Speaker 1: Hi, I'm Dana Perkins and you're listening to Switched On,
Speaker 1: the b n OF podcast. So a few years ago,
Speaker 1: offshore wind was in the same camp as other conceptual
Speaker 1: renewable energy technologies like aerial turbines. In fact, we did
Speaker 1: a podcast episode on it back in July of twenty
Speaker 1: nineteen titled because why Not Floating an airborne Wind. This
Speaker 1: was actually one of the really early episodes of the podcast,
Speaker 1: and I was pretty new to the process back then.
Speaker 1: We did the whole podcast without me actually hitting the
Speaker 1: record button in the studio, So let me just tell you,
Speaker 1: it was not all that pleasant to go back to
Speaker 1: my guest and let them know that we had to
Speaker 1: have the entire conversation over again. And I don't think
Speaker 1: he laughed at any of my jokes orquips the second
Speaker 1: time around. But a lot has changed since then, and
Speaker 1: we are now over a hundred episodes into Switched On,
Speaker 1: and floating wind technology is now on track to commission
Speaker 1: giga watts of capacity this decade. Flying wind, on the
Speaker 1: other hand, has yet to take off. No pun intended,
Speaker 1: but we thought it might be the right time to
Speaker 1: talk about floating wind again, and that's because things like
Speaker 1: the scot Wind seabed auction. It surprised the world when
Speaker 1: it rewarded up to fifteen gigawatts of floating offshore wind
Speaker 1: sites earlier this year. That's more than the existing operating
Speaker 1: offshore wind capacity in the UK. And that's not all.
Speaker 1: France is set to announce the winner of the world's
Speaker 1: biggest subsidy tender yet this year, and California is looking
Speaker 1: too soon conduct its first floating seabed lease auction in
Speaker 1: the US. But questions remain, won't these projects cost a fortune?
Speaker 1: How big will the sector get and who will be
Speaker 1: the leaders? And what's enabling this growth? So to explore
Speaker 1: this topic, the b andF WIN team published a research
Speaker 1: note titled Tomorrow's Cost of Floating Wind and looked at
Speaker 1: a new model that helps users create the cost of
Speaker 1: building a floating wind project by turning over fifty different parameters.
Speaker 1: They also published their one h offshore wind Market Outlook.
Speaker 1: So from that team, I will be speaking with Louisa
Speaker 1: M Marin, who writes about offshore wind at b n
Speaker 1: EF and Oliver Metcalf, the head of Wind at b NF.
Speaker 1: All of these reports can be found at b enof
Speaker 1: Go on the Bloomberg terminal at BNF dot com or
Speaker 1: on BNFS mobile app. And as a quick reminder, we
Speaker 1: do not provide investment of strategy advice, and there is
Speaker 1: a complete disclaimer that is found at the very end
Speaker 1: of the show. But now let's speak with Ali and
Speaker 1: Louisa about floating offshore wind. Ali, thank you for joining us,
Speaker 1: Thanks very much for having us on. And Louisa, this
Speaker 1: is your first podcast with us, right, so we're here
Speaker 1: today to talk about floating wind. Now, those of you
Speaker 1: who have been listening to the podcast for a while
Speaker 1: or who are happy to flip back through the back
Speaker 1: catalog will realize that we did something on floating and
Speaker 1: flying wind in the early early days, which I referenced
Speaker 1: actually in the opener that you just heard. But I
Speaker 1: want to from you Ali and Louisa. Why is it
Speaker 1: the right time now for us to revisit this topic
Speaker 1: and why should everybody be interested in an update on
Speaker 1: the floating wind space. Well, when we first started looking
Speaker 1: at floating wind and published our first research on it,
Speaker 1: we kind of put the technology in the same bucket
Speaker 1: as pine the sky technologies, as you say, like airborne
Speaker 1: wind kites in the sky, whereas some of those other
Speaker 1: technologies have gone nowhere, floating wind has come on leaps
Speaker 1: and bounds. That's from a technology perspective, and the technologies
Speaker 1: are getting better and better, much faster than a lot
Speaker 1: of people predicted. But also governments are starting to get
Speaker 1: ambitious on this technology as well. So we're seeing governments
Speaker 1: around the world really start to show commitment to bring
Speaker 1: down the costs and to really make commercial scale projects
Speaker 1: of reality. So we're going to come to which governments
Speaker 1: in which locations. But before we even go there, can
Speaker 1: you create a picture for all of us who are
Speaker 1: listening today on what does a floating wind project actually
Speaker 1: look like. So a floating wind project is made up
Speaker 1: of winter and is obviously these similar ones to what
Speaker 1: you see on onshore and traditional offshore wind projects. These
Speaker 1: turbines are sitting on top of a floating structure that
Speaker 1: is kept stable using system of mooring lines which are
Speaker 1: anchored to the seabed and help limit the floater emotions.
