However, this surge comes with a cost.

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2 1. juni 2015 We are at a changing point for the energy industry on several fields, - energy markets are in transition both in Europe and in Japan, as we just learned from Prof. Hatta, - There will be a shift towards decentralized power generation and end user active participation, and - We already see the massive deployment of renewable energy world wide led by China, USA and western Europe. Since 2013 the world installation of clean energy generation capacity exceeded addition of gas, coal and oil power plants, and this trend has shown now sign of reversal. According to analysts from Bloomberg New Energy Finance, new renewable will exceed fossil fuel additions fourfold by 2020, reaching a market value of between 600 billion and 1 trillion US$. 2

3 1. juni 2015 However, this surge comes with a cost. Bloomberg New Energy Finance estimates that in order to replace enough fossil fuel with clean energy to be able to reach the 2-degree target, we will need to double the annual investments in renewables from 300 to 600 billion US$ per year. And as with everything else, these investments will be paid by us consumers through green taxes and uplifts on our electricity bills. The electricity tariffs for household and service sector consumer in Germany has increased significantly since introduction of the Energiewende or energy reforms mainly due to green or carbon taxation. This is the blue segment in the illustration above. In Japan, there has been also been a substantial increase of electricity tariffs since March 11, mainly by increased cost of imported fossil fuel, but the generous Feed-In-Tariffs for renewable will also add to the electricity bill for some time to come. Until the cost of renewable energy such as solar and wind is lowered to so-called grid parity, - and solar PV are already close to grid parity several areas in the 3

4 01 June 2015 world - these investments will be covered by subsidies. The global subsidy for renewable energy was at about 150 billion US$ last year which sounds like a huge number. However we need to see this in the right perspective. I assume most of you last week noticed and perhaps read the report from International Monetary Fund named How Large Are the Global Energy Subsidies? This report estimates the current, annual aggregated subsidy to fossil fuel at 5,000 billion or just over the GDP of Japan last year. Furthermore, the annual fiscal gain of removing these subsidies amounts to 3,000 billion US$. To put this in further Japanese context the US National Renewable Energy Laboratory (NREL) has calculated that the cost of replacing the Japanese nuclear fleet of about 200 GW with PV will cost about 1 trillion US$, and with wind onshore and offshore of 375 billion US$. 3

5 01 June 2015 Frost and Sullivan estimates that although investment in solar PV and in wind will be about the same, wind will be continue to be the dominant renewable energy source in terms of installed capacity and in energy generated by 2020 and beyond. Furthermore, according to analysis from the European Wind Energy Association, power output from offshore wind will match land-based wind power generation by 2030 or so in EU. 4

6 01 June 2015 So why should one go offshore? This is an example that was presented on the EWEA (European Wind Energy Association) Conference. These examples are from Europe, but the numbers are expected to be similar globally, also in Japan. In Europe, the average onshore wind turbine structure has a capacity of 2.2 MW, the capacity factor is 24% and that is enough to power approximately 1200 households The corresponding European offshore installation has a capacity of 3.6 MW and a capacity factor of 41%. This is then enough to power more than 3300 households. 5

7 01 June 2015 The evolution of making larger windmills continues the state of the art today is 6 to 8 MW. These are currently the top 6 largest wind turbines under testing. Exept from MHI Sea Angel which may be mothballed due to merger with Vestas, these will soon go into commercial production. Also note that all except the Enercon machine are aimed for the offshore market 6

8 01 June 2015 This single turbine can produce the energy consumption of a village of 12,000 households. I also think it is quite obvious why turbines with blade lengths of 100 meters or more are not very practical to install on land 7

9 01 June 2015 The other obvious reason for going offshore and going floating offshore is the combination of best wind conditions and water depth. Bottomfixed foundations has a practuial and ecomical depth limit of around 50 meters, while floating foundations can be anchored at several hundred meters depth, thus hugely expanding the areas where offshore wind can be installed. 8

10 01 June 2015 From upper left: - Windfloat outside Portugal - The FOREWIND pilot outside of Fukushima, that Fukuda-san of Marubeni will present for us at the offshore wind session after lunch. - Hywind - which most of you know has been sucessfully 9

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12 1. juni 2015 The cost of floating offshore wind must be reduced from today s best levels to be on par with bottom-fixed wind farms. This implies a 40% reduction in cost over the next 5-7 years. This can be done according to DNV GL s manifesto: - Do it right: reducing risk and preventing mistakes, representing the potential to cut cost by around 7% - Do it better: improving the efficiency of existing processes, representing a cost reduction potential of 6% - Do it differently: alternative, innovative ways of doing things, representing around 12% cost reduction potential The target is to reach a level of about 10 EUROcents/kWh or 15 JPY/kWh range within , depending on deployment rate of large-scale wind farms and associated learning curves. 11

13 1. juni 2015 Offshore wind combines all the main industries in the DNV GL Group, and all our legacy companies. We work with the industry on all aspects of the offshore wind value chain including site selection, energy assessment, technical and financial due diligence, project management, stakeholder management and advisory on maritime operations and subsea electrification topics. 12

14 I would like to highlight two ongoing initiative at DNV GL. The first initiative is our annual summer projects, where 13 students from Japan, Norway, China, Sweden and Denmark shall work for 7 weeks on this innovative project. The idea is to study the technical and economic feasibility of using hydrogen as energy carrier from far offshore wind farms instead of subsea cables. This will include study of a floating hydrogen factory including salt-water electrolysis and storage options, plus maritime transport options. Japan is chosen as a case study since this project combines three of the interesting and unique drivers in Japan strong focus on hydrogen infrastructure; focus of offshore wind and challenges with bottlenecks in the transmission grid. 13

15 The second initative is our vision for large scale deployment of floating offshore wind towards The name of the vision: Nigashima Continental Shelf: combined of the words on the slide. In this vision we see the commercial and technical development of floating wind going through three phases.

16 1. juni 2015 Phase one of the vision : Integration with the Oil & Gas industry. The reason for this is to generate extra revenues in the early stage of the learning curve where the capital expenditures are high. The idea is to supply offshore oil and gas platforms with intermittent power for water injection pumps, which again will lead to enhanced oil or gas recovery and extend the lifetime of the fields. The cost of producing electricity offshore by gas turbines is far higher than the power prices on land, and thus rises the value of electricity produced by the wind mill. 15

17 1. juni 2015 In phase 2: : Offshore wind farms will be combined with energy storage solutions such as batteries or hydrogen storage for the purpose of reliable supply of electricity to islands and other offgrid systems. 16

18 1. juni 2015 Phase 3, : At this stage the technology is mature and the industry has become an integrated part of society and particularly the fishing industry. It is built up in very large scale with hundreds or even thousands of floating wind mills contributing a substantial part of the enrgy mix in coastal countires like Japan. The electricity is transferred to the large demand hubs by subsea high voltage DC cables or as hydrogen produced inside the wind farms offshore. I will end my presentation by showing our Niigashima vision for the future of floating offshore wind. 17