Global Offshore Wind Market

Transcription

1 Global Offshore Wind Market Presented at: Wind Shipping and Logistics Conference Presented by Bruce Hamilton Navigant Copenhagen, Denmark March 12, Navigant Consulting, Inc. D I S P U T E S & I N V E S T I G AT I O N S E C O N O M I C S F I N A N C I A L A D V I S O RY M A N A G E M E N T C O N S U LT I N G

2 Disclaimer Content of Report This presentation was prepared by Navigant Consulting, Inc. for the DHL Wind Shipping and Logistics Conference. The work presented in this report represents our best efforts and judgments based on the information available at the time this report was prepared. Navigant Consulting, Inc. is not responsible for the reader s use of, or reliance upon, the report, nor any decisions based on the report. NAVIGANT CONSULTING, INC. MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESSED OR IMPLIED. Readers of the report are advised that they assume all liabilities incurred by them, or third parties, as a result of their reliance on the report, or the data, information, findings and opinions contained in the report. March, Navigant Consulting, Inc. All rights reserved. Navigant Consulting is not a certified public accounting firm and does not provide audit, attest, or public accounting services. See for a complete listing of private investigator licenses. Investment banking, private placement, merger, acquisition and divestiture services offered through Navigant Capital Advisors, LLC., Member FINRA/SIPC. 1

3 Introduction» Navigant Overview Navigant» STRONG PLATFORM Business Overview 2014 RBR = $767M Healthcare, $224m Energy, $98m Dispute & Investigative Services $291 M (37%) Financial, Risk & Compliance Advisory $135m Disputes, Investigations & Economics, $310m Talent Profile 3382 employees as of Dec. 31, billable FTEs 207 Managing Directors Credentials include CPAs, physicians, PhDs, attorneys, economists and engineers Niche areas of expertise combined in unique ways Broad networks of experts and affiliates Collaborative and nimble resource management Geographic Profile Chicago New York San Francisco Washington,D.C. Los Angeles Atlanta Dubai Hong Kong London 2 Investor Profile Largest shareholders are well-known institutions and funds, little turnover Largest holders include Index, Value, Growth and GARP styles Approximately 85% of ownership is by 50 institutional shareholders No shareholder owns more than 10%

4 Introduction» Navigant Wind Industry Service Offerings We provide our clients wind energy services from strategy through to operational improvement. Strategy Go-to-Market Strategy Resource, Technology & Market Assessment REC and Energy Forward Price Curves Asset & Portfolio Modeling & Valuation Business Model Development and Analysis M&A Support Policy Analysis Development Support Independent Engineer Review Company/Technology Due Diligence Transmission and Interconnection Analysis Project Finance and Closing Support RFP Review and Proposal Evaluations PPA Negotiations Operational Improvement Benchmarking - Performance and Cost NERC Reporting Wind Plant Post-Warranty Operations Strategy Business Planning Performance Bonus/Penalty Determination Procurement & Contracting Best Practices Primary Market Research on Wind Energy Supply and Demand 3

5 Table of Contents» 1» Offshore Wind Market History 2» Offshore Wind Market Policies and Forecast 3» Navigant s World Market Update Highlights and Forecast 4

6 Offshore Wind Market History» Global Offshore Capacity There are approximately 7.7 GW of offshore wind installations worldwide. Region Europe Asia Installed Global Offshore Capacity through 2014 Country New MW in 2014 Total Capacity (MW) Operational Projects Installed Turbines U.K , ,198 Denmark 0 1, Belgium Germany Netherlands Sweden Ireland Norway Portugal China Japan Total 852 7, ,456 Note: Excludes test projects. Individual phases of projects at a single site may be counted as separate projects. Includes only project officially commissioned and feeding electricity to the grid. Source: Navigant analysis of data provided by NREL and BTM Majority of activity continues to center on northwestern Europe. Development in China continues to progress. In 2014, 852 MW were added globally. The European market will continue to grow rapidly over the next two years New and expanding projects likely to contribute a record-setting 4.9 GW in 2015 alone (mostly in Germany, U.K., and China). 5

7 Offshore Wind Market History» Global Annual MW Additions by Country and Year The global offshore wind market has been generally increasing, with large fluctuations due to the impact of completing large projects. Global Offshore Wind Annual MW Additions by Country and Year MW Denmark was the early leader and continues to have active projects. U.K. is the current leader due to the implementation of Rounds 1 and was the record year, with 1,734 MW added in 7 countries. Several projects in Germany were completed in 2014 but delayed due to substation problems, therefore not included here. 6

8 Table of Contents 1» Offshore Wind Market History» 2» Offshore Wind Market Policies and Forecast 3» Navigant s World Market Update Highlights and Forecast 7