Speaker 1: As any offshore wind project, the turbines are connected to
Speaker 1: each other through cables, but using floating substructures which are
Speaker 1: moved by waves and currents, requires a special type of
Speaker 1: cables dynamic cables, which are specially designed to stand this
Speaker 1: constant moving during the project's lifetime. The cables are their
Speaker 1: linked together in a substation which receives all the power
Speaker 1: produced by the wind bines and connects to the onshore
Speaker 1: grid via an export cable so that the electricity can
Speaker 1: reach all of us. So I've seen a ton of
Speaker 1: offshore wind, but that's the fixed offshore wind space. Actually,
Speaker 1: just the off the coast of England, we have the
Speaker 1: London Array and it is massive and you can see
Speaker 1: it as you fly onto the continent. And that seems
Speaker 1: to be working very well. So why this innovation and
Speaker 1: and really what's the incentive for floating wind to come
Speaker 1: to scale? Why all the household well, the ushore wind
Speaker 1: industry as a whole is progressed incredibly fast over the
Speaker 1: last couple of decades. So costs have dropped around six
Speaker 1: fourteen for those traditional bottom fixed projects you talk about.
Speaker 1: But offshore wind also allows us now to install renewable
Speaker 1: energy projects with the same generating capacity as some of
Speaker 1: the biggest conventional power plants. But these are so far
Speaker 1: out at sea they're almost invisible from shore. And all
Speaker 1: that comes while delivering a new green industry that brings
Speaker 1: jobs and all the economic benefits with that. But the
Speaker 1: problem is you can only install those traditional projects in
Speaker 1: waters of around deep, whereas you can install floating projects
Speaker 1: in waters up to a thousand meters deep or even more.
Speaker 1: So that means you can search more areas to find
Speaker 1: the windiest spots with the most consistent wind speeds, so
Speaker 1: the turbines generate more electricity. But it also means in
Speaker 1: places that have really steep continental shells, so places like
Speaker 1: California or the Mediterranean Sea where the sea gets deep
Speaker 1: really quick, you can take advantage of some of those
Speaker 1: benefits of bottom fixed offshore wind that I mentioned before,
Speaker 1: but pretty much in any country that has a coastline.
Speaker 1: So what if I want to see one, Are there
Speaker 1: any of these projects that have already been built or
Speaker 1: is it still actually a bit pie in the sky. Well, yeah,
Speaker 1: the project exists, but the sector is still very much
Speaker 1: of the demonstration scale. So the first project of more
Speaker 1: than one turbine came online in off the coast of Scotland.
Speaker 1: It was built by a Norwegian oil company called Equanol.
Speaker 1: That was five turbines, but the sectors still needs to
Speaker 1: see a lot of consolidation before we start to see scale.
Speaker 1: So last time we did the analysis, there were over
Speaker 1: forty different floating platform design so the designs for these
Speaker 1: platforms that turbine sit on top of. Now we'd expect
Speaker 1: to see a bit of consolidation and the industry to
Speaker 1: settle on on maybe just a few designs, and we
Speaker 1: haven't really nearly got there yet. The biggest operating project
Speaker 1: is the fifty megawat Kin Cardine, Scotland project, which has
Speaker 1: six turbines. It was commissioned last year. Now, just for comparison,
Speaker 1: the biggest cbed fixed offshore wind projects in the world
Speaker 1: is off the east coast of England. Now that's one thousand,
Speaker 1: two hundred megawats a hundred and seventy four turbines. So
Speaker 1: we've got a long way to go until we hit
Speaker 1: the kind of scale that we're seeing with traditional offshore
Speaker 1: wind projects. Six turbines does it sound anywhere close to
Speaker 1: commercial scale? So we don't have those in the water today.
Speaker 1: And we have, however, built a tool that will estimate
Speaker 1: the cost of different commercial scale projects. So how does
Speaker 1: this tool essentially work alongside the floating wind space and
Speaker 1: is it able to help us better understand what the
Speaker 1: costs will be for this in the future. So yeah,
Speaker 1: last week we released the tool that estimates the total
Speaker 1: cost of floating offshow wind projects from fabrication to transport
Speaker 1: and installation. So to build this tool with follow up
Speaker 1: bottom up approach where we forecast the price for each
Speaker 1: subsystem of a flotting inform in terms of material cost
Speaker 1: of intimerdial components, which then added up to a total
Speaker 1: capex value. So answering how did we think about these costs.
