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Driven by cost declines and technology breakthroughs in the offshore wind sector, large integrated power companies, oil and gas (O&G) majors and private equity (PE) firms have recently announced moves to broaden their global footprint. During the week beginning February 13th, 2023 - European O&G majors bp and TotalEnergies, as well as utilities EDF and RWE have expanded their holdings in emerging markets in Asia and Europe.
bp acquired a 55% stake in Deep Wind Offshore’s 6 GW portfolio of early-stage projects in South Korea. bp is the fourth European O&G major - after Shell, Equinor, and TotalEnergies - to enter one of the most attractive offshore wind markets in the Asia-Pacific region. The company has been active in South Korea since 1993, with legacy operations covering the marketing of petrochemical products, liquid fuels trading, and shipbuilding. Meanwhile, TotalEnergies partnered with the Green Investment Group’s (GIG) offshore development arm Corio Generation, on the 2 GW Formosa 3 project in Taiwan. The project, which recently secured a grid connection for 600 MW of capacity, comprises three phases.
EDF Renewables acquired the Newcastle floating wind project in Australia from local developer Newcastle Offshore Wind Energy. The project has the potential to generate up to 10 GW of power and is currently in the early permitting stage. EDF entered the Australian renewables space in 2021 with an initial focus on onshore renewables and energy storage projects, along with plans to invest in transmission infrastructure and green hydrogen facilities. The recent acquisition expands its portfolio in the country to include offshore wind, and follows similar moves by other global energy players. In Oct '22, Orsted announced its intention to enter the Australian offshore wind market, while Iberdrola also plans to build an offshore wind portfolio in the country through its unit Infigen Energy.
German utility RWE has also expanded its portfolio, partnering with Ferrovial to develop floating wind projects in Spain. The country targets to install 3 GW of floating wind power by 2030. To date, Ferrovial has submitted expressions of interest for four wind farms in the country with an installed capacity of 1,750 MW.
While the development of offshore wind farms is extremely capital-intensive and technologically challenging, significant cost declines and technology innovation have improved the economics of such projects. According to a recent report, installation costs reported in 2021 represented a 50% decline, compared to 2014 levels, with the cost expected to reduce by a further 30% during this decade. Additionally, offshore installations have a high capacity factor- typically averaging 50-55% for fixed foundations, exceeding 60% for floating foundations - compared to 30-45% for onshore wind farms. These characteristics have attracted companies with significant project development experience and the capacity to deploy billions of dollars in equity or debt capital. Large integrated utilities, O&G majors, and PE firms have ramped up their activity in this space yearly, over the last three years, tapping opportunities in emerging markets worldwide.
The above analysis is proprietary to Enerdatics’ energy analytics team, based on the current understanding of the available data. The information is subject to change and should not be taken to constitute professional advice or a recommendation.
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