Although floating offshore wind has much to do to reduce costs, policy rather than technology risks are likely to be the main bottlenecks for floating offshore wind.
Most advanced floating offshore wind developers have a diverse portfolio. They are unsure where the support for floating offshore wind can be found and the most likely source of initial projects. The resultant geographic spread of potential projects makes perfect sense from a portfolio risk management point of view. It does, however, mean that these developers have to keep their options open and their supply chain supported in each of the possible markets. This spreading of potential makes the possible individual activity for each region much smaller, reducing the likelihood of the required investment in supply chain and logistics.
In order to have projects which are debt as well as balance sheet financed, floating offshore wind will need a support mechanism to ensure cost of capital. This support mechanism should reflect the risk of the projects, but it should enable costs to become competitive. To provide such a support mechanism, a jurisdiction will need to feel confident that it will have some return on its investment, either in guaranteed energy supply, local economic benefit or in export revenue. Many jurisdictions don’t need much floating offshore wind as a guaranteed energy supply. If other jurisdictions want to keep local content high, then export revenue is not large.
As well as the support for the energy, there is also the infrastructure for the manufacture, installation and maintenance of the devices. There are not many ports currently equipped for these activities at a commercial scale. To expand or build a facility that can handle such needs could require billion dollar investments. To get this investment, the public and private sectors will probably need to share in the investment. Such investment requires a strong business case – and one that is rigorous and realistic. This in turn requires confidence in costs, production and the market for any electricity generated.
Idealistic arguments won’t win through, but if we embrace the practicalities, floating offshore wind can develop into a truly commercial, truly global technology.
