Summary
Siemens recent commitment to build two offshore wind parks in Britain reinforces that the German engineering company wants to be a part of the offshore sector of the wind industry. The offshore sector has not been completely successful, and many companies have either pulled out of projects or seen overruns in costs. But as demand for alternative energy escalates, and as onshore wind sites become more constrained in Northern Europe, the demand for offshore wind should grow.
Analysis
The United Kingdom and Denmark have been the only significant markets for the offshore industry, but expect that to change by 2010. Currently, costs and risks of building offshore projects are high — at nearly twice the rate of onshore. No wind turbines have yet been engineered to be completely optimized for offshore conditions. Implementing onshore wind turbine designs in an offshore environment has caused problems with reliability and with access to the turbine during foul weather. Consequently, many offshore projects to date have been hit with unexpectedly high maintenance costs. But engineers continue to work on optimizing wind turbines for offshore use and projects adding up to more than 60,000 MW are planned for the future.
Siemens plans to be a part of that future, as their Britain projects attest. Siemens, at 26 percent of the offshore market, is second to only Vestas (68%). The battle for the acquisition of REpower could also change the competitive landscape for the offshore sector, as the company currently has offshore projects in the works, although only one percent of the market. Oil giant Shell and GE Wind have or are looking to invest into the offshore market.
But the market is riskier compared to onshore wind farms, which are cheaper, easier and quicker to install than offshore. With technology dragging behind and a track record that includes heavy losses, the offshore industry is not yet viable, but should be in the mid-term future as turbine designs for offshore are perfected and as transmission lines and other infrastructure for offshore projects are developed.
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
