Low

Carbon
Innovation
Coordination
Group

Technology Innovation Needs Assessment

(TINA)

Offshore Wind Power

Summary Report

February 2012
Background to Technology Innovation Needs Assessments
The TINAs are a collaborative effort of the Low Carbon Innovation Co-ordination Group (LCICG), which is the
coordination vehicle for the UK’s major public sector backed funding and delivery bodies in the area of ‘low carbon
innovation’. Its core members (at the time of this document’s completion) are the Department of Energy and Climate
Change (DECC), the Department of Business, Innovation and Skills (BIS), the Engineering and Physical Sciences
Research Council (EPSRC), the Energy Technologies Institute (ETI), the Technology Strategy Board, and the Carbon
Trust.
The TINAs aim to identify and value the key innovation needs of specific low carbon technology families to inform the
prioritisation of public sector investment in low carbon innovation. Beyond innovation there are other barriers and
opportunities in planning, the supply chain, related infrastructure and finance. These are not explicitly considered in the
TINA’s conclusion since they are the focus of other Government initiatives, in particular those from the Office of
Renewable Energy Deployment in DECC and from BIS.
This document summarises the Offshore Wind Power TINA analysis and draws on a much more detailed TINA analysis
pack which will be published separately.
The TINAs apply a consistent methodology across a diverse range of technologies, and a comparison of relative values
across the different TINAs is as important as the examination of absolute values within each TINA.
The TINA analytical framework was developed and implemented by the Carbon Trust with contributions from all core
LCICG members as well as input from numerous other expert individuals and organisations.

Disclaimer – the TINAs provide an independent analysis of innovation needs and a comparison between technologies.
The TINAs’ scenarios and associated values provide a framework to inform that analysis and those comparisons. The
values are not predictions or targets and are not intended to describe or replace the published policies of any LCICG
members. Any statements in the TINA do not necessarily represent the policies of LCICG members (or the UK
Government).
 Offshore wind TINA 1

Key findings
Offshore wind has tremendous potential to replace aging power plant, reduce reliance on
imported gas, and meet GHG emissions and renewable energy targets. Innovation is critical
to enabling the deployment and cutting the cost of offshore wind, with an estimated saving
to the energy system of £18-89bn1 to 2050. Innovation can also help create UK based
business opportunities that could contribute an estimated £7-35bn to GDP to 2050.
Significant private sector investment in innovation, catalysed by public sector support
where there are market failures, is needed to unlock these opportunities.

Potential The UK has a large natural resource of wind power around its coast, and offshore wind power is a
role in the commercially available, proven technology to capture this resource.
UK’s energy Over the next decade, offshore wind has the potential to replace much of the UK‟s aging power
system plant whilst helping to meet our GHG emissions and renewable energy targets and reducing
reliance on gas and fuel imports. Offshore wind can be rapidly deployed at scale with fewer
planning constraints than onshore wind, has a quicker development time than nuclear power and,
unlike CCS, has already been proven at scale.
By 2050 sensitivity analysis suggests offshore wind could deliver c.20-50% of total UK electricity
generation. This depends primarily on the constraints (economic, technical or public acceptance) to
alternatives (onshore wind, nuclear, and CCS), and on the overall energy demand.
Cutting However, offshore wind power is currently a relatively high cost source of energy. How much and
costs by how quickly it is deployed will depend on how successful innovation is in reducing costs.
innovating Innovation has the potential to drive down the costs of offshore wind by 25% by 2020 and 60% by
2050. Together with savings in the supply chain and financing, this could reduce the cost of energy
to about £100/MWh by 2020 and £60/MWh by 2050. Such improvements would enable large
deployment potential, and greatly reduce energy system costs.
Successfully implementing innovation would save the UK in the range of £18–89bn to 2050.
Green The UK could become one of the leaders in a global offshore wind market, with a 5-10% share of a
growth market with potential cumulative gross value-added of between £200 - 1,000bn up to 2050.
opportunity If the UK successfully competes in a global market to achieve the market share above, then the
offshore wind industry could contribute £7 – 35bn to UK GDP up to 2050 (cumulative).
The case for To unlock this opportunity there is a strong case for targeted public sector intervention to catalyse
UK public private sector investment – there are significant market failures to innovation and the UK cannot
sector exclusively rely on other countries to develop the technologies within the required timescales.
intervention – There are on-going market failures, including demand uncertainty (negative externalities), a lack
of shared test facility and other infrastructure requirements (public goods), insufficient payback on
early stage R&D and insufficient coordination and sharing of data (positive externalities/IP
spillover). Other potentially short-term market failures include limited competition in some areas,
notwithstanding expected new entry into this industry, and a constraint on capital availability.
– The UK has an earlier and greater need for offshore wind than other countries, and UK farms are
further out to sea and in deeper water than other earlier adopters.

1
Cumulative (2010-2050) present discounted values for low-high scenarios. Depending on counterfactual methodology (see below), these values could be ~65%
lower (i.e., roughly £6-32bn)
2 LCICG

Potential Innovation areas with the biggest benefit to the UK are:

priorities to – Test sites and drive train and blade testing facilities to support development of high yield/reliability
deliver the turbines
greatest
– Novel/innovative designs of: high yield/reliability turbines, foundations for depths of greater than
benefit to 30m, cabling concepts, installation techniques that are fast, low cost and can access deep water
the UK and O&M vessels/access systems
– Developing serial manufacturing/production of foundations
– Measurement and sharing of test data
The LCICG is already delivering a number of publically supported innovation programmes that are
working on addressing most of these innovation areas. Substantial further UK public sector
investment is planned, with the LCICG members together expected to invest in excess of £100m of
funding over the next 3-4 years, leveraging up to three times that from the private sector.
To realise the full benefit from innovation over the following 4-10 years will require on-going support
to existing areas, scaling up a subset as they move from design to demonstration, as well as adding
a prioritised set of new programmes.
Supporting all the prioritised innovations would require a significant increase in public sector funding
to UK projects in future funding periods. Resources will therefore need to be targeted on particular
areas but material impact can be achieved by doing so.
 Offshore wind TINA 3

