UK Offshore Wind:

latest vision of market and

technology development

Giles Hundleby

BVG Associates

23 October 2014

• EU offshore market

• The UK offshore market

• Cost of energy driver

• Technology changes

Contents

Agenda

Selected clients

BVG Associates

• Market and supply chain

• Analysis and forecasting

• Strategic advice

• Business and supply chain development

• Technology

• Engineering services

• Due diligence

• Strategy and R&D support

• Economics

• Socioeconomics and local benefits

• Technology and project economic modelling

• Policy and local content assessment

2/11 © BVG Associates 2014

UK41%

DE33%

NL9%

DK5%

BE4%

NO3%

FR3%

Other2%

0

10

20

30

40

0

2

4

6

8

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21

Cum

ula

tive in

stalle

dcap

acity

(G

W)

An

nual i

nsta

lled

cap

acity (G

W)

UK DE NL DK BE NO FR Rest of Europe Cumulative

EU offshore wind market for supply to 2020

© BVG Associates 2014

EU Market

EU market history

• UK most consistent,

growing market

since ‘03 (CAGR 33%).

• UK 3-year slow-down

‘14-’16 impacts whole

market.

• Germany only starts at

scale ‘14.

• Installed capacity to ‘16 now almost set.

3/13

• CAGR in period 21%.

• Leading market is UK. UK and Germany, make up ¾ of the forecast EU market.

• All offshore wind markets are subsidised to a roughly similar extent and support is likely to

be required until at least 2030.

• Typical time from first development activity to first operation of UK projects is about

10 years. FID typically 3 years before first operation.

• Average turbine size moving from 4MW to >6MW by 2020.

Market forecast

4 © BVG Associates 2014

Completed or under construction:

Includes projects in which the main

contracts have been placed. 5.1GW

Consented: Projects that have

received planning consent. 5.6GW

Consent applied for: Application has

been submitted. 10.3GW

The UK market

5 © BVG Associates 2014

Projects in the planning process

Pre- application

Acceptance Pre-

examination Examination Decision

Post decision

Navitus Bay PINS accepted on

09/05/2014

Dogger Bank

Teesside

A&B PINS first round

of responses

closed 12/06/2014

Dogger Bank

Creyke Beck PINS recommendation

by 18/11/2014

Hornsea

Project one PINS examination

closed 10/06/2014

Walney Extension PINS recommendation

07/08/2014

Decision by 07/11/2014

Burbo Bank

Extension Decision by

26/09/2014

Neart na

Gaoithe Marine Scotland

decision expected

Q3 2014

Recently consented

Beatrice March 2014

Moray Firth Phase 1&2 March 2014

East Anglia One June 2014

Rampion July 2014

Firth of Forth

Phase 1

(Seagreen) Marine Scotland

Inch Cape Marine Scotland

6 © BVG Associates 2014

Completed or under construction:

Includes projects in which the main

contracts have been placed. 5.1GW

Consented: Projects that have received

planning consent. 5.6GW

Consent applied for: Application has

been submitted. 10.3GW

Targeting ROCs: Companies have

published timelines. 1.3GW - 2GW

FIDER contracted: Announced in April

2014. 3.2GW

Targeting CfD?: Projects that meet the

criteria (or are expected to soon):

2.8GW – 4.4GW

Challenge: Government only expected

to support 500-600MW this year

The UK market

5.1

1.50.5

1.1

2.1

3.0

7.7

0

5

10

15

20

25

Insta

lled c

apaci

ty (G

W)

Government range (low)

Government "achieveable"

Government range (high)

7 © BVG Associates 2014

The UK market

2014 - 17 2016 - 18 2017 +

ROCs - consented

Galloper

Race Bank

Rampion

ROCs – Applied for

consent

Neart na Gaoithe

FIDER (Provisionally

affordable) - Consented

Beatrice

Dudgeon

FIDER (contracted) -

Applied for consent

Burbo Bank Extension

Hornsea Heron/Njord

Walney Extension

Project progress is

dependent on both

planning consent and

public funding approval .

Achieving a final

investment decision will

still be dependent on the

developer but these

other factors give an

indicative “running order”

16.5

5.1

1.50.5

1.1

2.1

3.0

7.7

0

5

10

15

20

25

Insta

lled c

apaci

ty (G

W)

Government range (low)

Government "achieveable"

Government range (high)

8 © BVG Associates 2014

The UK market Not yet applied for CfD -

Consented

Blyth (demo)

East Anglia 1

EOWDC (demo)

Moray Firth

Triton Knoll

Not yet applied for CfD -

Applied for consent

Dogger Bank Creyke Beck

Dogger Bank Teesside

Inch Cape

Navitus Bay

Seagreen Alpha/Bravo

It is likely Government

will only accept an

increase in offshore wind

activity beyond its 10GW

target if it sees strong

arguments to do so.

