Evaluation of Offshore Wind Market Faces Profound Uncertainty, says Energy Consultancy

London-based energy consultancy Westwood has expressed concerns, suggesting that up to 40% of the pre-Final Investment Decision (FID) development pipeline for global offshore wind projects is at risk of being suspended. This assessment highlights the ongoing impact of inflation and evolving market conditions on the industry.

Westwood’s analysts identify non-specialist newcomers such as TotalEnergies and BP as having the highest risk of potential withdrawal. These companies possess extensive development pipelines but lack significant operational capacity. In contrast, dedicated renewables firms like Orsted and RWE, with longer track records in offshore wind, are viewed as less likely to abandon their portfolios. Orsted, for example, recently faced challenges, including a $4 billion writedown and the termination of its Ocean Wind megaproject off New Jersey.

According to Westwood senior analyst Bahzad Ayoub, the energy market has become more complex due to the growing diversity of developers and the evolving approaches to development and commercialization. The involvement of various investor types, including oil and gas majors, public investment funds, and even fashion houses, has further complicated the landscape. Ayoub states, “Our current projections reveal a pipeline that faces sizeable risks before reaching FID, with only 9% of capacity deemed ‘Probable,’ while the remaining 51% is labeled as ‘Possible,’ and 40% is considered ‘Risked.'”

Although risk factors have been visible in the U.S. market, with announcements of multiple offtake contract suspensions, Westwood believes that the number of projects threatened in the pipeline is relatively limited. Challenges in the U.S. industry stem from escalating supply chain costs and interest rates, with analysts anticipating a recovery and the possibility of renegotiated offtake agreements at higher prices.

Westwood perceives minimal threats to projects in China, driven by the country’s commitment to national offshore wind policies, increased investment, and insulation from global supply chain cost pressures. China’s provincial governments along the coast continue to provide subsidy support.

The report indicates heightened risk for Taiwan, characterized by numerous unawarded leases and stringent rules for local content. Local procurement requirements can increase costs, potentially discouraging investments. While recent revisions to these rules may improve the outlook, a significant portion of Taiwan’s pipeline is currently classified as “risked” by Westwood.

Depending on market developments and the actual risk to project FID, Westwood outlines three scenarios for offshore wind capacity by 2030. The top-end forecast is approximately 500 gigawatts globally, while the low-end estimate is less than 200 gigawatts. This substantial difference reflects a significant 10-fold spread in capital expenditure investment between the most and least active scenarios.

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