Chart 1 Offshore wind TINA summary

Value in
meeting Value in
Sub-area Focus emissions business Key needs for public sector innovation activity/investment
targets at low creation £bn3
cost £bn2
Funding for demonstration sites (both on wind farm extensions
and at national centres); accelerated consenting to enable
testing of innovative designs
Drive train and blade testing facilities
High yield /
Coordinated pooling and dissemination of reliability data
reliability 11 (5 – 19)
turbines Funding to develop novel components and demo turbines for
Turbines 4 (1 – 7) testing new components
Product and process development – not core to innovation
support, but critical complementary support to the creation of
competitive advantage

High yield
6 (2 – 10) Funding wake effects measurement and modelling
arrays

<30m 4 (2 – 3) Development of serial manufacturing processes

Development of novel foundation designs – concept

development, detailed design and demonstration of
Foundations 30-60m 6 (2 – 6) 3 (1 – 5) foundations tailored for larger turbines in 30-60m water depths
Development of serial manufacturing processes and
potentially fabrication facilities

Development and demonstration of new concepts such as

60-100m 0 (0 – 13)
floating foundations

Design and test innovative cabling concepts – including higher

Improved voltage AC, DC arrays and integration with national and
Collection &
intra-array 4 (2 – 8) 1 (0.3 – 2) supergrid
Transmission
connections
Develop, design and test centralised power clean-up

Increased
Design and test new installation vessels, float-out concepts
installation
Installation 7 (3-17) 2 (1 – 4) and other installation innovations (e.g. cranes for feeder
rate/deep
concepts)
water

Improved
access Design and test novel vessels and transfer systems
5 (1 – 9)
technologies
9 (3 – 16)
O&M
Remote Coordinate the installation and usage of condition monitoring
monitoring/ 2 (1 – 4) equipment in all offshore wind turbines and the dissemination
O&M planning of this pooled data set

5-10 year investment in the hundreds of millions of GBP

Total Value: £45bn (18 – 89) £18bn (10 – 35) (programmes of material impact in individual areas in the
millions to tens of millions of pounds)

Benefit of UK High
public sector Medium
activity/investment4 Low
Source: DECC „2050 Pathways Analysis‟ (2010); UKERC „Great expectations: The cost of offshore wind in UK waters‟ (2010); expert interviews; Carbon Trust
analysis

2
2010-2050 Medium deployment / High improvement (L/H – H/H)
3
2010-2050 with displacement
4
Also taking into account the extent of market failure and opportunity to rely on another country but without considering costs of the innovation support
4 LCICG

Offshore wind has an important role to We have considered 3 indicative deployment levels of
offshore wind, aligned to different beliefs about the
play in the UK energy system
exogenous factors affecting the future energy system
(these scenarios aim to capture the full range of feasible
Offshore wind has large resource potential, and although deployment scenarios, and are neither forecasts for the
it is more expensive than onshore wind, it is more UK nor targets for policy makers6):
scalable and is dealt with as major infrastructure in Low scenario (8GW by 2020, 20GW by 2050) if
planning terms. Moreover, while its cost-competitiveness there are few constraints on nuclear, CCS and
against nuclear and CCS is still uncertain, it is currently onshore wind, energy demand is relatively low
deployable sooner and faster than either of these. This (through successful energy efficiency and demand
means that it is a low carbon alternative to CCGT that can reduction measures), large amounts of biomass are
be deployed at the required scale to replace aging power available for energy needs, and electrification of heat
plant ready for decommissioning. and transport is relatively limited
Nevertheless, how much and how quickly offshore wind is Medium scenario (18GW by 2020, 45GW by 2050)
deployed (especially in the medium to long run) will if there are moderate constraints on nuclear, CCS
depend on how successful innovation is in reducing and/or onshore wind, energy demand is moderate
costs. The improvement potential from innovation is very (owing to only partial success of reduction
large (detailed below), and various energy system measures), and electrification occurs extensively in
modelling exercises suggest that offshore wind could heat or transport
cost-effectively deliver c.20-50% of total electricity
generation by 2050. High scenario (29GW by 2020, 100GW by 2050) if
there are strong constraints on nuclear, CCS and
While innovation will play an important role in ensuring onshore wind, biomass availability is limited, or
offshore wind is deployed at large scale, the overall energy/electricity demand is relatively high
capacity installed also depends significantly on key
“exogenous” factors, especially the cost of alternative These deployment scenarios were generated based on
generation technologies, the degree of public CCC MARKAL runs for the fourth carbon budgets, DECC
acceptability of onshore wind and nuclear, the (relative) 2050 calculator scenarios, and customised runs of the
technical success of CCS, the availability of biomass for ESME model for this work. ESME determines how much
energy use, the overall energy/electricity demand, and capacity is required across the generation mix to meet
the success of energy efficiency and demand reduction energy demand and emissions reduction targets at lowest
measures.5 cost based on the constraints outlined above.
Whilst all scenarios meet energy demand and carbon
emission constrains, it is unlikely that the low 8GW 2020
scenario would meet renewable energy targets without
significant trading.
The medium 18GW by 2020 and 45GW by 2050 is used
as the central scenario for the following analyses.

