Offshore wind is scaling up. Last week (3 February 2016) Danish state-backed energy business Dong Energy made a final investment decision for what is set to be the biggest offshore wind farm in the world, the 1.2GW Hornsea One offshore wind project off the English coast.

Dong has not disclosed the estimated cost, but the current largest operational offshore wind farm, the 630MW London Array, cost £1.8 billion to build and is roughly half the size of Hornsea One.

In another sign of the sector’s growing maturity, a week earlier, a much smaller development happened. Vattenfall said it had decommissioned the 10MW Yttre Stengrund offshore wind farm in the Kalmar Sound, Sweden. The Swedish power company said the farm is thought to be the first offshore wind project to be decommissioned.

The project came online in 2001 and was developed by Vindkompaniet at a capital cost of around €13 million ($14 million).

Offshore wind has quickly evolved, moving over the past decade from a risky, small-scale technology with modest budgets to a key sector within the renewables industry, that can attract big-ticket investors with low-risk, long-term appetites.

Floating new ideas

In another indication of the sector’s growth, developers are successfully developing a new generation of offshore technologies at a commercial scale.

Dong will build Hornsea One using traditional, foundations-based methods, but as projects get bigger and go further out to sea, construction costs rise and technical challenges increase.

Floating technology, where offshore wind turbines are not anchored to the sea bed, offer the opportunity for sponsors to take advantage of higher wind speeds and deeper waters.

At sea depths beyond 50 metres, the UK’s Energy Technologies Institute says floating wind is more cost effective than traditional, foundations-based technology, reducing the amount of heavy vessels and components required compared to their predecessors.

This month, Norwegian utility Statoil started awarding contracts for its NKr2 billion ($230 million), 30MW Hywind floating offshore wind project off the coast of Scotland. Statoil wants to develop a pilot park of five floating 6MW turbines which will be located 25km off the coast of Peterhead, Aberdeenshire. Statoil made a final investment decision on the project, which is set to be the largest floating offshore wind farm in the world, in November 2015.

In December, EDP was granted €19.2 million ($20.98 million) in funding from the European Commission for its €26.8 million Demogravi3 offshore wind demonstration project in Portugal. 

Demogravi3 will test a wind turbine with a gravitational foundation made of concrete and steel. Unlike floating platforms, Demogravi3 will be installed on the seabed, although it will already be assembled and floated to the mooring place. The whole structure of the turbine and its constituent elements will be assembled onshore and then transported. This avoids the need for heavy lift vessels to anchor the foundations and assemble all the turbine components in situ. 

Separately, the European Investment Bank (EIB) is considering a €25 million ($27.2 million) loan for a €125 million, 25MW project in Portugal, also developed by EDP and alongside Spanish oil and gas company Repsol.

Floating technology has scaled up steadily in less than five years - the first major floating project, EDP and Principle Power’s €20 million, 2MW WindFloat project, only came online at the start of 2012.

The future

A new breed of owners may pave the way for new approaches, at least in the operational phase of these projects. Last week the UK Green Investment Bank’s (GIB) offshore wind fund and funds managed by US investor BlackRock acquired the Lynn and Inner Dowsing offshore wind farms in the UK from Centrica and EIG Global Energy Partners for £423 million ($613 million). The transaction marks the first time that operating offshore wind farms in the UK have been 100% owned by non-utility investors. 

As both traditional developments and the new breed of floating technologies attract investment, it remains to be seen what the next evolution within the offshore wind sector will be.  Despite big projects like Hornsea One getting the green light, one major insurer told IJGlobal this week that it anticipates smaller, but more numerous offshore wind projects going forward, as the range of technologies and project owners increase. Smaller sizes would allow less experienced sponsors to be more agile, and provide broader opportunities for investors, they said.