AWARENESS: How NIORD strategically divides its focus globally - Part Two
By Simon Markussen - Senior Underwriter
This is the second part of a two-part article on offshore renewables geographic markets.
As previously mentioned, NIORD harbors a global vision in supporting offshore renewables. While numerous regions worldwide share ambitious goals for their offshore renewables industries, some have progressed further than others.
NIORD strategically divides its focus into five main areas:
A) UK
B) Europe – Mature Markets
C) Europe – Emerging Markets
D) Asia
E) Americas
In this second article, we will be focusing on C, D and E. Points A and B were covered in the first instalment.
C) Europe - Emerging Markets
Norway
Finland
Sweden
Ireland
Italy
Poland
Portugal
Spain
The countries in the Emerging Markets category are just that: emerging. All of the countries except Poland have some operational offshore wind but none of them have any operational farms of significant size.
Norway is presently assessing candidates for SNII, a 1.5 GW bottom-fixed wind farm. Additionally, there are plans to award 1.5-2 GW of floating wind projects early next year. However, it's anticipated that these projects will not come to fruition until around 2030.
Norway possesses considerable wind resources and is geographically close to power-demanding Europe. To harness its wind potential, the development of floating wind projects is crucial. The Norwegian industry, with a strong foundation in the existing oil and gas sector, is well-positioned to support this transition. Notably, Norway hosts the world's largest floating wind project, Hywind Tampen, along with UNITECH's Zefyros and the Tetraspar demo. Despite these significant projects, the cumulative capacity remains below 100 megawatts (MW).
Approximately one-quarter of Norway's carbon dioxide emissions stem from the operation of offshore oil and gas facilities. The prevailing political climate in Norway emphasizes the need for measures to reduce these emissions, with the Hywind Tampen project serving this purpose. Consequently, Norway presents opportunities in the "Wind for Oil" segment.
Finland has two smaller fixed offshore wind operational projects but does have further ambitions for the future. The ice-conditions of the Baltic will be an interesting factor to understand, both in regard to maintenance and repairs as well as the general design requirements such conditions demand. Finland does not have any floating wind ambitions, likely due to water depths and sea-conditions.
Sweden has significant offshore wind ambitions, which include a few floating wind projects. Sweden currently has four operational projects totalling less than 200MW. The country is home to energy giant Vattenfall which is a significant name in offshore wind. It is also the home of the unique Hexicon floating wind foundation design, with two turbines. This design has on occasion been listed as the design with the most GW of wind attributed to it in the pipeline. Although that pipeline perhaps is somewhat intangible, for now.
Except for the build-out of the 1.4GW Swedish Arkona Project (not to be confused with the Arkona project in Germany which has been operational since 2019); few projects will happen soon. Swedish Arkona led by EOLUS will start construction in 2027/28.
Ireland presently hosts one operational farm, Arklow. However, 26.2GW and 22.2GW for bottom-fixed and floating wind installations - respectively - are slated for deployment prior to 2035. This projected timeline suggests a surge in insurance placements from 2027 onward to underpin these ambitious endeavours. The extent to which these aspirations will materialize remains uncertain; however, even a realization of one-third of these projections would approximate the existing offshore wind industry in the United Kingdom.
Italy has one modest offshore windfarm of 30MW, which is the first offshore windfarm in Europe to use the Chinese-manufactured MingYang turbines. Italy has a long coast, with relatively deep waters. This contributes to Italy having the most substantial list of potential floating wind “Blue Sky” projects at 45GW, supplemented by 10GW of potential bottom-fixed wind projects.
Portugal is the home of one floating offshore windfarm, the three 8.4MW Vestas turbines of the Windfloat Atlantic were installed in 2019. This was also the first “farm” of Principle Powers, “Windfloat T” design, what today is one of the leading floating wind designs. The water depths off Portgual means that nearly all the expected future offshore wind projects here will be floating.
Spain had its first offshore wind-turbine go operational in September 2023. Saitec’s DemoSATH foundation has a 2MW turbine. Like Hexicon, it is based on a singlepoint mooring-based floating wind design. Waterdepth makes bottom-fixed wind unsuitable for Spain. As such, all its potential future projects are floating.
D) Asia
Japan
South Korea
Taiwan
Vietnam
Japan is slowly ramping up its offshore wind industry while also being cautious about developing its own domestic contractors in parallel with its industry. The country has 11 operational offshore wind projects, most of which are demonstrators, exemplified by these totalling less than 200MW.