5
Successful deployment of offshore wind will also depend on other factors
affecting the energy system such as the grid upgrades and connections. Our
analysis of deployment potential took those factors (and their cost) into
account, including ensuring that the proportion of variable offshore wind
6
generation was feasible within an optimised energy system, but this TINA By trying to capture the full range of uncertainty over the mid to long term to
does not look at the innovation and other challenges related to these inform innovation policy, these indicative deployment levels were not
developments. precisely aligned with UK government short and mid-term targets.
 Offshore wind TINA 5

Cutting costs by innovating Therefore innovation must tackle not only the cost
challenges of shallow-water near-shore sites, but also
Current costs deliver new technologies for Round 3 and beyond which
will reduce the sensitivity of cost to water depth and
Offshore wind power currently costs about £3.1m/MW
distance-to-shore.
and over £140/MWh7 for a typical Round 2 site. However,
the costs are very site-specific, driven by water depth, Offshore wind systems can be split into five major
distance to shore, and wind speed. Round 3 sites are technology sub-areas: the turbine and their integration
typically deeper and further from shore, which means into arrays, foundations, collection & transmission,
costs are likely to be higher all other things being equal. installation and operation & maintenance. The turbines
Compared to typical near-shore shallow-water site, constitute the largest share of cost of energy (28%)
moving to water depth of 40-60m can increase the cost of followed by the foundation, installation and O&M (about
energy by 15-20%, and moving beyond 100km offshore 20% each) with connect & transmission the lowest cost
can increase cost of energy by another 15-20%. element (13%) as detailed in Chart 2.
However, this can be compensated for by higher wind
speeds which improve the capacity factor – cost
reductions of up to 20% can be achieved if the site is in a
high-wind speed regime.

Chart 2 Overview of offshore wind sub-areas

Sub-area Descriptions % COE

Current turbines are less than or equal to 5-6 MW, with 3 blades on a horizontal axis, and 28%
Turbines most designs use gearboxes to drive the generator
Turbines are installed in arrays to create large wind farms

<30m foundations are usually simple steel tubes e.g. monopiles, although larger turbines 19%
may use more sophisticated foundations
Foundations suited for 30-60m water depth are more sophisticated than monopiles and
Foundation are fixed to the sea floor e.g. concrete gravity bases, tripods or jackets
Floating platforms could potentially be used in 60-100m depths – for example, tension leg
platforms; various spar buoy concepts are being developed outside of the UK for depths
>>100m

Currently high voltage AC (HVAC) cables are used to link turbines to an offshore 13%
Collection & substation, with power clean-up at each turbine
Transmission HVAC cables are also used to transmit power to the onshore substation as current wind
farms are relatively close to shore within (60-80km)

Currently oil & gas vessels that jack-up from the seabed to install the foundation and 22%
Installation turbine. Dynamic positioning (DP2) vessels have also been used to a certain extent, but
this is not yet the norm

Current access technologies involve helicopter transfers and direct boat access from 18%
O&M shore which works best in calm seas
Limited remote condition monitoring

Source: Carbon Trust „Offshore Wind: Big Challenge, Big Opportunity‟ (2008), BVG Associates, Expert interviews

7
Offshore wind costs (and those of other generation technologies) depend
critically on factors such as the level of competition in the supply chain,
efficient financing mechanisms, world commodity prices, and the value of
the Pound. For example, the cost of offshore wind is believed to be about
50% higher than it might have been had the Pound held its value of 3 years
ago, and commodity prices not risen. This analysis holds those other factors
constant, focussing instead on the impact of innovation. As such, the anchor
costs of £140/MWh does not necessarily represent the actual costs, but
rather a reasonable base cost from which to assess the potential for
innovation improvements.
6 LCICG

Cost savings through economies of scale and Innovation opportunities over the next 10 years can bring
innovation down the deployment costs of offshore wind by up to
~25%, with further savings after 2020 likely to bring down
Offshore wind power is a relatively nascent technology
costs even further (up to c.60% by 2050).
compared to the gas, coal and nuclear technologies that
make up the majority of our current generation mix. Cost savings are also possible in the supply chain and
Offshore wind power has been deployed at scale since financing. Combined with a high level of innovation, the
2002. It has been proven to operate in harsh offshore cost of energy from offshore wind power would be about
conditions. Nevertheless technologies are largely based £100/MWh by 20208 and £60/MWh by 2050 (see Chart
on modified onshore wind turbines and oil/gas 3).
foundations. Further innovation is required at both a
system level and in each sub-area to reduce costs and
enable deployment in deeper water, further offshore.

Chart 3 Potential impact of innovation on levelised costs of an example offshore wind site
£/MWh
160
Some potential for further cost rises or declines due
to foreign exchange, increased competition and
commodity costs - not modelled1
140

Base case
120 ‘learning by doing’

100
Innovation opportunities
to 2020, followed by
‘learning by doing’ only
80

60 Cost saving vs. 2010 Full ‘learning by

RD&D’ to 2050
2020 2050

40 Base case -3% -14%

RD&D to 2020 -24% -35%

RD&D to 2050 -24% -58%
20

0
2010 2015 2020 2025 2030 2035 2040 2045 2050

1 Such factors were taken as independent of innovation improvement potential, and its value. Hence the analysis normalises for these factors (i.e. holds them
“constant”). For this reason today‟s levelised costs estimate of ~£140/MWh may be somewhat lower than current estimates. This has no impact on our main
conclusions.
Source: Carbon Trust „Offshore Wind: Big Challenge, Big Opportunity‟ (2008); DECC „2050 Pathways Analysis‟ (2010): ETI ESME; UKERC „Great expectations: The
cost of offshore wind in UK waters‟ (2010); Carbon Trust „Focus for success‟ (2009); expert interviews; Carbon Trust analysis

