Standard beats size in Europe’s offshore wind

Industry Overview - Offshore wind (OW) is a key pillar of Europe's energy transition, crucial for meeting climate targets, achieving energy independence, and creating earning capacity in the region's future economy [3] - Europe's OW industry must triple its supply chain capacity over the next seven years to meet ambitious rollout targets, requiring a massive ramp-up from 7 GW/year in 2023 to 20 GW/year by 2030 [11][13] - The North Sea countries aim to reach 120 GW of offshore wind capacity by 2030, requiring the installation of 5,600 turbines with a capacity of 15 MW each, along with 15 new installation vessels [15][16] Challenges in the OW Industry - A "rat race" towards ever-larger turbines is causing costs to increase and hampering capacity rollout due to shorter product life cycles and uncertainty about future turbine sizes [3][4] - The vicious cycle includes competitive auctions by governments, pressure on project developers to use the newest turbines, and OEMs accelerating product introductions, leading to performance issues and supply chain bottlenecks [4][27] - The levelized cost of energy (LCOE) for wind farms in Europe has risen from ~50 to ~70 EUR/MWh due to inflation, interest rate hikes, and supply chain bottlenecks, leading to project postponements [20][21] Diminishing Returns on Larger Turbines - Larger turbines historically reduced costs by decreasing the number of turbines needed, but the cost-benefits are now diminishing due to the negative economy of scale for expensive components [32][33] - Incremental increases in turbine capacity are leading to relatively lower decreases in the number of turbines required for a given wind farm capacity, reducing the cost-benefit of larger turbines [33][38] Standardization as a Solution - Setting a standard turbine size for a considerable period is necessary to break the vicious cycle, create investment certainty, and support the capacity boost needed for Europe's OW industry [4][41] - Standardization will lead to longer product life cycles, stronger learning effects, and more predictability in capacity rollout, enabling investments in R&D and industrialization [41][44] - A fixed turbine size will still allow for differentiation and competition in aspects like turbine performance, installation techniques, and circularity gains [41] Standardization Roadmap - A standardization roadmap is needed to plan the move to larger and/or smarter turbines, creating predictability for the supply chain to invest in capacity extensions and technological innovations [60][61] - The roadmap should align on the dimensions and timetable of the next standard, such as 30 MW turbines for commercial deliveries in 2037, to ensure sufficient lead time for industrialization and innovation [61][63] Action Required - Governments must enforce a turbine standard, either through EU regulation or the North Seas Energy Cooperation (NSEC), to break the vicious cycle and ensure a timely and affordable rollout [73] - The European OW industry must develop a roadmap for future turbine sizes and pursue other standardization initiatives, such as for turbine components and vessel landings [73][74]