Speaker 1: Initially we asked the question of whether these solutions being
Speaker 1: used in each sub system have already been deployed in
Speaker 1: bottom fixed projects or even in other industries as oil
Speaker 1: and gas, and looked at how mature are these industries
Speaker 1: and how sensitive prices have been to the scale of deployment.
Speaker 1: I think a good example of this process is how
Speaker 1: we calculated win turbine costs. Most floating platform designs are
Speaker 1: turbine agnostic, meaning that they can use the same turbine
Speaker 1: models that are currently being developed and even deployed in
Speaker 1: fixed bottom project. This way, we looked at a more
Speaker 1: mature industry that fixed bottom industry, and we saw how
Speaker 1: turbine prices have been decreasing with the scale of deployment,
Speaker 1: and how this trend is looking into the future. A
Speaker 1: little bit different known approaches followed for floating substructures. As
Speaker 1: all they mentioned, there are numerous technology designs in the
Speaker 1: market at different development stage, and so we had to
Speaker 1: narrow down or research those that have already completed the
Speaker 1: testing and transition to a full scale demonstration project now
Speaker 1: for a very short break stay with us. So we've
Speaker 1: looked at the minutia around all of these different parts
Speaker 1: and how expensive this can be. We've kind of already
Speaker 1: established that. Unfortunately, your model is able to really get
Speaker 1: at the heart of it. How are we thinking about inflation,
Speaker 1: because that is definitely something that I think is affecting
Speaker 1: every industry. There's so many different things actually that are
Speaker 1: leading into this inflationary environment, and is that something that
Speaker 1: the model is able to handle. So that's a really
Speaker 1: interesting question and something that's right at the top of
Speaker 1: the minds of renewable energy developers. More generally, commodity prices,
Speaker 1: other input prices like labor costs, like logistics costs have
Speaker 1: shot up recently as countries have bounced back from pandemic
Speaker 1: injuced lockdowns, and so that makes the cost of building
Speaker 1: some of these projects much more expensive. Now, when we
Speaker 1: look specifically at floating wind, then some of those projects
Speaker 1: are really steel intense. A lot of floating platforms are
Speaker 1: built completely by steel, and so the cost of these
Speaker 1: projects can be pretty sensitive to fluctuations in the steel price.
Speaker 1: So what we did is within our model, we allow
Speaker 1: users to pull several different tickers from the Bloomberg terminal
Speaker 1: to choose which steel price from around the world they
Speaker 1: want to use to estimate project costs. Users can also
Speaker 1: input their own cost and so if they're thinking that
Speaker 1: a steel prices are different, or if they have different
Speaker 1: access to cheaper steel, then many can generate their own
Speaker 1: bespoke capex breakdown. I mean, that's how the whole system works,
Speaker 1: so it all inter relates, and that's really fascinating. So
Speaker 1: I guess that then just brings me to a question
Speaker 1: as we're talking about floating wind specifically within this you know,
Speaker 1: will it ever be cost competitive or at least as
Speaker 1: competitive as the bottom fixed offshore wind, which we already
Speaker 1: know is more expensive than onshore wind. Well cost is
Speaker 1: certainly significantly higher today so the early demonstration projects that
Speaker 1: I've been talking about, they come in around two to
Speaker 1: three times more expensive than the seabed fixed offshore wind
Speaker 1: projects that are getting installed today. So reaching commercial scale
Speaker 1: is going to be crucial to cutting costs. The sector
Speaker 1: needs to go from building one of these platforms at
Speaker 1: a time in a bespoke way to building twenty or
Speaker 1: even a hundred of these on a on a serial
Speaker 1: production line. So according to our latest calculations, we never
Speaker 1: really expect floating wind projects to reach that cost parity
Speaker 1: with bottom fixed projects, not at least before the horizon
Speaker 1: of our forecast out of But that isn't to say
Speaker 1: that the two technologies really need to compete. Different use
Speaker 1: cases right exactly. Cost very significantly depending on the project site.