8
The Crown Estate and DECC have created the Offshore Wind Taskforce to
look at how we can reduce the cost of offshore wind to £100MWp/h by 2020
 Offshore wind TINA 7

The scenario „Innovation opportunities up to 2020‟ is These estimates include maximum innovation potential,
based on a bottom-up assessment of highest potential combining „learning by research‟ (driven by RD&D
cost and yield improvements identified and potentially spending)9 and „learning by doing‟ (achieved through the
commercialisable by ~2020 as shown in Chart 4. Full incremental learning associate with increased deployment
innovation until 2050 is a top-down assessment of the alone)9 – the bottom path in Chart 3. This path is steeper
long term potential for cost reduction and yield than a base case scenario with only „learning by doing‟
improvement, with c. 50-60% reductions in CAPEX and (without focussed RD&D activity). The path in-between
OPEX. these in Chart 3 incorporates the maximum innovation
opportunities to 2020, followed by „learning by doing‟ only.

Chart 4 Potential cost savings from innovation by sub-area

Innovation
Foreseeable impact
innovation impact potential by
potential 2050
1
Sub-area Type (by ~2020) (levelised cost) What is needed (source of improvement potential)

Turbine High yield / 8% yield increase c.50% ▪ Series of innovations in turbines, blades and
reliability generators will increase yield and reliability
turbines
▪ Better array layout designs to optimise wind farm
High Yield 4% yield increase yields. For example, to limit wake effects
arrays ▪ Increase scale, greater reliability and optimised
designs give scope for further cost reduction

Foundation <30m 40% capex c.70% ▪ New design structures for 30-60m (e.g. improved
reduction jackets, gravity base or suction buckets) will lower
material and construction costs as will serial
30-60m 40% capex production techniques. These structures and
reduction manufacturing processes will likely also provide
cheaper alternative for shallower water
60-100m 60% capex ▪ Floating foundations, once proven, will lower costs
reduction (60% capex reduction foreseeable)

Collection & Intra-array 2% yield increase c.50% ▪ Higher voltage intra-array cabling will reduce
Transmission and to-shore transmission losses
connections ▪ Longer term improvements may result from
centralised power clean-up

Installation 40% increase in c.60% ▪ Newly designed higher efficiency installation vessels,
installation rate float out concepts and/or other innovations will
reduce the installation costs or large scale farms, far
from shore

Operation & Access 4% yield increase c.55% ▪ New technologies enabling access to turbines in
Maintenance rougher sea conditions will reduce down time for far
O&M 1.5% yield from shore turbines and increase yield
planning increase ▪ Better O&M planning by using data from monitoring
devices smartly will reduce down time from turbines
Total
(Levelised c.25% c.60%
cost)
1
The innovation impact potential represents what experts deem to be “aspirational but feasible”, and will form the central scenario for our modelling, our innovation
goals, and our value assessments. Project development cost are smeared over the components of the system and re-powering is excluded
Source: Carbon Trust „Offshore Wind: Big Challenge, Big Opportunity‟ (2008); Carbon Trust „Focus for success‟ (2009); expert interviews

9
As defined in Jamasb, T. (2007). Technical Change Theory and Learning
Curves: Patterns of Progress in Energy Technologies, The Energy Journal,
Vol. 28, Issue 3, 45-65.
 8 LCICG

An alternative counterfactual was also used assuming

Value in meeting emissions and energy „perfect system optimisation‟ whereby offshore wind
security targets at lowest cost deployment could adjust significantly if cost
improvements are not achieved, which is more
Based on our cost and efficiency improvements, and our
appropriate when least cost alternatives are readily
scenarios for deployment (taking into account emissions
available and easily substitutable and deployment
and energy security constraints), we calculate the
incentives adjust perfectly to changes in the relative cost-
potential savings in energy system costs through
effectiveness. Under this counterfactual, our savings
innovation.
estimate would be about 65% lower. The right hand side
In our medium scenario, the identified innovation of Chart 5 illustrates the implied cost savings under
opportunities lead to a saving of £45bn in deployment perfect system optimisation. The actual cost savings are
costs over 2010-2050. As shown in the left hand side of likely to be somewhere in between the inflexible
Chart 5 below, the majority of this, £37bn, is from deployment and the perfectly optimised system
„learning by research‟ improvements achievable by 2020. scenarios. We have shown the former estimates
An additional £8bn is saved from ongoing „learning by throughout this paper to give a clear indication of the
research‟ post 2020. The £45bn cost saving from RD&D upper limit of our estimates.
is in addition to the base case £27bn cost saving from
The savings opportunity can be further broken down by
„learning by doing‟. These savings estimates use an
each sub-area, as shown in Chart 6. The greatest cost
„inflexible deployment‟ counterfactual, which is most
savings are from high yield/reliability turbines (and
appropriate if we believe the feasibility of substitute
feedback suggests this is a conservative estimate). The
technologies is low and/or deployment incentives are
next highest cost savings are from foundations and
inflexible to changes in the relative cost-effectiveness of
increased installation rate/in deep water.
different technologies. This is a high cost saving estimate.

