BAKU, Azerbaijan, June 4. It is expected that the first offshore wind energy (OSW) farms will be more expensive than conventional generation but will become more cost-competitive over time, Trend reports with reference to the Offshore Wind Roadmap for Azerbaijan.
The document was released June 3 by the Ministry of Energy of the Republic of Azerbaijan, the World Bank and the International Finance Corporation (IFC).
The following key factors will be critical to accelerating OSW cost reduction in Azerbaijan:
- The use of larger offshore turbines with rotors designed for lower wind sites. It is not certain yet that these turbines will be developed. Clear market signals from countries needing such turbines will help investment happen. These countries include Japan and Korea. Across the leading turbine suppliers, the investment needed to develop these low-wind turbines could be up to about US$1 billion, but the potential market is huge.
- Availability of a local solution for efficient installation of OSW foundations and turbines. Conventional fixed OSW farms use specialist jack-up vessels built almost exclusively for OSW use. These vessels will not be able to access the Caspian Sea so by necessity, Azerbaijan OSW farms will use vessels drawn from the Caspian Sea fleet. With sufficient installation activity, an installation vessel with state-of-the-art features could be built locally to support the OSW industry from 2031;
- Ensuring low weighted average cost of capital (WACC). WACC is a function of a wide range of market risks and issues. Achieving a low WACC requires the establishment of stable, transparent, and robust frameworks and regulations for OSW, meeting lender’s standards, confidence in the long-term pipeline of projects and growth of the industry in Azerbaijan, and access to concessional finance;
- Learning by doing. Players in all OSW markets advise that significant efficiencies are obtained through repeat activity, both within a single project and in delivering multiple projects, one after another. The larger the project pipeline, the greater the cost reduction, as long as players continue to invest, responding to learning by improving processes in a culture of cost of energy reduction.
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