Big players from the oil & gas and power indsutries are lining up to become equity partners in floating offshore wind projects, in a trend that can help the sector make the leap to large commercial arrays, an industry conference was told.

A growing appetite for equity investment in the earlier stages of large floating projects, when fewer financing options are generally available, bodes well for the sector’s ability to meet growth forecasts that foresee hundreds of gigawatts over the coming decades, said Clement Weber, a director at Green Giraffe, the Paris-based renewable energy financial advisors.

“Developing a floating offshore wind project of commercial size, of 500MW or more, is €30m-70m ($35m-83m) just to get to the start of construction,” Weber told a session on financing at the FOWT 2020 industry conference held this week in Marseille.

“The good news is that even for early development, there are several investors or developers who are interested in coming at different stages in the development of the project.”

Weber said: “Most of the commercial sized projects in floating offshore wind are at early and mid- development stage. There are several parties that can invest and bear the risk, from the large utilities and oil & gas companies, very active in the sector, also some contractors who want to secure their contracts and are ready to invest in the project to do so.”

Weber’s comments came soon after French oil giant Total and finance group Macquarie unveiled plans for the world’s largest single floating offshore wind portfolio yet announced, at more than 2GW off South Korea. BP and Equinor this week also specifically namechecked floating as they formed their landmark offshore wind alliance in the US.

Weber told the session, moderated by Recharge editor-in-chief Darius Snieckus, that the trend comes against the background of a narrowing gap of risk perception between floating wind and the far more established fixed-foundation sector.

“We see in terms of appetite and valuation the difference between floating and fixed is not so high.

“There is a risk premium of course … but it’s more in the 2% range from an equity IRR than 10% or more.”

Thomas Boehme, a senior engineer with technology and standards group DNV GL, told the same session that the floating wind sector had come a good way in dealing with the unique technical and operational factors seen as adding risk barriers for financing, but that some remain.

The fledgling industry has been “lucky” that so far no major problems had emerged with the handful of floating turbines currently operating in the world’s seas, but Boehme warned that will inevitably change.

“We need to anticipate there will be bigger problems, failure of major components,” with future floating plant operators needing to show they can effectively deal with repairs to floating platforms potentially operating far further out to sea than fixed-bottom offshore wind.

As floating wind plants in the multi-hundred megawatt scale and larger are proposed, Boehme said the industry will also need floating substations.

“We can anticipate that the movement of floating substations will provide new challenges to the equipment [on board] and the lessons will have to be learned in that area as well.”

Wind

Energy giants' equity appetite bodes well for floating wind growth, says finance expert