Chart 5 Potential cost savings from 2010 to 2050 – assuming inflexible deployment (left-hand chart) or perfect
system optimisation (right-hand chart)
High cost savings estimate (inflexible deployment)1 Low cost savings estimate4 (perfect system optimisation)
2010-2050, discounted £bn, medium deployment/high innovation 2010-2050, discounted £bn, medium deployment/high innovation

Deployment costs based on 2010 Cumulative system costs

levelised costs2
254 from 2010-2050 without >1000
innovation
Cost savings from 'learning by Cost savings4 from 'learning by
doing' improvements (2010-2050) 27 doing' improvements (2010-2050) 9

Cost savings from 'learning by Cost savings4 from 'learning by

RD&D' improvements (2010-2050) RD&D' improvements (2010-2050)
37 13
to be commercialised by 20203 to be commercialised by 2020

Cost savings from 'learning by Cost savings4 from 'learning by

RD&D' improvements (2010-2050) 8 RD&D' improvements (2010-2050) 3
to be commercialised post-2020 to be commercialised post-2020

Deployment costs based on Cumulative system costs from

182 >1000
achieving expected 2050 2010-20504 with innovation
levelised costs
1
Cumulative levelised cost of offshore wind capacity installed between 2010 and 2050 discounted to 2010 using the social discount rate
2
£254bn is the total actual cost of deployment (medium scenarios), it does not represent the additional cost over the best high-carbon alternative
3
About £2bn of the 2020 deployment cost saving will be delivered by 2020, equivalent to about £4bn of capex between 2010-20
4
Cumulative system costs and savings are as calculated by running one representative scenario in the ESME model (with TINA-specific assumptions) without cost improvements. Model assumes ~80%
reduction in greenhouse gas emissions by 2050; The total cumulative system costs are highly sensitive to all assumptions in the model, and to avoid “false precision” we do not provide a precise figure;
for similar reasons cost savings estimates are also highly sensitive.
Source: DECC „2050 Pathways Analysis‟ (2010); UKERC „Great expectations: The cost of offshore wind in UK waters‟ (2010); expert interviews; Carbon Trust analysis
 Offshore wind TINA 9

Chart 6 Potential cost savings from 2010 to 2050 by sub-area (medium deployment scenario)

Remote
monitoring/O&M
planning
Improved access
4%
technologies High yield/
10% reliability turbines
24%

Increased
installation
rate/deep water
16%

High yield arrays

13%
Improved intra
array connections
10% Foundations
Foundations < 30 m depth
>30m depth 9%
14%

Source: Expert interviews (including input from ETI, RPS, GL Garrard Hassan, RUK, and developers), DECC, UKERC, Carbon Trust analysis

Green growth opportunity competing against established foreign competitors, to

15% in installation, leveraging the UK‟s skills from the
A large global offshore wind market North Sea oil & gas industry.
A large amount of offshore wind power is required
globally as well as in the UK, with IEA estimates ranging £10 – 35bn net contribution to the UK
widely from around 100GW to over 1,000GW by 2050: economy
Low scenario (32GW by 2020, 119GW by 2050) if If the UK successfully competes in a global market to
the world fails to remain on a path to 2 degrees achieve the market share above, then offshore wind could
Celsius and/or few constraints on nuclear and CCS, contribute c.£2.6bn (£0.8 – 7.4bn)10 in GVA per annum by
and/or electricity demand is low, relatively 2050, a cumulative contribution11 of c.£37bn (£14 –
Medium scenario (86GW by 2020, 439GW by 2050) 69bn)10 to 2050.
the world keeps on a 2 degrees path and few It may be appropriate to apply an additional displacement
constraints of nuclear and CCS effect since part of the value created in the export market
will be due to a shift of resources and thus partly
High scenario (118GW by 2020, 1142GW by 2050)
cancelled out by loss of value in other sectors. Expert
the world keeps on a 2 degrees path and there are
opinion has roughly assessed this effect to be between
strong constraints on nuclear and CCS
25% and 75%, so we have applied a flat 50%. Including
Across the low-medium-high scenario, the global market this displacement factor, offshore wind would still make a
turnover by 2050 could grow to £16bn – £168bn (£56bn net contribution of £1.3bn (£0.4 – 3.7bn)10 in GVA per
in medium scenario) (undiscounted). In the medium annum by 2050, a cumulative contribution of c.£18bn (£7
scenario, this represents potential cumulative, discounted – 35bn)10 to 2050.
GVA between 2010 and 2050 of £526bn.

The UK could be one of the market leaders

The UK is well positioned to become one of the leaders in
the global offshore wind market, achieving a market share
of 5-10% in 2050. It can leverage its capabilities from the
offshore oil and gas, maritime, aerospace and other
sectors which allow the UK to create a strong position in
turbines, foundations, installation and O&M. 10
Medium (Low – High) deployment scenarios
11
Market shares will vary by each sub-area (turbine, Discounted at 3.5% to 2035, and 3.0% between 2035 and 2050, in line with
HMT guidelines
foundation etc.), from 3% in turbine components,
10 LCICG

The case for UK public sector intervention The UK cannot rely on other countries to drive
Public sector activity is required to unlock this opportunity innovation with the required focus and pace
– both the £45bn reduction in the costs to the energy For most offshore wind technologies, the UK cannot wait
system from learning by research, and the c.£18bn net and just rely on other countries to intervene in tackling
contribution to UK GDP from new business creation. these market failures, and in driving innovation with the
focus, and at the pace, required for UK value creation.
Market failures impeding innovation Overall, the UK has an earlier and greater need than
A number of overall market failures inhibit innovation in other countries:
offshore wind, especially critical failures in market Offshore wind comprises a much larger share of UK
demand (externality effects) and infrastructure conditions renewable resource than in most other countries
(public good effects). Significant failures in supply
conditions (e.g. oligopoly power and constraints on capital The UK lags behind its European peers on renewable
availability) also exist, but are expected to be ameliorated deployment with only 4% of electricity demand
in the future. compared to a 15% EU average. Germany and China
both have ambitions to deploy double-digit GWs of
Within the value chain, the critical market failures have
offshore wind capacity, but have fewer pressing
most impact on:
requirements driving for significant deployment by
turbine and foundations 2020
o test sites / facilities UK RD&D programmes have been among a handful
o associated monitoring and pooling of of leaders in offshore wind, and there would be some
reliability data time lag before other major programmes were able to
catch up and supersede UK efforts given that they
o development of novel/innovative
start from a lower base
concepts
Finally, the UK has specific needs in the technology sub-
sharing wind farm wake effects data areas:
innovative installation methods and vessels Foundations – the UK has a greater need than most
These are further detailed in Chart 7 below. others for 30-60m foundations and a potential
specific need for 60 - 100m foundations; it could
potentially rely on others for very deep water (100m+)
foundations
Installation and O&M – to meet ambitions some UK
farms will have to be in deeper water and further out
to sea than other earlier adopters
O&M – UK farms have larger arrays and some are in
tougher wave climates12 and further out to sea than
other earlier adopters

