installed capacity has grown steadily, reaching 743GW in 2020, with a compound annual growth rate of 12.06% since 2011.

② Offshore wind power has more advantages

In China's energy structure, wind power has the fastest year-on-year growth. From the perspective of China's energy structure, thermal power is still the main source of electricity in China, with a cumulative installed capacity exceeding 50%. However, from the perspective of growth rate, the growth rate of new energy installations such as wind power and photovoltaics has been significantly higher than that of thermal power. Among them, wind power grew the fastest year-on-year.

As of November 2021, the cumulative installed capacity of wind power in China has reached 305 million kilowatts, a year-on-year increase of 29.0%, which is the fastest growing energy type among hydropower (5.5%), photovoltaic (24.1%), and thermal power (3.5%) in the same period. Compared with onshore wind power, offshore wind power has the characteristics of high stability, high wind speed and easy consumption. Offshore wind speeds are typically 20% higher than onshore, and power generation takes longer than onshore when there are few quiet periods.

And for wind power equipment, the land terrain is complex and rough, and the wind speed at different heights often varies greatly, resulting in easy damage to the wind power equipment. There are few such risks at sea. Therefore, offshore wind turbines can provide higher wind speeds and a more stable source of power. In addition, as far as China is concerned, the economy in the eastern region is relatively more developed, and the development of offshore wind power is more conducive to local consumption and reduces power loss during transportation.

China has huge potential to develop offshore wind power. According to relevant data, China has a technical development potential of 2,982GW of offshore wind power in waters 200 kilometers away from the coastline and within 1,000 meters of water depth. Judging from the cumulative installed capacity of 26.38GW in China in 2021, it only accounts for 0.9% of this value. From the perspective of the cumulative installed capacity of China's land and sea, as of 2021, the cumulative installed capacity of China's offshore installations is 25.35 million kilowatts, accounting for only 7.7% of the total cumulative installed capacity.

2. Global development status of offshore wind power

① Global offshore wind power maintains steady growth

In the past ten years, the compound annual growth rate of new installed capacity of offshore wind power has reached 22%, and the proportion of installed capacity of wind power has continued to increase. Before 2010, offshore wind power accounted for only 1% of the newly installed wind power capacity. In 2019-2020, the newly installed capacity exceeded 6GW, and the proportion increased to 7%-10%. In terms of regional distribution, China will continue to maintain its advantage in newly installed capacity in 2020, accounting for more than 50% of the global total.

The Netherlands, Belgium, the United Kingdom, and Germany ranked 2-5, accounting for 24.6%, 11.6%, 8% and 3.9% respectively. Driven by China, the newly installed capacity in Asia surpassed that in Europe, accounting for 51.4% of the global share. Under the influence of European home energy storage, Europe continues to maintain its first-mover advantage in terms of the total installed capacity of offshore wind power, accounting for more than 70%. Europe is the birthplace of the offshore wind power industry. As the world's largest regional offshore wind power market, Europe will maintain steady growth in the future.

The market is generally optimistic about the development of offshore wind power in the United States. Compared with European countries, Asian offshore wind power started late. In recent years, affected by the constraints of traditional energy sources and the pressure of low-carbon transition, Asian countries have deployed the offshore wind power market one after another, showing a steady growth trend from 2021 or 2022.

② Global offshore wind power to see strong growth in the next decade

According to the carbon reduction route of IEA and IRENA, if the zero carbon emission target is to be successfully completed by 2050, offshore wind power, as one of the cores of global carbon reduction, will greatly expand its scale to support the carbon reduction target. According to IRENA's forecast, under the 1.5°C scenario, the installed capacity of offshore wind power will exceed 2,000GW, accounting for nearly a quarter of the total installed capacity of wind power, putting forward new requirements for the construction of global offshore wind power. Offshore wind power is set for strong growth over the next decade.

