Offshore wind, jobs, hydrogen

Technology is fascinating. It usually gets cheaper as it gets better. That is what has happened with offshore wind globally. 

It has slid down the cost curve, with the result that gigawatt-scale, multi-billion-dollar projects are being built globally using giant turbines installed up to 200 kilometres from shore. 

“These industrial-scale projects generate for more hours of the year than other variable renewable energy technologies, and the investment is revitalising coastal communities with local jobs,” according to BloombergNEF’s wind energy analyst Imogen Brown.

BNEF is forecasting a surge in offshore wind installations this decade. Total global installations are set to cross the 200-gigawatts mark by 2030 — an almost six-fold jump from current levels.  China, the UK, the US, Germany and Taiwan are seen leading the market. India has a target to install 5 gigawatts of offshore wind by 2022. The target for 2030 is 30 gigawatts. The first set of projects are likely off the coast of Gujarat and Tamil Nadu, though progress has been slow so far.

Green hydrogen and offshore wind

Finance minister Nirmala Sitharaman announced the launch of a Hydrogen Energy Mission in her Budget speech to generate “hydrogen from green power sources.” India thus joins the expanding list of countries planning to produce the so-called “green” hydrogen that is critical for decarbonisation of sectors like steel, chemicals and heavy-duty transport.  

There is a synergy between offshore wind and green hydrogen. On January 20, Denmark’s Orsted announced its decision to go ahead with a demonstration project, H2RES, to use offshore wind to produce renewable hydrogen. “The project is expected to produce its first hydrogen in late 2021 and will be Orsted’s first renewable hydrogen project in operation,” it said. The 2-megawatt plant will produce around 1,000 kg of renewable hydrogen daily.

Making the production of green hydrogen possible would be cheap renewables, and cheaper electrolysers. The costs of the latter are expected to come down as installations increase.  

Breakout year for electric vehicles

BNEF is projecting global sales of 4.4 million electric vehicles this year. This is about 60 per cent higher than last year’s record sales of 2.8 million vehicles. The total number of electric vehicles on the road have now crossed 10 million.

US President Joe Biden signed an executive order last month that aims to expand the usage of electric vehicles in the government fleet, among other things. The US federal fleet has 645,000 vehicles, of which less than 5 per cent are electric or hybrid.  The order also directs state, municipal and tribal governments to consider electrifying some share of the 3 million vehicles that they own.

About half a trillion dollars are expected to be invested in “energy transition” this year, according to BNEF. This includes investments in renewable energy, electric vehicles, batteries, carbon capture and green hydrogen.   

New solar installations are expected to surpass 150 gigawatts this year for the first time, and could reach close to 200 gigawatts. Wind installations, including offshore wind, are projected at 84 gigawatts.

New record for sustainable finance

Funds raised via green bonds, social bonds, sustainability bonds, sustainability-linked debt and other similar instruments are projected to set another record this year, as investors with sustainability mandates seek green investments. 

BNEF expects as much as $900 billion of sustainable finance to be mobilised in 2021. A record sum of $732 billion was raised last year, with green bonds and social bonds accounting for the largest chunk of issues.

There has been quite a burst of activity already. Hyundai Motor’s first green bond, to raise 400 billion won ($359 million) for the development of electric cars and the reduction of carbon emissions, was oversubscribed. Hyundai Capital, the financing arm of the vehicle company, raised $600 million this year via green bonds to provide financing for environmentally friendly cars.

Volvo cars signed a 1.3 billion-euro sustainability-linked revolving credit facility last month, renewing an earlier undrawn facility of similar size. “Interest rate margins for the facility are linked to Volvo Cars’ progress in reducing its carbon emissions,” a statement from the car company said. Citi, HSBC, Nordea and SEB acted as coordinators for the facility that encompasses 21 participating banks. Earlier this week, Sunlight 

Real Estate Investment Trust announced that it had secured a sustainability-linked loan of HK$500 million. 

The sustainability quotient of all kinds of products and services is becoming increasingly important. BMW and Emirates Global Aluminium announced a deal this week for the first aluminum produced using solar power. West Asia’s’ aluminum maker will use power generated at the Mohammed Bin Rashid Al Maktoum Solar Park located in a desert near Dubai to supply 43,000 metric tonnes per year of “solar aluminum” to the German carmaker.

The writer  is editor – global policy for BloombergNEF.  vgombar@bloomberg.net