Speaker 1: So in some cases there may be a floating project
Speaker 1: closer to shore that's cheaper than a bottom fixed one
Speaker 1: so far from shore that requires one of those really
Speaker 1: long and expensive export cables to bring the electricity to
Speaker 1: the consumer. Also, there are loads of countries with limited
Speaker 1: space or maybe no space at all where they can
Speaker 1: build one of these big, industrial scale seabed fixed off
Speaker 1: wind projects. So if they want to use offshore wind
Speaker 1: to support the net zero goals, they're going to have
Speaker 1: to use floating wind turbines, even if they are more expensive. Yeah,
Speaker 1: because so much of the discussion around trying to electrify
Speaker 1: everything relies on us having a lot more installed renewable
Speaker 1: energy around the world. So I suppose this is one
Speaker 1: of those where there are some technical aspects that are
Speaker 1: standing in our way from a cost standpoint, But we
Speaker 1: do expect that they will get cheaper and not everything
Speaker 1: is going to be the lowest cost option because that
Speaker 1: will have been exhausted at a certain point. So thinking
Speaker 1: about these costs a little more, and Louisa, I know
Speaker 1: you've looked into this, what is the most expensive part
Speaker 1: of the projects? So as all they just mentioned, the
Speaker 1: costs for floating winto projects can vary significantly. This depend
Speaker 1: on how far we are from shore, what is the
Speaker 1: water depth in the project location, or even where platforms
Speaker 1: are manufactured, or the topic around commodities and logistic prices.
Speaker 1: There's being said. I think it is sometimes difficult to
Speaker 1: define a benchmark project. But looking at project located fifty
Speaker 1: offshore in a water depth of two hundred meters, for example,
Speaker 1: we predict that turbinds are the most expensive cost element.
Speaker 1: This account for around thirty percent of the total cost,
Speaker 1: and the second and third most expensive elements are export
Speaker 1: system and platforms, which vary between twenty and These turbines
Speaker 1: are dramatically different from the ones that we're seeing in
Speaker 1: other on and after our projects. I'm just trying to
Speaker 1: think about, like, are the cost essentially verily consistent, it's
Speaker 1: just all of the additional installation that's the problem, or
Speaker 1: they just fundamentally different pieces of kits pretty much the
Speaker 1: same kind of machines. Offshore wind turbines are hugely bigger
Speaker 1: than those you see on shore. Some of the latest
Speaker 1: models are almost as tall as the Eiffel towers. So
Speaker 1: when you're thinking of one of these commercial scale projects,
Speaker 1: think of a hundred Eiffel towers with spinning fans on
Speaker 1: the top, each sitting on a floating platform. They're the
Speaker 1: same kind of technology that sits on top of a
Speaker 1: typical bottom fixed offshore wind foundation. Although that that you
Speaker 1: do need to tune some of the some of the
Speaker 1: kit in the top of the turbine, some of the
Speaker 1: controller and so the turbine can handle and optimize its
Speaker 1: output on top of a moving structure instead of one
Speaker 1: that's fixed at the seabed. And just as a point
Speaker 1: of comparison, how tall is an onshore wind turbine, but
Speaker 1: they reach to around two high. For the taller ones,
Speaker 1: often they have to rise much higher above the above
Speaker 1: the trees, so you get much taller, slender onshore wind turbines.
Speaker 1: The offshore ones tend to be squat and still tall,
Speaker 1: but they have much longer blades and sit much lower
Speaker 1: above the sea. So given the casts and the head
Speaker 1: winds here, there's a lot of I guess, R and
Speaker 1: D that needs to go into it. Who's looking at
Speaker 1: this market and who do we think is kind of
Speaker 1: men in some respects leading the way. The market is
Speaker 1: currently dominated by renewable energy developers such as A Withdrawal
Speaker 1: of and and full We are looking into extend their
Speaker 1: offshore project in pipeline. But as we mentioned before, oil
Speaker 1: and gas players are starting to become more and more
Speaker 1: interested in the floating offshore wind and so companies as Equino,
Speaker 1: Totel and BP we're broadening. They're trying to broaden their
Speaker 1: portfolio and include more renewable energy projects are also becoming
Speaker 1: more interested in and investing in this type of projects,
Speaker 1: and some of these companies are getting really really ambitious
Speaker 1: of renewable energy in general. Now, floating off shore wind
Speaker 1: or offshore wind in general is a technology that allows
Speaker 1: them to contribute gigawatts towards their renewable energy targets with
Speaker 1: one single project. They're also big infrastructure projects similar to
Speaker 1: the kind of things that they're working on on their
Speaker 1: distant offshore oil and gas platform And so that's where
Speaker 1: we've seen many of the kind of oil and gas
Speaker 1: majors start to look seriously offshore wind over the last
Speaker 1: few years. How well do they perform in storms? So
Speaker 1: that's a really good question, and I think at the moment,
Speaker 1: a lot of the projects that we've seen have been
Speaker 1: installed in the North See now that's a pretty tough environment.