From 2020 to 2025, the compound annual growth rate of new global offshore wind power capacity will reach 29.3%. In 2025, the newly installed capacity will exceed 20GW and reach 21.96GW; the CAGR from 2026 to 2030 will be 12.7%, and the newly installed capacity in 2030 will reach nearly 40GW. In addition, in terms of cumulative installed capacity, the cumulative total installed capacity in 2030 will increase from 35GW in 2020 to 270GW, of which 107GW will be installed before 2030. Global offshore wind growth over the next decade will mainly come from Asia and Europe.

3. Development status and policies of offshore wind power in China

The development of China's offshore wind power started in 2009, and it began to develop in 2014. In 2021, the cumulative installed capacity will become the first in the world. The Chinese government has issued a series of documents related to offshore wind power, including 44 offshore wind power development and construction plans, with a total capacity of 10.53 million kilowatts. So far, China's offshore wind power has entered the take-off stage.

In 2017, China offshore wind achieved a milestone of 1GW of newly installed capacity, and in 2018, it surpassed the United Kingdom to become the country with the largest newly installed capacity in the world. In 2021, affected by the expiration of the national subsidy at the end of the year, the newly installed capacity of China's offshore wind power will reach 16.9GW, a year-on-year increase of 339%, and the cumulative installed capacity will reach 26.38GW, ranking first in the world.

The policy orientation is good, and the future prospects of China's offshore wind power market are promising. With the release of China's dual carbon goals and related policies, it is also clearly proposed to develop offshore wind power in an orderly manner, promote the coordinated and rapid development of wind power, improve the offshore wind power industry chain, and encourage the construction of offshore wind power. Since the second half of 2021, Chinese provinces have successively issued the "14th Five-Year Plan" to help the development of offshore wind power.

4. Offshore wind power industry chain sorting

The initial investment ratio of submarine cable and tower pile foundation is expected to increase with far-reaching Marine development. From the perspective of cost distribution (estimated), fans (including components) account for 40%, towers 11%, submarine cables 10%, and construction costs 20%. Among them, the proportion of initial investment in submarine cables and towers has increased with the deep sea. There is room for cost reduction in other links (scale, technology update) with large-scale, and the cost ratio in the era of Haifeng parity may decrease.

Except for the main shaft bearing, all links have basically been localized, and the production capacity of high-power parts and components has been supplied. Compared with the land breeze, the sea breeze has the characteristics of larger single machine capacity and more complex environment. Therefore, it is more conducive to leading companies with economies of scale in the competitive landscape. In terms of the degree of localization in China, except for the main shaft bearings, other links have basically been localized, and the main shaft, wheel hubs and other casting and forging parts have been exported to high-quality companies.

In addition, with the acceleration of large-scale iterations, there are constraints on the release of high-power component production capacity, and relevant leading companies benefit. Parts are greatly affected by raw materials, and the effect of large-scale cost reduction in the whole machine link appears. From the perspective of revenue, the revenue from mid- and downstream links such as complete machines, cables, operations, and towers accounted for a relatively high proportion. Among them, the whole machine accounted for the highest proportion, at 37.70%.

On a year-on-year basis, benefiting from the rush to install offshore wind at the end of 2021, the overall revenue of major companies in each link of the offshore wind industry chain has increased to varying degrees. Large-scale, lightweight, and platform-based wind turbines have brought about a decrease in the consumption of unit parts and components. With the mature application of carbon fiber technology and cost reduction, it will further drive down the overall cost of fans. In addition, the number of single-GW wind farms will be reduced after the large-scale operation, which can dilute the investment in installation and cable laying.

In addition, with the large-scale fan, under the same wind speed, the blade is longer and the swept area is larger. The higher the tower, the larger the shear value, and the higher the wind energy utilization rate. In order to achieve the effect of improving the power generation efficiency and reducing the cost of electricity. Offshore wind power has a lot of room for cost reduction, and global offshore wind power propulsion exceeds expectations. With the large-scale development of Sea Breeze, the application of large-megawatt models, and technological advancements such as floating foundations and flexible DC transmission, there is still a lot of room for cost reduction in the future.

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