Image: Offshore Wind
US Offshore Wind Projects Stumble Amid Economic Pressures
The US offshore wind sector, once heralded as a pivotal player in renewable energy, is now grappling with substantial hurdles. A perfect storm of inflation, high interest rates, and supply chain bottlenecks has led to widespread project delays and cancellations. Notably, Ørsted’s Ocean Wind 1 and 2 projects, with a combined capacity of 2.248 GW, were abandoned in late 2023, citing vessel shortages and permitting delays.
Developers are now reevaluating their financial models, especially for projects contracted under state-mandated power purchase agreements (PPAs). The economic realities have rendered many of these agreements untenable, prompting renegotiations or outright terminations. For instance, the Skipjack Wind project in Maryland saw its offtake agreement terminated, although its developers remain optimistic about future opportunities.
Europe Pushes Forward, But Not Without Setbacks
Across the Atlantic, Europe has shown resilience despite similar economic pressures. The North Sea remains a hotspot, with substantial investments in transmission infrastructure by TenneT and Amprion. Yet, even here, the pace of growth is slowing. Ørsted, a major player in the sector, recently scaled back its renewable capacity targets and withdrew from several European markets, including Norway and Spain.
Challenges extend beyond economics. The ambitious Trollvind floating wind project in Norway was postponed indefinitely, emphasizing the technical and logistical difficulties of such ventures. The UK’s floating wind farms, while progressing, are yet to reach final investment decisions, with the first power generation anticipated no earlier than 2028.
Asia-Pacific: A Mixed Bag of Challenges and Opportunities
Asia-Pacific presents a contrasting picture. While mainland China faced a brief slowdown post-incentive expiration, markets like South Korea are ramping up activities. The Haewoori and Anma offshore wind projects have moved forward with conditional contracts, supported by a robust local industrial base. Taiwan, another key market, plans to add nearly 5 GW by 2028 despite facing supply chain issues and local content regulations.
Elsewhere in the region, countries like Australia and Japan are poised for growth, contingent upon regulatory reforms and strengthened local supply chains. India and Vietnam, however, remain longer-term prospects.
Fabrication and Vessel Markets Tighten
The offshore wind supply chain is feeling the pinch. Fabrication yards are facing capacity constraints, particularly for monopiles and high-voltage substations. New players like Haizea Wind Group and Dajin Heavy Industry are entering the market to meet demand. Meanwhile, installation vessel availability is projected to tighten significantly by 2028, with utilization rates potentially exceeding 100%.
High day rates for heavy-lift vessels have already been recorded, especially in Europe. This trend is expected to continue as demand for specialized crane vessels grows, driven by the increasing technical complexity of offshore installations.
Looking Ahead
Despite these challenges, the offshore wind industry remains a cornerstone of global renewable energy strategies. Governments worldwide are setting ambitious targets, with total capacity aims exceeding 330 GW by 2035. However, achieving these goals will require navigating a complex web of economic, technical, and logistical challenges.
Source: Offshore Wind/ S&P