9 Belgium Denmark Germany Netherlands U.K. China U.S. Offshore Wind Policies and Forecast» Summary of Policies A variety of policies have proven success in developing offshore wind markets worldwide. Jurisdictions Where Used Policy Options Feed-In Tariff 2 Contracts for Difference 3 Tax exemptions Green certificates with premium prices for offshore installations 1 4 Grants Carbon tax Public finance institutions (5) (1) New policy is currently being developed, new system will still be based on GC but with a contract for difference principle. (2) Denmark s FIT level is set by competitive tenders, currently in the EUR /MWh range. (3) Netherlands generators receive the market energy price and the premium up to a maximum predetermined strike price per kwh. (4) U.K. offshore generators receive 2 Renewable Obligation Certificates (ROCs) per MWh. The offshore rate will be reduced to 1.9 ROC/MWh and to 1.8 ROC/MWh if built in 2015 and 2016 respectively, and beginning 2014 the government will move to a CfD system (a FiT program). (5) The European Investment Bank (EIB) also borrows funds on the capital markets, which it lends on favorable terms to renewable energy developers or commercial banks. 8

10 Offshore Wind Policies and Forecast» U.K. The U.K. government is replacing the Renewable Obligation (RO) with Contracts for Difference (CfD). ROC system (1.9 ROC/MWh in , 1.8 in ) CfD system from mid-2014 CfD is a type of Feed-in Tariff: generators sell their electricity on the market and receive a top-up payment from a state-owned counterparty for the difference between the strike price and that market price. From 2014 to March 2017, generators can choose between the ROCs and CfD system. From April 2017 onwards, the only system will be CfD. Offshore wind CfD strike prices were announced in late They are challenging but should be manageable: GBP 155 /MWh (EUR 189 /MWh) through 2016, GBP 150 /MWh in and GBP 140 /MWh though Installed MW as of 12/31/14 Under Construction U.K. Offshore Wind MW Installations Navigant Forecast Consented ,055 1,714 9,979 1,000 1,000 1,200 1,500 2,000 9

11 Offshore Wind Policies and Forecast» Denmark Denmark began organising offshore wind tenders in 2014 for a cumulated capacity of 1,500 MW. 28% of electricity from wind (both onshore and offshore) 50% by 2020 In March 2012, the Danish government has set the target for half of its electricity mix to come from wind energy by To achieve this goal, several offshore areas have been identified and tenders began at the end of 2014 for the following projects: (i) the 400 MW Horns Rev 3 wind farm, (ii) the 600 MW Krieger s Falk wind farm and (iii) a combination of near-shore wind farms totalling 450 MW. Vattenfall won the Horns Rev 3 bid at 103.1/MWhr. For each tender, the bidder offering the lowest FiT will be granted the project and receive this FiT for the first 50,000 full-load hours. Installed MW as of 12/31/14 Under Construction Denmark Offshore Wind MW Installations Navigant Forecast Consented ,

12 Offshore Wind Policies and Forecast» Belgium Belgium is reforming the support scheme to lower costs paid by consumers. GC bought by TSA for 20 years at a minimum guaranteed price CfD system Belgium has allocated zones for 7 offshore wind parks, good for around 2.2 GW. Three of them are already operational, including one completed in 2014 (Northwind). In December 2013, Belgium approved the reform of offshore wind support mechanism moving from a GC system with a premium to a CfD system. The reform aims to minimize costs to consumers while guaranteeing a decent return to investors. It will not apply to parks that are already under construction or in operation. Each project will receive a total fixed price of 138/MWh and will be reassessed on a project by project basis every 3 years and will be subject to changes in the level of the contracted maintenance costs and the correction factor in the PPA. Installed MW as of 12/31/14 Under Construction Belgium Offshore Wind MW Installations Navigant Forecast Consented ,

13 Offshore Wind Policies and Forecast» Germany Two issues were resolved favourably to German offshore wind in 2014: extension of the compressed FiT and grid connection agreements : Compressed FiT scheme available until end : Compressed FiT scheme available until end-2019 The Renewable Energy Sources Act (EEG) was revised for the 4 th time in August Operators now have a choice of (a) selling power through direct marketing and auctioning or (b) a reduction of.004/kwh to the FiT. The 2014 EEG revision extended the initial tariff acceleration model (Stauchungsmodell). This increased tariff of.194/kwh for the first 8 years of operation has been extended to plants commissioned before January In addition, the FiT can be extended (under both models) if the turbines are >12 nautical miles from land or installed in waters with a depth >20 metres. In Germany, the grid operator is responsible for connecting the projects to the onshore grid. But because of substantial delays, the legislator has adopted a detailed liability regime which comprises an obligation to publish a grid plan each year. It sets out which grid connections will be provided and when. Now all projects depend on the grid plan. Installed MW as of 12/31/14 Under Construction Germany Offshore Wind MW Installations Navigant Forecast Consented ,812 8,131 2,

