Longer blades, taller towers, more powerful turbines: wind energy seems to be past the peak of innovation now, improving incrementally rather than with breakthrough. And yet none other than an oil company has ventured into a new field with massive potential: floating offshore wind.
The Norwegian petroleum ministry earlier this month approved a plan by Equinor to build and operate a floating offshore wind farm in the North Sea that will supply power to as many as five oil and gas platforms. The project is the first of its kind, but it would have significant implications both for offshore oil and gas and for offshore wind.
The facts: the Hywind Tampen wind farm, 140 km off the Norwegian coast, will have a total capacity of 88 MW with 11 turbines that will meet around 35 percent of the electricity needs of the two Snorre platforms and the three Gullfaks platforms. However, Equinor says that "In periods of higher wind speed this percentage will be significantly higher."
The $490-million (5 billion kroner) project will reduce the use of gas turbines for power generation, consequently lowering the emissions of carbon dioxide from the five platforms by some 200,000 tons annually and emissions of nitrous oxides by 1,000 tons.
That's certainly a sizable undertaking. It is unlikely to score Equinor many green points since the power generated by the wind farm will be used for extracting oil and gas from the bottom of the sea, but this is not the only purpose of the project.
According to Equinor, the Hywind Tampen wind farm will also be a test site for future offshore wind installations.
"The Hywind Tampen project will contribute to further developing floating offshore wind technology and reducing the costs of future floating offshore wind farms, offering new industrial opportunities for Norway, the licences and Norwegian supplier industry in a growing global offshore wind market," Equinor said on its website.
The global offshore market is indeed growing. A recent report from Wood Mackenzie said investments in offshore wind over the next five years could exceed $211 billion as investors move their focus from oil and gas to wind power. What's more, the investment gap between offshore wind and offshore oil and gas will narrow, with capital expenditure in offshore wind rising to top $200 billion in the period.
"Offshore wind projects are changing; the offshore wind supply chain will have to change with it," the Wood Mac analysts wrote. "The number of project interfaces – the supply deals associated with a project – is both broadening and decreasing, while the size of projects and contracts is growing."
Offshore wind carries lower returns for investors but also lower risk, the report's authors also noted. Typically, there would be many investors opting for higher returns over low risk. Still, with two oil market crashes in six years, it may be safe to say that a growing number of investors would now prefer the low risk associated with wind power over the higher—but uncertain—returns of oil and gas.
What's more, investors have been paying attention to what has been happening around the world in terms of changing sentiments towards oil and gas, and the push to arrest rising global average temperatures. Wood Mac is calling this energy transition risk, and this risk is present in oil and gas investments but absent in wind power projects, hence the greater interest.
The fact that Equinor is far from alone in its renewables push is indicative enough that the oil and gas industry, or at least part of it, has done its homework and is following investors in their changing attitudes.
Shell, for example, has a small but growing presence in wind power, both offshore and onshore. The company has a stake in two projects in the Netherlands, one in operation and one in construction, and it is also a 50-percent shareholder in the Atlantic Shores project: a 2.5 GW offshore wind farm in New Jersey.
French Total is also betting big on renewables. The company eyes some 25 GW in renewable power generation capacity by 2025. To achieve this, Total has been expanding in the industry through acquisitions. It now has a presence along the supply chain and is further expanding it. Recently, Total joined the Erebus offshore wind project: a floating wind farm off the Welsh coast that will have a capacity of close to 100 MW.
Floating wind farms may well be the future: sooner or later, free space onshore and in shallow waters will run out, but the energy demand of a growing human population will continue to rise. Whether it starts as a way to reduce offshore oil and gas platforms' reliance on gas turbines for electricity, it will inevitably progress further than that. The great thing about it? Floating wind turbines are built in relatively deep water, where there is rarely a shortage of wind. This means they wouldn't need energy storage facilities, which are now becoming mandatory for the approval of some onshore wind and solar projects.
By Irina Slav for Oilprice.com
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