Once a curious novelty, the sight of wind turbines off our coasts is now a standard part of the maritime landscape, but offshore wind’s long-running growth now looks to be entering the doldrums.
Hit by the combined inflationary effects of US tariffs, higher transport expenditure and supply constraints, offshore developers are struggling with a combination of rising costs and project delays.
The situation is especially dire in the US, where the Trump administration appears bent on preventing the industry’s continued rollout.
“President Trump campaigned saying that he was going to stop offshore wind on day one, and he’s following through on that,” says Jeff Fodiak, a director at the renewable energy consultancy OWC.
In July, the US Bureau of Ocean Energy Management made good on that promise by temporarily halting all new approvals and permits for offshore projects. The order also resulted in the de-designation of 3.5mn acres of federal waters previously earmarked for potential wind development.
Nor are approved projects beyond regulatory disruption. In August, Danish renewable energy group Ørsted was ordered to stop work on its almost completed $1.5bn Revolution Wind project off the coast of Rhode Island because of “national security” concerns. The suspension was later lifted by a federal court but not before adding to market concerns.
Recommended
Such moves come on the coattails of the withdrawal of tax breaks and other state support as the US government gradually dismantles incentives for clean energy established under Joe Biden’s 2022 Inflation Reduction Act.
Not helping matters was an incident last year at Vineyard Wind, the country’s first large-scale offshore wind project, where a 107-metre blade broke off and the debris washed up along the beaches of nearby Nantucket.
“Early-phase projects have not given up exactly, but they are not in a hurry to do much,” says Fodiak. “Right now, most companies are working with a skeleton team and holding out for an eventual change in the administration.”
Debris from a damaged blade that broke off a turbine at the Vineyard Wind project © Scott Eisen/Bloomberg
At the same time, developers in the US and beyond are facing supply-side problems. With turbine manufacturing concentrated among a few large operators, choice can be limited and lead times long. Fierce competition for cables, electrical components and other key materials is proving a further bottleneck.
Adding to concerns are high interest rates in many markets, notes Robert Fradley, a director for offshore wind at RES, a UK-registered global renewable energy company. If government bonds are paying 5 per cent or 6 per cent, say, compared with about 10 per cent for an offshore wind project, “then you’re being asked to take on a fair bit more risk for maybe not a huge additional reward”, he reasons.
Meanwhile, old hurdles have not gone away. Notable examples include environmental concerns, local opposition and integration with existing power distribution systems.
Although the latter is arguably more complicated because of offshore wind’s location out at sea, transmission bottlenecks are a problem for all clean power projects, says Ana Musat, head of policy at the industry body RenewableUK.
“There’s just not enough grid capacity . . . it’s one of those bits of infrastructure that takes a lot to get built out,” she says.
Yet, despite this lengthy list of challenges, industry insiders are exhibiting a strong determination to look to the positive.
The fundamentals remain sound, Musat insists. Compared with other renewable sources, offshore wind has high relative capacity, is less prone to intermittency, and can be located close to coastal cities and other demand centres.
As proof, she points to the example of China. Backed by strong state support and a robust domestic supply chain, Chinese project developers have succeeded in sidestepping many of the obstacles encountered by operators elsewhere.
By the latest count, China has nearly 200 offshore wind farms at the planning, approval or construction phase. With about 41 gigawatts already connected to the grid, Asia’s largest economy already comprises more than half of the world’s offshore wind capacity.
Wind turbines in Dongying, China. The country has about 200 wind farms at the planning, approval or construction phase © Qilai Shen/Bloomberg
“China is not only building a lot of renewable generation, but it’s also investing quite heavily in electrification . . . so that creates a virtuous circle,” Musat argues.
Ben Backwell, chief executive of the Global Wind Energy Council, strikes a similarly sanguine tone. While he concedes that the sector is “not growing as fast as it needs to”, he notes that offshore wind is expanding faster than its onshore equivalent.
Fuelling his assertion is a growing enthusiasm for offshore wind in countries outside the historic mainstays of China and Europe. South Korea, Taiwan, Vietnam, the Philippines and Australia, for example, have all issued their first licences or are looking to do so shortly, he says.
“Offshore wind is very cyclical . . . but what gives me hope is that lots of new projects are still getting approved,” Backwell adds. “This technology isn’t going to be everywhere, but it’s set to be an important part of the clean energy market nonetheless.”
If operators could lock in a competitive, long-term electricity price, then its woes would instantly look less serious. To date, however, even with feed-in tariffs and other guarantees, prices in regulated markets have often been deemed too low or too short-term to make projects viable.
One exception is long-term power purchase agreements with corporations such as Google and Amazon, that are looking to green their power supply. For now, however, limited demand means premium contracts are likely to remain the exception.
Another development that industry experts insist could turn around the sector’s fortunes is grid-level storage. Emerging battery solutions such as iron-air, sodium-ion, and green hydrogen are seen as potential answers to offshore wind’s grid integration challenges.
At present, lack of storage means offshore operators end up flooding the market with surplus electricity when winds are high, thus pushing down the price, explains Lebona Vernon, associate director for renewable energy at consultancy, Anthesis.
“With negative pricing, it’s like you can’t get paid to charge your battery, which will later be worth five or 10 times more when it’s time to discharge,” she argues.
