As a example of this, Germany is allowing only up to 15GW by 2030, while there are caps on support in the UK.
The UK Pot 2 budget available for offshore wind and biomass in the recent CFD auction round amounted to £260 million (€356 million).
But if there is insufficient capacity in the pipeline, the industry may be unable to achieve the economies of scale it needs. Or, in the UK government's words: "To become as competitive as the more established low carbon generation sources."
In a presentation at March's EWEA Offshore event, the UK's Catapult Offshore Renewable Energy said: "It is unclear if there is sufficient confidence in the market size up to and beyond 2020 to justify further investments to develop the products and industrialised supply chain requirements."
A report on offshore wind cost reduction, delivered in February 2015 by Offshore Renewable Energy Catapult in collaboration with The Crown Estate, concluded "whilst progress has been made in the face of a reduced deployment outlook, it is not safe to assume that the supply chain will continue to invest in the required technology innovations if the size of the market is not sufficient". The report shows that "continued innovation and cost reduction depends on the scale of growth planned for the sector".
ORE Catapult is the UK's technology innovation and research centre for offshore wind, wave and tidal energy.
At an EWEA offshore 2015 conference session titled "Hard talk with a united industry," LM Windpower CEO Leo Schot declared "the offshore volume is too low" in response to a a question of how economies of scale could be made.
His answer — to standardise the underlying technology — is one route. But, he asked, in view of the limited size of the market "is one integrated company, like Siemens, able to drive the industry forward, with industry clusters as competitors? Companies will continue on their own or consolidate."
The upcoming volumes of offshore turbine numbers is not large. Offshore wind capacity is expected to grow from 17GW in 2020 to 26GW by 2025 in eight European countries with a coastline (Norway, Sweden, Denmark, Poland, Netherlands, Belgium, France, and Italy) not including the UK. The data from consultancy Consentec in a study on supply security in Germany and its neighbouring countries for the German federal economy ministry was released in March.
The 9GW increase breaks down into an average of 1.8GW a year, or 300 turbines a year if 6MW units are used, falling to 225 for 8MW machines. That is not a lot to divide between the clutch of offshore wind turbine manufacturers in Europe.
The UK market is dictated by the pool of funds in "Pot 2" of the Contracts for Differences budget. The funds are made available to make up the difference between the wholesale market price of power and a "strike price" of support for offshore wind (and biomass projects) pre-agreed in an auction process.
The offshore wind strike prices awarded in February 2015 were £119.89 for the 714MW East Anglia 1 project, due online 2017/2018, and £114.39 for the 448MW Neart Na Gaoithe project, due online 2018/2019. If both projects are assumed to operate at 4,000 full load hours per year, relatively modest for offshore wind, the support required per year will be roughly £268 million. This oversteps the UK Pot 2 budget by £8 million.
The support is calculated here as the strike price for each project minus the market price, assumed to be £60/MWh, and multiplied by the MWh generated, assumed to be 4,000MWh per year. The average UK day-ahead base load power price January to mid-March 2015 has been just £45.32/MWh according to analyst Spider Energy data, but wholesale prices may increase sharply if, for example, planned changes to the CO2 emissions trading mechanism are implemented by the European Commission.
But if the current lower wholesale market price is assumed in the calculation, the gap to the strike price will be bigger and the support sum required will be even higher.
In a rough calculation, assuming the UK maintains its current Pot 2 annual budget for the coming years, wholesale market prices do not exceed the current level of around £46/MWh, offshore wind stations perform at a bullish 4,500 full load hours per year, and the lower recent strike price for Neart Na Gaoithe is assumed, only up to around 850MW of new offshore capacity could be added each year.
The calculation: a strike price of £114.39 per MWh minus market price of £46 per MWh equals £68.39 per MWh in support. Pot 2 support of £260 million divided by £68.39 equals 3,801 per GWh getting support. Dividing this by 4500 full load hours equals 844MW of capacity that can be supported.
844MW of capacity equates to 141 6MW or 106 8MW turbines a year.
Adding this UK market potential to that for the rest of Europe, as found by Consentec, equates to 440 turbines a year using 6MW units, or 331 8MW turbines. This presents a difficult volume to achieve an economy of scale.
The industry is disappointed. Paul Gibson, chairman of turbine installation specialist MPI Offshore, complained in a supply chain forum at EWEA Offshore, that in drawing up the CFD support mechanism the UK government "got it wrong giving us just a small amount of megawatts. It was not just the price [of the CfD] that counts. We wanted more megawatts. Two gigawatts a year would give us more view to the future. We need more East Anglia 1 projects to finance a new vessel," he said.
Also pleading for more volume, Claudia Martens, supply chain vice president of Adwen, the newly named offshore turbine joint venture set up by Areva and Gamesa, added that aside from the size of support visibility of volume is the key. "We have undertaken the commitment to build factory facilities in France but really we need more visibility, more tenders," she stressed.