12
The Dogger Bank and west coast of Scotland have particularly tough wave
climates
 Offshore wind TINA 11

Chart 7 Market failures in offshore wind innovation areas

Sub-area What market failures exist? Assessment

Turbines - 1. Test sites and facilities lacking due to high capital costs, demand uncertainties Critical failures
High yield/ and private sector coordination failures
reliability Turbine manufacturers lack the capability to develop their own test sites, and so
turbines rely on national centres or developers to provide sites
Developers are reluctant to add risk, cost and complexity to their commercial
projects to test new technologies
Where developers do have positions in their wind farms to test new technologies,
they may not have a sufficiently broad consenting envelope

2. Coordination failures (positive externalities) including a lack of monitoring and

pooling of reliability data

3. Barriers to developing novel/innovative concepts – barriers to entry, risk aversion,

long lead times:
High barriers to new entrants – need a track record of operating hours but
investment is high to get to this point without an order book
Construction and operating risks can have a catastrophic impact on IRRs, so
developers are unlikely to add additional risks to the project therefore
Product lead times are very long (5-10 years) (i.e. negative externalities)

4. Lack of competition may hinder turbine innovation (i.e. imperfect competition and May ameliorate
high barriers to entry). The OSW turbine market is currently dominated by a limited in future
number of firms; however, entry by other players are expected soon

Turbines - High 5. Insufficient sharing of array performance data due to perceived risks of losing Significant failure
yield array competitive advantage (i.e. positive externalities/coordination failures)

Foundation See 1 and 3 above impacting test sites/facilities and novel/innovative concepts Critical failure
(including serial manufacturing processes) and aligning developers, turbine
manufacturers, foundation designers and test sites

Collection & See 1 and 3 above impacting new solutions Significant failure
Transmission

Similar to 4 above - both switchgear and cabling markets dominated by l large Important failure
players,) (i.e. barriers to entry and immateriality)

Installation 6. Uncertainty on future offshore wind demand inhibits investment in innovative Critical failure
installation methods and vessels - installation vessels are high cost (~£100m), long
lead time (3-4 years) items that pay off only over multiple installations (i.e. negative
externalities).

O&M 7. Uncertainty on future offshore wind demand has particular effect since Important failure
investments in new access and condition monitoring technologies are substantial
for the relatively small O&M play

8. There are barriers for companies to collaborate as turbine manufacturers do not Important failure
want to share product warranty data

Source: Expert interviews, Carbon Trust analysis

 12 LCICG

Potential priorities to deliver the greatest These have been prioritised by identifying those areas
that best meet the following criteria:
benefit to the UK
value in meeting emissions targets at lowest cost
The UK needs to focus its resources on the areas of
innovation with the biggest relative benefit to the UK and value in business creation
where there are not existing or planned initiatives (both in extent of market failure
the UK and abroad). The LCICG has identified and opportunity to rely on another country
prioritised these innovation areas.

Innovation areas with the biggest relative

benefit from UK public sector
activity/investment
The LCICG has identified the areas of innovation with the
highest relative benefit from UK public sector
activity/investment13. These are high yield/reliability
turbines and increased installation rate/deep water
installation innovations, followed by high yield arrays,
deep water foundations (30m+) and improved O&M
technologies (see Chart 8).

Chart 8 Benefit of UK public sector activity/investment by sub-area and technology type

Value in meeting Value in Extent Opportunity to Benefit of UK public sector

Type emissions targets business market exclusively rely on activity/investment
Sub-area at lowest cost £bn1 creation £bn2 failure others (without considering costs)

▪ High yield/ 11 (5-19)

▪ No due to earlier
HIGH
& greater need
reliability turbines
Turbine 4 (1 – 7) Critical
▪ High yield arrays 6 (2-10)
▪ No due to earlier
MEDIUM-HIGH
& greater need

▪ <30m depth 4 (2-3)

Significant
▪ Yes for <30m LOW

Foundation ▪ 30-60m depth 6 (2-6) 3 (1 – 5) 4 ▪ No for 30-60m MEDIUM

Critical
▪ 60-100m depth 03 (0-13) ▪ No for 60-100m MEDIUM

Collection & ▪ Improved inter-

4 (2-8) 1 (0.3 – 2) Significant
▪ No due to earlier
LOW-MEDIUM
transmission array connections & greater need

▪ Increased
▪ No for deep
Installation installation 7 (3-17) 2 (1 – 4) Critical HIGH
water
rate/deep water

▪ Improved access 5 (1-9) ▪ No for larger

sites and for sites
O&M 9 (3 – 16) Significant MEDIUM-HIGH
▪ Remote monitoring/ 2 (1-4) with a tough
O&M planning wave climate

Significant HIGH relative to other

TOTAL 45 (18 – 89) 18 (7 – 35)
-Critical technology families
1
These values are potentially 65% lower according to alternative “perfect system optimisation” counterfactual;
2
After displacement effects
3
Innovation (e.g. floating foundations) may unlock economical high wind speed sites in +60m deep water, creating value in meeting emissions targets under the medium
deployment scenario
4
Value in business creation is not split by different depths. Data on the market sizes for different depths of foundation was not available.