14 Offshore Wind Policies and Forecast» Netherlands The Dutch government moved its 16% renewable energy target from 2020 to 2023 but has set up a plan to speed offshore wind deployment. 16% in % in 2023 The government amended the SDE (a feed-in tariff and market premium system) in 2014 and has a target of 4.5 GW offshore wind capacity installed by For 2014, 3.5 billion have been made available under the SDE. The subsidy value is based on the difference between the strike price and the basis price. For offshore wind energy, the subsidy is 0.675/MWh, with a base energy price of /MWh. Installed Netherlands Offshore Wind MW Installations MW as of 12/31/14 Under Construction Navigant Forecast Consented ,

15 Offshore Wind Policies and Forecast» France France increased its cost cap and awarded 2 projects (1 GW) under its 2 nd competitive tender for offshore wind. 2012: all bids exceeded 175 and 200/MWh caps : 2x500 MW awarded w/ 220/MWh cap The French government has outlined plans to build 6 GW of offshore wind by Projects get a fixed feed-in-tariff for 15 years. Both the duration of the power purchase contract (hours of operation at the equivalent of full load) and the price paid are subject to competitive tender. In evaluating bids, the price is weighted at 40%, with the establishment of a local supply chain and the project s environmental impact being taken into consideration. Projects are expected to be built starting in 2017 and over the next several years. Installed MW as of 12/31/14 Under Construction France Offshore Wind MW Installations Navigant Forecast Consented

16 Offshore Wind Policies and Forecast» China China has ambitious goals for offshore wind and a growing development pipeline /MWh for onshore wind 50-80/MWh for onshore, 119/MWh for offshore China has official offshore wind goals of 5,000 MW by 2015 and 30,000 MW by In June 2014 China introduced new FiTs specific to offshore projects. Now, new offshore wind projects installed between June 2014 and December 2016 will receive CNY 850/MWh ( 119/MWh). Intertidal projects will receive CNY 750/MWh ( 105/MWh). The new offshore FiTs were put in place to accelerate offshore wind development, as offshore wind development has been slower than expected due to the postponement of four concession projects since Currently, there are seven offshore wind projects under construction, totaling 1,560 MW. Installed MW as of 12/31/14 Under Construction China Offshore Wind MW Installations Navigant Forecast Consented ,700 4,000 (est.) 1,500 1,000 1,200 1,600 1,800 15

17 Offshore Wind Policies and Forecast» U.S. There are a variety of favourable U.S. federal and state policies in place. The first projects are finally beginning construction. DOE National Offshore Wind Strategy Federal Tax Credits & Deductions Bureau of Ocean Energy Management Initiatives State Initiatives DOE Offshore Wind Initiative Advanced Technology Program & Grants DOE Guaranteed Loan Program Production Tax Credit (US$22/MWh) (expired 2014) Investment Tax Credit (30% of capital costs) (expired 2014) Accelerated Depreciation Deduction (expired 2014) Smart from the Start Favourable Rules Revisions Competitive Auction Lease Process Renewable Portfolio Standards w/offshore Carveout (NJ, MD) Mandatory Long Term Power Contracts (ME, MA, RI, DE) Broadly Defined Benefits for Rate Recovery (ME, MA, NJ, MD) Installed MW as of 12/31/14 Under Construction U.S. Offshore Wind MW Installations Navigant Forecast Consented

18 Offshore Wind Policies and Forecast» Total World Navigant forecasts that the global offshore wind market will grow at 10%/year from 4.9 GW in 2015 to 7.2 GW in Global Offshore Wind Installations ( ) MW Navigant View 26.3 GW will be installed globally in , brining the cumulative total to 34 GW. UK, Germany, and China will each install >5 GW in the next 5 years. France, Netherlands, Belgium, and Denmark will each install >1 GW in the next 5 years. Installed Total World Offshore Wind MW Installations MW as of 12/31/14 Under Construction Navigant Forecast Consented ,697 7,033 27,000 (est.) 4,888 3,617 4,353 6,262 7,181 17

19 Table of Contents 1» Offshore Wind Market History 2» Offshore Wind Market Forecast» 3» Navigant s World Market Update Highlights and Forecast 18

20 Navigant s World Market Update» Highlights World Market Update 2014 Highlights With a record 51.2 GW of new installations, worldwide installed capacity of wind power grew to ~372 GW in Annual additions were 42% higher than China increased its position as the world s largest wind market with a record 23.3 GW installed in Offshore wind installations are expected to grow from <2% in 2014 to ~14% in The average growth rate of new installations is expected to be approximatly flat between Average cumulative capacity growth rate is expected to be ~12%/year. 19