Speaker 1: Although not in the kind of environment that you see
Speaker 1: hurricanes like we see in the US in the America's
Speaker 1: or typhoons in the in the Asia Pacific. The turbine
Speaker 1: makers are already releasing turbines that are so called typhoon resistant,
Speaker 1: and while it may take some modifications to the floating platforms,
Speaker 1: the turbine technology is there, and so we've already seen
Speaker 1: some demonstrator scale floating wind projects in Japan. Those are
Speaker 1: the kind of markets we might have to see typhoon
Speaker 1: resistant turbines in the future, and slight changes to the
Speaker 1: floating wind platform that those turbines sit on top of. Yeah,
Speaker 1: because climate adaptation is coming up more and more frequently.
Speaker 1: I think out there in the world, and you know,
Speaker 1: when we go to conferences, we hear it come up.
Speaker 1: And I definitely think as we're looking at these things
Speaker 1: that are going to be in the ocean that may
Speaker 1: be subject to as you reference, you know, hurricanes or typhoons,
Speaker 1: I imagine those developing this technology will be looking at
Speaker 1: that in some details so that they don't have to
Speaker 1: go back and essentially fix it later. You mentioned the
Speaker 1: North Sea, and you mentioned Japan, and you mentioned the
Speaker 1: coast of California. Where do you think will be the
Speaker 1: leading countries where these will be utilized. Well, we've seen
Speaker 1: the early demonstration projects in countries that are willing to
Speaker 1: pay that premium in order to bring the cost of
Speaker 1: the technology down. Now many of the leading countries are
Speaker 1: already thinking about that scaling up that I said is
Speaker 1: really crucial to bringing costs down. So, for example, the
Speaker 1: UK held the first lease auction offering seabed sites that
Speaker 1: is capable of hosting gigawatt scale floating wind projects. So
Speaker 1: in that auction at the beginning of the year, sites
Speaker 1: that could host fifteen gigawats of floating wind one contract.
Speaker 1: Now the UK is planning two more of those lease
Speaker 1: auctions over the next couple of years, and so that's
Speaker 1: the market was really starting to think about scale at
Speaker 1: the moment, and we're expecting there will be more than
Speaker 1: seven gigawats are floating wind in the UK by other
Speaker 1: markets and markets that don't have sufficient space to install
Speaker 1: bottom fixed projects but are really looking at how to decarbonize.
Speaker 1: So the West coast of the US is another one
Speaker 1: markets like Oregon, California. The continental shelf drops off really
Speaker 1: quickly as you move off the coast, and so we're
Speaker 1: expecting the US to be the second largest floating wind
Speaker 1: market globally, driven by those states that have really ambitious
Speaker 1: for renewal energy targets are struggling to build on shore
Speaker 1: renewables because of local pushback and and other reasons, and
Speaker 1: so now a're seeing offshore wind and floating offshore wind
Speaker 1: as a crucial technology to help them get there. There
Speaker 1: are markets further afield. So in South Korea, offshore wind
Speaker 1: farms already received higher subsidies if they're built in deeper waters,
Speaker 1: if they're further from shore, and so that favors floating
Speaker 1: wind projects. So South Korea's limited space again to god
Speaker 1: bottom fixed projects, and so are expecting the market to
Speaker 1: have an explosion of floating wind over the next fifteen
Speaker 1: years or so and install three gigawats of capacity now
Speaker 1: for a very short break stay with us. So in
Speaker 1: addition to the costs, which we really have discussed and
Speaker 1: we know we can look out into the future and
Speaker 1: try and figure out how these cost of clients might work.
Speaker 1: What are some of the other bottlenecks that are limiting
Speaker 1: the expansion of floating wind that we mentioned, You know inflation,
Speaker 1: which again is tied to costs, but how about things
Speaker 1: associated with supply chains and delivery and even how the
Speaker 1: options are structured. I think the major question than that
Speaker 1: the floating wind industry has to answer right now is
Speaker 1: how to ramp up the supply chain in order to
Speaker 1: commit to such massive scale up and installations. So for
Speaker 1: most of the elements of the wind farms, like the
Speaker 1: turbines platforms in the Morning system. The question is no
Speaker 1: longer if those are technically feasible, but how can we
Speaker 1: reproduce them at a base that is fast enough to
Speaker 1: meet the developers downlines? Right So, for instance, when we
Speaker 1: look at more systems, the solutions used in the floating
Speaker 1: wind for objects have been deployed before in ryland gas,
Speaker 1: but the skill that we're looking right now is completely different.