Still, Japan was the home of the first floating substation and it is fostering several good technologies in the floating wind category. Currently three projects are under construction in Japan: Ishikari, Kitakyushu Hibikinada and the floating Goto Project. These three will, over the next two years, add ~350MW to Japan’s offshore wind portfolio. The country has a mix of floating and bottom-fixed wind in its future, although it is expected that for the foreseeable future there will still be a lot of bottom-fixed projects. In general, Japanese projects are built nearshore, normally removing the need for offshore substations.
Mitsubishi has been awarded all three projects in the General Sea Area Round 1 Auction. These projects will equate to about 1.7GW in total. All will have 12MW turbines from GE. Japanese contractors will install the assets, which is considered to be positive in regard to potential repair costs in the event of claims.
South Korea has four operational offshore wind farms, three of which use domestic Doosan turbines. However, offshore capacity will almost double with the addition of the 100MW Hanlim project which is being developed, again with Doosan turbines.
South Korea has a massive 53GW of potential projects, including such high profile floating projects such as Equinor’s Firefly and Corio Energy’s Grey Whale.
Taiwan has a decent 600MW of operational offshore wind split over four projects. However, this is not a lot compared to the ~4.7GW under construction. The very large number of projects under construction has become aggravated by massive delays for some of the projects. Significant losses have also plagued some projects.
Taiwan is being developed largely with the help of foreign contractors as it does not have the volume for a domestic contractor industry itself. From the COVID pandemic until now, this has led to challenges. In-experience in working in the domestic conditions, limited familiarity with seabed and challenges in finding suitable local tonnage has established the basis of large losses.
None of the current developing projects in Taiwan are floating but, of the nearly 40GW of potential projects, there is a good mix between bottom-fixed and floating wind.
Vietnam has many smaller projects which are often in the surf and/or beach zone. This creates slightly different risks than projects further offshore. The country has an active offshore wind industry, with more than 800MW of operational wind split over almost 20 projects. The country has 1.5GW of projects in development over 24 projects, creating a large amount of different projects. Vietnam has also strong ambitions for growth with more than 60GW of potential projects, the vast majority of which are to be bottom-fixed.
Vietnam, as with the other countries in the Asia group, is an area where international insurers will be reinsuring the local cedents. Still, great ambitions and the existing industry do make it an interesting country to observe.
Even if China has more than half of the global operational offshore wind fleet, NIORD is not insuring any farms in China at present. There are also many other countries which, in the intermediate time-scale, will become increasingly interesting such as, for example, India.
At the same time, it can be mentioned that Australia harbours ambitions to supplement its significant onshore renewables industry. The question will be how to also handle distance to liquid markets for repairs.
E) AMERICAS
The United States can roughly be divided into huge potential for bottom-fixed wind on the East-Coast, with a similar need for Floating Wind on the West Coast. There are several significant projects under construction such as Vineyard Wind and South Fork to supplement the two current, smaller operational projects. The past half year has seen placement of four massive construction projects in the US, with one more to come in the near future. Several of these projects are struggling with profitability as their models are being updated to account for the current interest and inflationary environment. Two projects in New Jersey have been cancelled.
The US projects are vulnerable to the Jones Act limitation on vessel operations. One vessel, the Charybdis, is under construction. It is planned to be used on several projects including the massive 2.6GW Coastal Virginia project developed by the vessel’s owner Dominion Energy. However, it is massively delayed which will have implications for the projects expecting to use the jack-up vessel. Generally, the insurance industry is educating itself to the cost-implications of not having a “liquid” offshore wind industry in the region where projects are being developed - which is removing the possibility of “fly-by” jobs. Clearly, at some level the industry in the various regions will create its own gravity with reasonable, local supply-chain enabling repair-cost scenarios.
This is particularly true for the deep waters off the West Coast, where floating wind will become a large industry. However, most aspects of this industry will need to be built up. This creates both opportunities and challenges in the interim.
There has also been a fairly unsuccessful auction-round in the Gulf of Mexico. This exemplifies uncertainties and lack of knowledge regarding the impact of NAT-CAT events, perhaps particularly hurricanes and typhoons and their effect on on offshore-wind farms. This is becoming particularly true in a reality where climate change is exacerbating weather phenomenon.
Outside the US, several countries in the Americas have significant ambitions.
Brazil, which already has an active onshore renewables industry as well as a thriving deepwater oil and gas industry. These can combine to create ideal conditions for a significant floating wind industry.