Source: Expert interviews, Carbon Trust analysis

13
Without considering costs – these are considered in the final prioritisation).
 Offshore wind TINA 13

Existing innovation support Potential priorities for public sector

The UK is supporting many of the areas highlighted innovation support
above. This is through a combination of policies to In the sections above, we identified the key innovation
incentivise demand, supply-side innovation programmes needs and the market barriers hindering these
to „push‟ technology and support for enablers (Chart 9). innovations. This analysis points to a number of priorities
for public sector innovation support:
Test sites and drive train and blade testing facilities
to support development of high yield/reliability
turbines – funding and accelerated consents
Novel/innovative designs of high yield/reliability
turbines, foundations for depths of greater than 30m
with low material costs, cabling concepts, installation
techniques with increased utilisation/rates, lower
costs and ability to access deep water and
vessels/access systems – funding and coordination
Developing serial manufacturing/production of
foundations – funding
Measurement and sharing of data – funding and
incentives to share and/or coordination

Chart 9 Summary of current/recent UK public sector activity/investment

Market pull (demand side) Technology push (supply side) Enablers

▪ Levy Exemption Certificates − Offshore Renewable Energy Catapult – Testing sites:

(LECs) – As a renewable energy from summer 2012; up to £10m per annum − Narec – National Renewable Energy Centre;
source offshore wind energy over five years (£50m) from the Technology Narec operates the only full-scale and
qualifies for LECs Strategy Board. To be set up by a
independent blade testing facility in the UK (since
consortium of the Carbon Trust, Narec and
▪ Revenue support through Banded 2005). A second 100m+ blade test facility, a
Ocean Energy Innovation, headquartered in 15MW drive train test facility, and an offshore
Renewables Obligation - 2009 to
Glasgow with an operational centre in the
2017, offshore wind currently wind test site are under development (to be
North East of England (Northumberland) operational in 2012/13)
eligible for 2 ROCs/MWh*. CfD FiT
expected 2017 onwards − Supergen 2 – 2010 to 2014; £5.8m;
− AREG – Aberdeen Renewable Energy Group is
Research Council led funding to undertake
▪ Carbon price, via the EU Energy developing the European Offshore Wind
research to achieve an integrated, cost- Deployment Centre – an offshore wind test facility
Trading Scheme (ETS)
effective, reliable & available Offshore Wind off the coast of Aberdeen – in a joint venture with
Power Station
Vattenfall, using an EC grant of up to €40m
− Carbon Trust Offshore Wind Accelerator– Permitting regime:
2008 to 2014; c£30m fund to accelerate cost
reduction and increase reliability and yield in − Crown Estate – has leased sites with the aim of
a consortium with eight major developers installing 25GW by 2020

− ETI Offshore Wind Programme; funding Non-technology bottlenecks:

for the design and demonstration of novel − RenewableUK and Scottish Enterprise are
offshore systems and improvement of working on, amongst others, health and safety
existing technologies issues and skills shortages
− ETF Third Demonstration Call – 2010- − DECC ports & infrastructure funding
2011; up to £8m; capital grant funding for
component / technology development Centres for doctoral training (EPSRC)
There have also been a number of
programmes funded by RDAs including ONE,
NWDA, EMDA and SEEDA

N.B. In addition the Devolved Administrations have a number of active programmes and EU funding is being invested in offshore wind in the UK

Source: TSB (Energy and Supply KTN), Carbon Trust, ETI, NaREC, Crown Estate, AREG
*Renewables Obligation banding for 2013-17 in England and Wales currently under consultation
14 LCICG

Chart 10 outlines how the potential innovation priorities Summary of on-going LCICG innovation priorities
align against each technology sub-area, the scale of
public funding for each, the current activities/investment Test sites and facilities
in each area and potential, future activities. Accelerating the achievement of high yield and reliable
The LCICG‟s existing and planned innovation turbines requires a scale up of testing on existing and/or
programmes span almost all the innovation priorities. Its new sites and site consenting to enable testing of
members expect to commit over a hundred million GBP of innovative designs. The new test sites and associated
public sector funding to these programmes over the next infrastructure that are already being planned by Narec
3-4 years (leveraging up to three times that from the and AREG are a significant step in this direction. More
private sector). sites (both onshore and offshore) will be needed to test
To realise the full benefit from innovation over the a sufficient number of innovative new turbine designs.
following 4-10 years will require on-going support to Testing need not only occur in new/virgin test sites, it
existing areas, scaling up a subset as they move from can also occur in existing sites. However, developers‟
design to demonstration, as well as adding a prioritised consents are currently limited to existing designs. These
set of new programmes. Supporting all the prioritised will need to be changed if innovative designs are to be
innovations would require a significant increase in public tested on these sites. Furthermore, developers may
sector funding to UK projects in future funding periods. need to be incentivised to overcome additional risks.
The UK government will need to balance its own Test facilities are also required. The Narec drive train
investment, and any funding secured from European centre has recently been funded, complimenting the
Union programmes, with the risk of relying on Narec blade test facility.
developments in other countries. Resources may need to
be targeted on particular areas but material impact can be Novel/innovative designs
achieved by doing so. The public sector investment
The LCICG is supporting the concept design of
required however is a fraction of the value that offshore
novel/innovative designs across all the sub-areas,
wind innovation could bring to the UK economy, including
especially foundations, installation and O&M. Continued
helping to unlock £45bn (18 – 89) savings in meeting
support is required through the technology lifecycle up
energy and emissions targets at lowest cost, and the
until they are commercial. In most cases, the next step
£18bn (10 – 35) value add creation to UK GDP14.
would be supporting the full development and build of
A more detailed overview of ongoing requirements is prototypes that can then be tested.
given in the call out box below for the four priorities: test
Support could also be provided for additional novel
sites and facilities, novel/innovation designs, serial
design concepts with radical cost reduction potential,
manufacturing/production of foundations and
although the extent of such opportunities is hard to
measurement and sharing of data.
predict ahead of time.
As well as supporting innovation in each of the individual
areas above, public intervention can help collaboration Serial manufacturing/production of foundations
and integration across them. It can also facilitate the
To manufacturer thousands of foundations in the next
commercialisation of innovative concepts created by
ten years cost effectively will require the manufacturing
research institutes and small companies through
process to transition from low volume batch processes
entrepreneurial support programmes (generally across
to serial production. This would require funding to
many technology areas). Finally, it can join up innovation
develop these processes and to implement serial
programmes with supply chain and infrastructure
production methods. This may be out of scope for the
development. Where appropriate this includes helping to
mandate of some/most of the LCICG members, but
focus activity into centres of excellence where there are
should be considered as part of broader support.
colocation benefits. The recently announced Offshore
Renewable Energy Catapult will help capitalise on this
opportunity. Measurement and sharing of data
The LCICG‟s programmes in foundations and condition
monitoring are promoting the sharing of data. New
programmes to measure and share turbine reliability
data would benefit innovation at relatively low cost.