These could because of:

- Greater cost reduction

- Increased UK activity

16.5

2014 - 17 2016 - 18 2017 +

0

3

6

9

12

0.0

0.5

1.0

1.5

2.0

'14 '15 '16 '17 '18 '19 '20

Cum

ula

tive in

stalle

d (G

W)

Insta

lled c

apaci

ty (G

W)

Operational/ Under construction ROCs FIDER CfD Demo Cumulative9 © BVG Associates 2014

UK market forecast

Gwynt

y Môr

West of

Duddon

Sands

Humber

Gateway

Westermost

Rough

Kentish Flats 2

Neart na

Gaoithe

Rampion

Dudgeon

Dudgeon

Burbo Bank

Extension

Race

Bank

Race

Bank

Rampion

Galloper

Beatrice

Walney

Extension

Beatrice

Hornsea

Heron

Wind

Blyth

EOWDC

Moray

Firth –

Phase 1

Hornsea

Heron

Wind

Inch

Cape

Moray

Firth –

Phase 1

Hywind

Notes

Rampion may not go for ROCs

Uncertainty about Neart na Gaoithe

Forecast gives DONG about 0.5GW/year and

Siemens about 1GW/year from 2017

Neart na

Gaoithe

Galloper

Neart na

Gaoithe

Rampion

Walney

Extension

Cost of energy

Health warnings

CAPEX has been going up, not down

© BVG Associates 2014

Cost of Energy is more than just CAPEX

LCOE = Revenue (from whatever

source) / MWh required in order to

get sufficient return on investment

LCOE = Annualised CAPEX + OPEX

AEP

~ €160/MWh

Today

£100/MWh (€125)

In 2020

€100/MWh

late 2020’s?

$100/MWh (€80)

in 2040’s?

10/11

4 Dimensional cost model: Time, types of wind farm site,

turbine sizes, industry scenarios

6 Industry day-long workshops (in UK, DK, DE)

20 Deep industry interviews (4 hours +)

125 Industry individuals directly involved

215 Pages – available for download

from our website

Methodology in numbers: technology work stream

The Crown Estate study

Overview

• 2011 UK Government Energy white paper:

• Central scenario 13GW by 2020

• Minded to support to 18GW if cost of energy

reduced – target £100/MWh

• The Crown Estate cost reduction pathways study established to

evidence what industry thinks could be done

• Supply chain, finance and technology work streams

= + +

• Published summer 2012

Context

Cost reduction pathways study: results

• Given right external conditions, industry

can meet target:

• Confidence in market size to beyond 2020

• Smooth and timely transition under EMR

• Planning consent timelines reliably met

• Clear and predictable offshore grid

regulatory framework

• Facilitation of new technology introduction

• To deliver, industry also needs to work together:

• Best practice, standardisation,

risk management, accessing new finance

© BVG Associates 2014 11/11

Technologies

Where are the greatest savings?

Advancements in blade and turbine technologies

70% 75% 80% 85% 90% 95% 100%

LCOE for wind farm with FID in 2011

Increase in turbine power rating

Optimisation of rotor diameter, aerodynamics,design and manufacture

Introduction of next generation drive trains

Improvements in jacket foundation design andmanufacturing

Improvements in aerodynamic control

Improvements in support structure installation

Greater level of array optimisation and FEED

About 30 other innovations

LCOE for wind farm with FID in 2020

Impact of innovation in on LCOE

Source: BVG Associates

© BVG Associates 2014 12/11

Turbine rating

Larger turbines cost much more, but...

From 4 to 6MW turbines

-10% -5% 0% 5% 10%

Wind farm development

Turbine rotor

Turbine nacelle

Support structure

Array cable

Installation

OMS

Net AEP

DECEX

Impact of change in element on LCOE

-30% -20% -10% 0% 10% 20% 30%

Wind farm development

Turbine rotor

Turbine nacelle

Support structure

Array cable

Installation

OMS

Net AEP

DECEX

Change in element

Source: BVG Associates

© BVG Associates 2014 13/13

Anticipated by 2020 Progress

Turbine

Balance of plant

Installation

OMS

Development

Overall technology

Overall supply chain

Technology Progress

Comparison with other studies

• Similar but simplified approach (budget only 10% of The Crown

Estate study)

• Often identical assumptions – aids comparison

• Similar trends, except:

• Higher energy losses due to aerodynamic wakes

• Higher support structure savings but lower installation savings

• Lower cost of capital

• More sharing of offshore infrastructure

German Stiftung Offshore Windenergie (2013)

KIC InnoEnergy (2014)

• Identical but simplified approach (budget less than 5% of The

Crown Estate study)

• Part of a series to be published on onshore wind and solar, using

same methodology

• Identical assumptions

• Assessment brought up to date

• Forecast extends to FID in 2025

Progress check (technology & supply chain)

-2%

-2%

-

- -5%

-17%

© BVG Associates 2014 14/11

-4%

-25%

-15%

• UK market likely to reach c 11GW installed capacity by 2020

• Significant share for Siemens

• Introduction of 7MW and 8MW turbines expected in projects before 2020

• Turbine and rotor developments will carry us beyond 2020

• Jacket foundation developments still to make a big impact

• Improvements in cables, installation and OMS need to be carried on

beyond 2020

15 © BVG Associates 2012

Conclusions

Thank you

BVG Associates Ltd.

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