For the global offshore wind supply chain to be able to cater to a fivefold growth in annual installations by 2030, it will need USD 27 billion (EUR 24.7bn) of secured investment by 2026, Wood Mackenzie estimates.
This investment is still short of what is needed to hit government targets. Wood Mackenzie’s base case outlook sees annual capacity additions growing to 30 GW by 2030, while policymakers’ targets would require almost 80 GW per year, which would imply a supply chain investment of over USD 100 billion.
“Nearly 80 GW of annual installations to meet all government targets is not realistic, even achieving our forecasted 30 GW in additions will prove unrealistic if there isn’t immediate investment in the supply chain,” said Chris Seiple, Vice Chair, Power and Renewables at Wood Mackenzie, co-author of the report. The analysis, which excludes China, is titled “Cross currents: Charting a sustainable course for offshore wind.”
The research firm outlines two challenges holding back investment. One is low profitability in the industry after too large capacity expansion in 2015, exacerbated by recent inflation and higher commodity input costs.
The other main hardship is uncertainty of project timing. Wood Mackenzie says that some 24 GW of projects planned for completion between 2025 and 2027 have secured a route to market via a subsidy or power purchase agreement (PPA), but have not yet made a financial investment decision (FID) and now can be delayed as they seek to renegotiate offtake contracts due to increased costs.
According to the firm, the actions to help scale up the offshore wind supply chain include extending beyond 2030 target setting and plans for power market infrastructure to support offshore wind in areas where this is not already done. “Other factors for policymakers to consider include the impact on the supply chain when deciding whether or not to renegotiate existing contracts and pausing the turbine size arms race with a size cap,” Wood Mackenzie adds.
It further suggests that developers should also consider innovative partnerships with suppliers to provide them with demand stability.
(USD 1 = EUR 0.916)