21 Navigant s World Market Update» Annual Installations While 2014 was a record year for the global wind industry, it has grown at an average annual rate of only 6% over the last five years. Global Annual Installations ( ) MW 60,000 50,000 40,000 38,103 39,404 41,712 44,951 36,134 51,231 Global financial and economic crisis has dampened growth. 30,000 20,000 10,000 U.S. market dropped by 12 GW from 2012 to 2013 but increased by 4 GW in Source: BTM Consult - A Part of Navigant Consulting - March

22 Navigant s World Market Update» Regional Market Share (Annual) In 2014, the Americas market more than doubled vs The Asian market grew by 41%, while the European market increased by only 5%. MW 60,000 50,000 40,000 30,000 20,000 10,000 - Global Annual Installations by Region ( ) 36,134 51,230 1,401 4,734 11,560 18, % +139% +5% +41% 1,829 11,311 12,157 25, Source: BTM Consult - A Part of Navigant Consulting - March 2015 Other Americas Europe Asia Europe was the market leader for decades, but lost its title to Asia in 2009, primarily due to explosive growth in China. Asia had a 51% share of the global market in both 2013 and Declines in UK and Denmark were offset by strong growth in Germany and France. The Americas market share increased from 13% in 2013 to 22% in 2014, primarily due to strong growth in the U.S. and Brazil. 21

23 Navigant s World Market Update» Regional Market Share (Cumulative) Asian markets surpassed Europe as the region with the largest cumulative installed capacity. Asia passed the Americas in MW 400, , , , , , ,000 50,000 Global Cumulative Installations by Region ( ) 321, ,381 9,846 77, , , % +15% +10% +23% 11,680 88, , ,059 Other Americas Europe Asia China passed the U.S. in annual installations in 2009 and in cumulative capacity in Three markets have installed >35 GW: China, the US, and Germany. India has passed Spain as the 4th largest market, with nearly 23 GW Source: BTM Consult - A Part of Navigant Consulting - March

24 Navigant s World Market Update» Country Market Share (Annual) In 2014, China increased its market share to 45%, compared to 29% in During the same period, U.S. market share fell from 29% to 9%. MW 60,000 Annual Installations by Country ( ) 44,951 36,134 51,230 50,000 40,000 30,000 20,000 10, Source: BTM Consult - A Part of Navigant Consulting - March 2015 Other India Brazil U.S. Germany China China: 45% increase from 2013 to 2014, driven by government targets. Germany: >5 GW installed in 2014 due to stable policies, offshore growth. U.S.: market rebounded from dismal 2013 due to the renewal of PTC/ITC incentives. Brazil: 195% increase from 2013 to India: 17% increase, driven by government targets and a desire to grow domestic manufacturing. 23

25 Navigant s World Market Update» Suppliers Siemens and Vestas continued to dominate the offshore wind market, with a combined market share of 84% in Offshore Wind Turbine Suppliers Global Market Share (2014) Envision (CN), Sewind (CN), 3% 12% Mingyang (CN), 1% Vestas (DK), 25% Siemens (DK), 59% Source: BTM Consult - A Part of Navigant Consulting - March

26 Navigant s World Market Update» Forecast Navigant expects the global wind market to be relatively flat from , down from 6%/year between MW 60,000 50,000 40,000 30,000 20,000 10,000 - Forecast: Global Annual Installations by Region ( ) 51,231 55,785 46,196 43,188 47,475 48,073 Average growth in 5 yrs = -1% Other Americas Europe Asia Navigant View In the Americas, Mexico and Argentina will likely grow at >20%/year. Europe is likely to grow at 4%/yr due to growing offshore markets and binding international clean energy targets. Asia is likely to be the largest market, but will likely shrink at -4% per year due to a relatively strong starting year of Source: BTM Consult - A Part of Navigant Consulting - March

27 Navigant s World Market Update» Forecast During the period , the average annual global wind growth rate is expected to be 7%. MW 125, ,000 75,000 50,000 25,000 Global Annual Installations Wind power is likely to improve in competitiveness compared to fossil fuels due to economies of scale. Electricity demand will outpace traditional supply sources and drive up prices. Increased climate change requirements may become a major factor Offshore (Prediction) Prediction Offshore (Forecast) Forecast Existing capacity Source: BTM Consult - A Part of Navigant Consulting - March 2015 The offshore sector is expected to reach a market share of ~14% in

28 Key C O N T A C T S Bruce D. Hamilton, P.E. Director Energy Navigant Consulting, Inc. Direct: bruce.hamilton@navigant.com 2010 Navigant Consulting, Inc. Confidential and proprietary. Do not distribute or copy. 27