Speaker 1: We're talking about commercial skill. Projects with dozens of units
Speaker 1: lead into hundreds of marine lines to be supplied all
Speaker 1: at once. I think another thing we need to look
Speaker 1: at is who is going to build these projects, but
Speaker 1: also where, so we need a drastic scale up of
Speaker 1: fabrication facilities. But equally important is the question of people.
Speaker 1: So each floating steel platform has as a load of
Speaker 1: joints that need welding. The industry needs to attract enough
Speaker 1: talent to make sure we've got enough welders to make
Speaker 1: those platforms, to make sure we've got enough engineers to
Speaker 1: design projects, or construction crews to man installation vessels. There's
Speaker 1: also a significant lack of suitable ports to support these
Speaker 1: projects today, So a big floating wind farm will require
Speaker 1: a port with deep waters with plenty of space for
Speaker 1: wet storage in the water and also dry storage somewhere
Speaker 1: in the port. So upgrading existing ports or building new
Speaker 1: ones is going to require a vast amount of government
Speaker 1: and private investment. And how about manufacturing the turbines, do
Speaker 1: you anticipate it will be the existing manufacturers and their
Speaker 1: existing locations or is there in this space And I
Speaker 1: suppose this extends beyond floating wind, but to all wind.
Speaker 1: Is there a drive for localization as there is in
Speaker 1: other industries. Well, that's a really good question because a
Speaker 1: lot of the turbine makers are struggling quite a lot.
Speaker 1: Now we mentioned before, but their input costs arising, so
Speaker 1: labor costs of their factories, logistics costs to deliver components
Speaker 1: to where they need to be, and then the materials
Speaker 1: themselves that make the turbines, all of those things have
Speaker 1: gone up in price, and the turbine makers are struggling
Speaker 1: to pass on all of those costs onto their customers,
Speaker 1: especially for contracts that they signed a year ago maybe
Speaker 1: and haven't delivered that turbine yet, And so they're delivering
Speaker 1: on a contract that they signed for a much lower
Speaker 1: cost in the past. So some of the major supply
Speaker 1: chain companies are struggling at the moment, and we're seeing
Speaker 1: in some cases they're downsizing, pausing production at factories or
Speaker 1: laying off staff at the same time as we need
Speaker 1: this drastic scale up in order to help them meet
Speaker 1: the demand of the industry. And so where to place
Speaker 1: the factories becomes a very important thing because governments are
Speaker 1: really keen to take advantage of the economic benefits of
Speaker 1: shore wind bring as well green jobs, green growth. But
Speaker 1: if the terb by makers are losing money, then it's
Speaker 1: expensive to set up a factory, and so there's this
Speaker 1: midsmatch at the moment between government ambition and this political
Speaker 1: cell of offshore wind is good for the economy as
Speaker 1: well as kind of good for decrbonization and the health
Speaker 1: of some of these supply chain companies that they're expecting
Speaker 1: to set up these factories. And we've seen before that
Speaker 1: also the fact that sometimes government impose local content requirements
Speaker 1: has not always been so helpful for the off showing industry.
Speaker 1: Has This might lead to our cost of the components,
Speaker 1: and so the competitiveness in the market decreases and we
Speaker 1: see actually rounds of auctions with higher prices and in
Speaker 1: markets where none of the local content requirements are in post.
Speaker 1: So local content requirements are requirements set by a government.
Speaker 1: Usually that certain proportion of the project's bend has to
Speaker 1: be in the market where the project is being installed.
Speaker 1: So a good example of this is in Taiwan, where
Speaker 1: the Taiwanese government insists that a certain proportion of projects
Speaker 1: that win subsidies have to manufacture certain components within Taiwan
Speaker 1: in order to secure those subsidies. Are these going to
Speaker 1: be competing against other technologies in these actions, or countries
Speaker 1: going to start setting up specific floating wind actions. Well,
Speaker 1: at the moment, they have to, because floating wind is
Speaker 1: so much more expensive than most other renewable energy technologies
Speaker 1: that they wouldn't win any subsidies if there are competing
Speaker 1: purely on cost. But some of the countries that are
Speaker 1: moving earliest on this are also hoping to establish themselves
Speaker 1: as future supply chain hubs for the global floating wind sector.
