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Market Development for Floating and Bottom-Fixed Offshore Wind - Future Prospects for the Norwegian Offshore Wind Industry

I Stock 1452859958

About the project

Background for the Project: Menon Economics was engaged by Norwegian Offshore Wind, Offshore Norge, Innovation Norway, and Export Credit Norway to conduct an analysis of market prospects and future opportunities for Norwegian actors in both floating and bottom-fixed offshore wind. The purpose of the study was to provide a knowledge base where climate transition, global trends, technological development, and the political framework were considered in connection with each other, in order to identify opportunities and barriers for further growth in the Norwegian offshore wind industry.

What We Have Done: The business-economic potential of the Norwegian offshore wind industry depends on two factors: 1) the size of the market and 2) the competitiveness of Norwegian actors. In the analysis, we assessed both aspects. To evaluate market development, we used a triangulated methodology. In the short term, we based our analysis on offshore wind projects and areas mapped through TGS 4C Offshore. We weighted the various projects based on factors such as maturity, the underlying trend related to the release of new areas, and the political uncertainty in the market. This resulted in two development scenarios for the next ten years. The long-term analysis focuses on how various market drivers can affect demand for renewable energy and the relative competitiveness between technologies. These include, but are not limited to: global climate and renewable policies, spatial limitations, profitability relative to other technologies, and national energy and industrial policies. Our forecast was further compared against a broad range of third-party analyses, which emphasize these drivers in different ways. This approach ensures that the range of outcomes identified is highly robust in terms of short-term variation, both politically and in the market. Regarding competitiveness, we adopted slightly different approaches for the two submarkets. For bottom-fixed offshore wind, where an established value chain already exists, we developed two scenarios based on the revenue of Norwegian actors, which amounted to approximately NOK 35 billion in 2022. The floating offshore wind scenarios were based on a bottom-up methodology, where competitiveness was assessed for each CAPEX and OPEX segment, as well as for various geographical markets.

Results of Our Analysis: Our analyses show that the global market for bottom-fixed offshore wind could grow to between 820 and 1,360 GW by 2050, while floating offshore wind is expected to reach between 160 and 300 GW. Currently, it is more cost-effective to build bottom-fixed offshore wind farms, which is reflected in our market forecasts. As the most favorable areas for bottom-fixed offshore wind are utilized, we foresee significant potential for investments to shift toward floating offshore wind. Our analyses indicate that this shift is likely to occur around the 2040s, after a period of considerable technological and commercial maturity. This will lead to an acceleration in the development of floating installations, while the growth rate for bottom-fixed offshore wind will plateau. We estimate that floating offshore wind has a global market potential of between NOK 720 and 1,040 billion by the late 2040s, while for bottom-fixed offshore wind, the potential market value is estimated at between NOK 1,100 and 1,600 billion. The analysis also highlighted a significant economic potential for Norwegian actors, particularly in the European market. If the high scenario is realized, the Norwegian offshore wind industry could support an employment effect of 50,000 people by 2040 and a value creation potential of NOK 105 billion.

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