The future of offshore wind

Offshore wind plays a critical role in the global pursuit towards renewable energy. Over the years there has been an impressive surge in offshore wind installations. From the coastlines of Europe to Asia and the Americas, offshore wind farms are proving to be a renewable energy source. There have been vital achievements with current offshore wind farms and the future predicts a promising trajectory of offshore wind farms on a global scale.

Offshore wind industry in 2023

In the first half of 2023, the global wind industry added 5.6gigawatts (GW) of offshore wind capacity, bringing the total installed global wind capacity to 63.2 GW. This marks a slower start compared to the same period in 2022 when new installations reached 6.8 GW worldwide. China contributed 2.2 GW of new offshore wind capacity in the first six months of this year, but this is less than half of the 5.1 GW installed in the first half of 2022. Despite the slower progress, China remains the leader in the wind industry market, with 45% of the world's total offshore wind capacity installed in the country. The U.K. follows in second place, followed by Germany and the Netherlands.

Project costs

Financing offshore wind farms is a significant task due to high capital costs and long project timelines. Unlike other forms of power generation, offshore wind is particularly affected because it requires a substantial capital investment, followed by ongoing maintenance. Lower power prices don't offset ongoing operational costs, leading to developers either making less profit or having trouble repaying their debts. With rising interest rates and policymakers making borrowing money more expensive, convincing investors to support these projects is becoming even harder.

In 2023, projects faced more economic challenges due to inflation, increased capital costs, and higher interest rates. Many projects, especially those expected to start operations between 2025 and 2028, have struggled to stay economically viable. Some developers want to renegotiate their deals, while others are considering canceling contracts altogether. For instance, Avangrid, a U.S. developer, agreed to pay a $48.9 million fine to Massachusetts to exit its offshore farm commitment, which is a small fraction of the total project cost.

Danish wind company Orsted is willing to incur losses of up to $5.6 billion to exit two offshore wind projects in New Jersey. The UK's recent auction failed to draw any offshore wind investment due to the low auction price. To remedy this, the government is now looking to increase the price offered to developers by 66% for the 2024 auction, hoping to stimulate more interest and bidding in the new year.

In development

Despite economic challenges, wind farms are still making progress in 2023. China remains at the forefront with 2.4 gigawatts (GW) of capacity under construction. Vietnam has set an ambitious offshore wind target of 6 GW by 2030, and Bangladesh has revealed plans for its first ever offshore wind project.

The world's largest wind farm has commenced production in the North Sea, featuring a projected 277 turbines. Expected to be completed in 2026, this windfarm will have a total installed capacity of 3.6 GW, sufficient to power 6million homes in the UK annually. Additionally, a project off the coast of Finland is anticipated to reach a total installed capacity of 1.4 GW and is projected to be fully operational by 2030. The global market is witnessing an expansion of capacity in various markets worldwide, showcasing a growing diversity in the wind energy sector.

Installation in small islands

Small island nations, with their abundant coastal regions, are recognising the untapped potential of offshore wind energy as a key driver of sustainable development. The Dominican Republic and Jamaica have made strides with onshore wind farms, with installed capacities of 135 MW and 99 MW.

There are environmental factors to consider, particularly the ever-present threat of hurricanes. The resilience of wind turbines is paramount. Developers are investing in cutting-edge technologies to withstand the extreme weather conditions that characterise tropical areas. Companies are developing typhoon-class wind turbines, built with components designed to endure extreme weather. This marks a significant leap forward in ensuring the reliability and durability of offshore wind infrastructure in such environments.

Curaçao, has taken a bold step by initiating offshore surveys to assess the feasibility of floating wind development. Similarly, Barbados has explored the potential of offshore wind in the past, and plans are underway for a new bid round for offshore exploration, signalling a renewed commitment to tapping into their offshore wind potential.

On the local front, the Regulatory Authority (RA) has proactively conducted a desk-based feasibility study, presenting our findings at three townhalls this year. This local initiative reflects a growing awareness of the importance of engaging the public in the process, ensuring that the benefits of offshore wind energy are not only sustainable but also inclusive. The next steps the RA is planning will be to procure the seabed assessment and wind measurement campaigns. To read the full consultation, go here.

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