Speaker 1: So again they're willing to pay increased costs today in
Speaker 1: order to establish themselves as the experts in this space
Speaker 1: and as the export hubs for future floating wind components.
Speaker 1: As more countries start to look towards the technology, and
Speaker 1: so there's this race to become the technology leader as
Speaker 1: well between countries and to take advantage of some of
Speaker 1: these benefits of green growth. And also in some of
Speaker 1: these countries, I guess government and even developers are hoping
Speaker 1: to revitalize the ideally declining oil and gas sector because
Speaker 1: floating wind can pick up a lot of technology and
Speaker 1: operational experience from oil and gas and crew too this
Speaker 1: opportunity to to increase jobs or pick up from existing expertise.
Speaker 1: So not only will some oil and gas companies be
Speaker 1: able to reuse some of their existing ships and drills
Speaker 1: and other equipment that they have, you think they'll be
Speaker 1: able to reuse some of the actual employees that were
Speaker 1: involved in offshore oil and gas exploration. Absolutely. I was
Speaker 1: at an offshore wind conference the other day up in Manchester.
Speaker 1: The exhibition hall was filled with companies that used to
Speaker 1: supply only the oil and gas industry and now are
Speaker 1: aggressively targeting floating wind because some of the expertise dovetails
Speaker 1: really nicely between the two sectors. Like I say, the
Speaker 1: oil and gas industry have been installing floating platforms in
Speaker 1: deep waters for decades and so there's a lot of
Speaker 1: learnings that can take place between the two sectors, and
Speaker 1: it's it's a way that a lot of these smaller
Speaker 1: supply chain companies that have been serving the oil and
Speaker 1: gas sector for a long time can start to transition
Speaker 1: their businesses in a new and greener world as well.
Speaker 1: So can we talk a little bit about the future
Speaker 1: and where you see this going from a timeline standpoint,
Speaker 1: because so much of the narrative at the moment is
Speaker 1: benchmarked around these you know, the race and then the
Speaker 1: race and then depending upon the country from net zero.
Speaker 1: But this next eight years, this now to is discussed
Speaker 1: so frequently. What role is floating wind potentially going to
Speaker 1: have to play? And do we see technology in what
Speaker 1: is essentially, you know, large infrastructure projects which take a
Speaker 1: lot of time. Do we think it's going to ramp
Speaker 1: up pretty rapidly this decade or is it a next
Speaker 1: decade thing? So this decade is all about scale up,
Speaker 1: but we're not really expecting the large commercial scale projects
Speaker 1: to come online until eight So we still expect bottom
Speaker 1: fixed foundations to continue to be the dominant supporting structure
Speaker 1: all the way out to twenty thirty five. So we're
Speaker 1: still expecting bottom fixed foundations to make up around nine
Speaker 1: of the global fleet by thirty five, but in our forecast,
Speaker 1: floating wind does begin to take market share from twenty seven,
Speaker 1: so we're expecting six gigawatts operating by twenty thirty, but
Speaker 1: that's going to shoot up to twenty five gigawatts by
Speaker 1: twenty thirty five. So floating wind might not be looking
Speaker 1: too much at this decade, but we're really expecting a
Speaker 1: quick pickup in the first half of the trade to happen.
Speaker 1: I think we need to keep in mind exactly what
Speaker 1: we're saying then that installation infrastructure investment has to be
Speaker 1: made on port vessels, manufacturing facilities, and there's still as
Speaker 1: we discussed previously, there's still some technical challenges that need
Speaker 1: to be overcome as an dynamic cables that connect the unit,
Speaker 1: and also as all they mentioned before, on substations to
Speaker 1: link to export the power produced. One of the things
Speaker 1: that we reference oftentimes when people talk about bird deaths
Speaker 1: associated with wind turbines is the fact that cats actually
Speaker 1: kill more birds than wind turbines do an annual basis. Now,
Speaker 1: believe it or not, I actually have two cats, so
Speaker 1: apparently I am not enough of a bird lover, but
Speaker 1: for those who are given that these offshore wind, floating
Speaker 1: wind turbines will be so far offshore is one of
Speaker 1: the potential benefits that they will be beyond where birds
Speaker 1: are flying or are we looking at the same kind
Speaker 1: of offshore wind bird deaths or has that not been
Speaker 1: looked into? So I think one of the benefits of
Speaker 1: looking at floating wind is that not only can you
Speaker 1: look for the windy sites, but you can also start
Speaker 1: to look at more sites from an environmental perspective as well.