14
2010-2050 with displacement
 Offshore wind TINA 15

Chart 10 Potential offshore wind innovation priorities and support

Potential innovation priorities Indicative scale Current activities/investments Future potential activities
of public
funding1

Turbine ▪ Test sites and incentives to test at those sites ▪ High tens of ▪ Planned Narec & AREG offshore test sites ▪ Expand existing and support new sites.
▪ High yield / millions of ▪ SSE‟s planned test site
reliability pounds
turbines ▪ Drive train and blade testing facilities ▪ Narec drive train & blade testing facilities
▪ ETI 90m+ blade project
▪ Monitoring and pooling of test data ▪ Millions of ▪ None ▪ New programmes to coordinate and provide
pounds incentive for sharing
▪ RD&D for components & novel concepts ▪ Tens of millions ▪ Scottish Enterprise call for novel turbine concepts ▪ Additional support for novel concepts and
of pounds ▪ DECC-TSB OSW Component Technologies turbines for testing
Development and Demonstration Scheme.
▪ High yield array ▪ Model, measure and monitor of wake effects ▪ Millions of ▪ Carbon Trust Offshore Wind Accelerator wake ▪ Funding and coordination of measurement and
layouts pounds effects programme (modelling) monitoring
Foundation ▪ Programme to develop, demonstrate, test and ▪ Tens of millions ▪ Carbon Trust Offshore Wind Accelerator - ▪ Support full demonstration with turbines (post-
▪ 30-60m monitor novel designs and serial manufacturing of pounds supporting 7 foundation designs 2014) including installation
processes ▪ DECC-TSB OSW Component Technologies
Development and Demonstration Scheme
▪ 60-100m ▪ Programme to develop new concepts, with ▪ Tens of millions ▪ ETI floating foundation concept programme ▪ Support a demonstration upon successful
potential demo and testing later of pounds completion of first stage
Collection & ▪ Design and test novel cabling concepts ▪ Millions of ▪ Carbon Trust Offshore Wind Accelerator - high ▪ Additional support for testing
Transmission ▪ Develop, design and test central power clean pounds voltage array design
up ▪ ETI transmission to shore project
▪ DECC-TSB OSW Component Technologies
Development and Demonstration Scheme
Installation ▪ Programme to design, build and test new ▪ Tens of millions • Carbon Trust Offshore Wind Accelerator funding • Additional support for design
vessels / barges, float-out concepts and other of pounds design work for new installation vessel • Support for building and testing
installation innovations • DECC-TSB OSW Component Technologies
Development and Demonstration Scheme
O&M ▪ Programme to design, build and trial novel ▪ Tens of millions ▪ Carbon Trust Offshore Wind Accelerator is funding ▪ Support to build and test novel vessels / barges
▪ Access vessels / access systems of pounds design work for access technologies. and access systems
technologies ▪ DECC-TSB OSW Component Technologies
Development and Demonstration Scheme
▪ Remote ▪ Condition monitoring technologies – support ▪ Millions of ▪ ETI Condition Monitoring programme ▪ Increased support and coordination to promote
monitoring/ the installation and usage of whole system pounds ▪ DECC-TSB OSW Component Technologies data sharing
O&M planning equipment and coordinate data sharing Development and Demonstration Scheme

N.B. In addition the Devolved Administrations have a number of active programmes and EU funding is being invested in offshore wind in the UK
Source: Expert interviews, Carbon Trust analysis 1 Provides an order of magnitude perspective on the scale of public funding (existing and future) potentially required over the next 5 to 10 years to address each need.
www.lowcarboninnovation.co.uk

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contractors and sub-contractors give any w arranty or make any representations as to its accuracy, nor do they accept any liabilit y for any errors or
omissions. The study should not be used or relied upon by anyone w ithout independent investigation and analysis and neither the LCICG nor its members ,
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publication shall be construed as granting any licence or right to use or reproduce any of t he trademarks, service marks, log os, copyright or any
proprietary information in any w ay w ithout the member companies‟ prior w rit ten permission. The LCICG and its members enforce inf ringements of their
intellectual property rights to the full extent permitted by law .
© Low Carbon Innovation Coordination Group 2012. All rights reserved.