Europe - Investments in offshore wind energy on the rise

Electricity to power European televisions and toasters will increasingly come from energy generated at sea as utility companies shore up offshore wind-energy capacity amid rising fossil-fuel prices and political pressure.

Over the past three years, yearly installed capacity from offshore wind turbines has more than doubled in Europe to 866 megawatts in 2011, exceeding growth rates for its onshore counterpart, according to the European Wind Energy Association, or EWEA.

New onshore installations rose only 10% in the same period. Further, in 2011, new installed capacity at sea accounted for 10% of the total new installations in the European Union, up from 5% in 2008.

“In the North Sea alone we have a potential to economically exploit the offshore resources to cover seven times Europe’s total energy consumption,” said Christian Kjaer, chief executive at European Wind Energy Association. “We wouldn’t have to import fuel if we can tap into that.”

The surging demand for offshore wind farms is set to continue, industry experts say, as political goals to reduce carbon emissions and geopolitical concerns in fossil-fuel-producing countries increase demand for clean alternative energy.

“Offshore wind is still just a niche industry, but it’s a rapidly growing niche. It will count for 8% of the global market in 2016,” said Steen Broust Nielsen, director at renewable energy consulting firm Make Consultants. “If I were to invest in the wind industry, I would choose a company with a market position in the offshore sector or emerging markets,” he said.

In 2011 offshore wind accounted for 2.5% of the global wind-energy market, according to the Global Wind Energy Council.

Utility firms have also kick-started projects offshore. In 2011, 80% of installed offshore capacity was developed by utilities, with DONG Energy, Vattenfall and E.ON AG DE:EOAN -0.29% the biggest players.

“We’re increasingly seeing utilities going for wind power because it’s an insurance against rising fuel prices.” said EWEA’s Kjaer. “It’s like if you have an investment portfolio — wind energy is a German government bond in a risk perspective. It removes carbon and fuel-prices risk and that will be a large driver going forward.”

Danish DONG Energy built the first offshore-wind-turbine park in 1991 near Vindeby, Denmark, and has since boosted investments in the field. The company now has a total of 1.3 gigawatts installed capacity, enough to power around 800,000 households, and is currently building offshore parks in Germany, Britain and Denmark.

The goal is to reach an energy mix where 85% of the electricity is generated from renewable energy by 2040 to reduce dependency on fossil fuels.

Separately, the European Union has a binding target of reducing carbon emissions to 20% below 1990 levels by 2020. The European Commission is looking at scaling up the target to a 30% reduction by 2030.

“In our part of the world, we’ve seen the opportunity that offshore will grow. We expect 37 GW to be installed in 2020 in Europe and the utility companies want a part of that market,” said Christina Grumstrup Sorensen, senior vice president at DONG Energy.

Other European countries and utility companies have also started to bolster their offshore investments.

Electricite de France SA FR:EDF -1.28% in partnership with Alstom SA FR:ALO +2.52% in early April won the bulk of France’s first offshore-wind-farm tender, aiming at kick-starting the sector in the country to reduce dependency on nuclear energy.