Speaker 1: So it's part of the permitting process for any wind project,
Speaker 1: whether it's onshore, offshore, bottom fixed or floating, you have
Speaker 1: to carry environmental studies to look at what the impact
Speaker 1: will be on marine mammals, on birds as well. When
Speaker 1: you're looking at floating wind, you can look at vastly
Speaker 1: more sites because you can look at more and more
Speaker 1: water depths and deeper water depths, and so that allows
Speaker 1: you to pick and choose where you build a project,
Speaker 1: so hopefully you'll have the minimal environmental impact as well.
Speaker 1: So yeah, we can start saving more of those birds.
Speaker 1: As with any model, which really was the basis of
Speaker 1: our conversation today. There are so many different inputs and
Speaker 1: we're sitting here staring at a model, staring at a
Speaker 1: computer about this very real and complicated thing which has
Speaker 1: variables that maybe we don't yet fully understand, especially with
Speaker 1: something so new. How do you, guys go about collecting
Speaker 1: information on something so new? Who do you engage with
Speaker 1: to try and make yourself? I guess it's murder? And
Speaker 1: how do you find all of these variables to build
Speaker 1: this too? We followed a bottom up approach, so we
Speaker 1: forecast the price for each system of a floating wind firm.
Speaker 1: We looked at material costs of individual components, We looked
Speaker 1: at manufacturing prices, and we added all that up to
Speaker 1: create our capex cost, the capex of a floating wind
Speaker 1: from and when we ask ourselves, how would we look
Speaker 1: at the individual costs? So we looked into other dissolutions
Speaker 1: were already being used in bottom fixed projects or even
Speaker 1: in other industries as well. Guess at how mature are
Speaker 1: these industries and how sensitive prices have been to the
Speaker 1: scale of of the ployment. So I think a good
Speaker 1: example of this is how we thought was It was
Speaker 1: out thought process behind the calculation of wind turbine costs.
Speaker 1: So most of floating wind platform designs are turbine agnostic,
Speaker 1: meaning that they can use the same turbine models that
Speaker 1: are currently used in fixed mode projects. And so this
Speaker 1: way we were able to look at a more mature
Speaker 1: industry and see how to bind prices have been decreasing
Speaker 1: or not with the scale of deployment, and how this
Speaker 1: trend is looking into the future. There's other components of
Speaker 1: the wind farm in which we don't have such a
Speaker 1: good visibility on the cost trants, and so we we
Speaker 1: used our network of clients who are currently working on
Speaker 1: this type of projects and we changed and thoughts with
Speaker 1: them and how do they look the prices look like
Speaker 1: for some for the components nowadays, if they see that
Speaker 1: they will come for them, they will come with the
Speaker 1: premium in the future, considering their deployment in flooding projects
Speaker 1: rather than fixed bottom ones. That was a bit of
Speaker 1: of our process. I think those two things are super key,
Speaker 1: like leveraging our network and like the people side of
Speaker 1: the question. And then also we just got down and
Speaker 1: dirty with a model and looked at each subsystem and
Speaker 1: used any data that we could that was out on
Speaker 1: the market, whether it was on a floating project and
Speaker 1: oil and gas project or or on a bottom fixed
Speaker 1: turbine for things that are transferable. So since we're revisiting
Speaker 1: a topic, tell me we also in our previous episode
Speaker 1: on floating wind, it was about flying wind as well.
Speaker 1: Is that still pie in the sky? No pun intended.
Speaker 1: I think that's probably better left to kids with their kites.
Speaker 1: It's a long time before we'll see big ebble wind projects.
Speaker 1: In my opinion. Yeah, I'm pretty new to the industry,
Speaker 1: but since I started working on our show and two
Speaker 1: years ago, I've never heard about that topic. So I
Speaker 1: think that tells a bit where it's going. Okay, alright,
Speaker 1: so coming to the deep ocean near you, but not
Speaker 1: to the sky, got it. Thank you very much, Ali
Speaker 1: and Louisa for joining today, and we look forward to
Speaker 1: seeing how these projects come along over the course of
Speaker 1: the next several years and whether or not they will
Speaker 1: be coming to scale at the beginning of the next decade.
Speaker 1: This episode was produced by Sanjeet Sangara at Bien e F.
Speaker 1: Today's episode of Switched On was edited by Rex Warner
Speaker 1: of gray Stoke Media. Bloomberg An e F as a
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Speaker 1: investment advice, investment recommendations, or recommendation as to an investment
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