Report: Nearly $350bn of offshore wind projects at risk

The UK has committed to hosting 50GW of offshore wind capacity by 2030.

The figure comes from a  white paper from the Westwood Global Energy Group, a market research and consultancy firm.

The analysis is based on approximately 380 gigawatts (GW) of pre-sanctioned offshore wind capacity that is forecast to reach a final investment decision (FID) between 2024 and 2030.

Each pre-sanctioned offshore wind project has been evaluated and segmented into three project certainty statuses: ‘probable’, ‘possible’ and ‘risked’.

According to the report, nearly 40% of the 380GW pipeline is considered ‘risked’, while only 9% is deemed as ‘probable’.

Moreover, developers such as TotalEnergies and BP have the highest risk profiles, with substantial pipelines but limited or no operational capacity. In comparison, Orsted and RWE with sizeable track records have a less ‘risked’ unsanctioned portfolio.

Westwood’s offshore wind senior analyst Bahzad Ayoub said: “Offshore wind market uncertainty is rife. Growing diversity of developers in the marketplace, combined with evolving development and commercialisation approaches has created a complex landscape.

“This is compounded further by the diversification of the investor landscape, with oil and gas majors, public investment funds, and even fashion houses entering the sector. However, despite this uncertainty, there is significant opportunity ahead to be capitalised on, but we must first understand the risk.”

A pressing and present risk for developers are soaring supply chain costs. Some projects are facing a 40% cost hike for materials, parts and services, which has led some firms to pause or axe projects – or to sell them on. Developers have been urging policymakers to intervene, accounting for these challenges in their subsidy provisions and broader industry support packages.

Three risk scenarios

The paper offers three scenarios, leveraging project certainty statuses to estimate the potential pace of project investments and the knock-on effect it could have on supply chain opportunities.

In the highest delivery scenario, assuming that the supply chain keeps pace with the demands required and policy award timelines run as planned, it is estimated that more than 504GW of cumulative capacity will be sanctioned by 2030. In this case, more than $882bn of additional global capital expenditure is expected.

In the medium scenario, the estimate falls to nearly 351GW of cumulative capacity and $529bn in capital expenditure.  It assumes ‘risked’ projects to face financial support challenges within the specified timeline.

In the low scenario, just under 157GW of cumulative capacity is projected to be sanctioned by the end of the decade. The challenges include supply chain capacity issues, slowly developing project timelines as well as scarce grid availability for additional capacity.

Regional pipelines

Europe is anticipated to dominate across all three scenarios, accounting for the highest amount of cumulative capacity (208GW) that will reach FID by 2030. Almost 47% of the pipeline sits within the ‘possible’ certainty status.

The second highest amount of cumulative capacity is expected to be sanctioned in China by 2030 with just 28% of the pipeline considered as ‘risked’.

The Rest of Asia accounts for the greatest extent of ‘risked’ capacity, with the Rest of the World (ROtW) next in line, primarily due to immature and evolving offshore wind markets and limited developer track record.