Offshore Wind Energy Industry Expects the Lowest Investment

Lowestoft, UK (12 December 2022) – As governments race to meet energy self-sufficiency and climate change goals, 2022 is set to see the lowest year ever for investment activity in offshore wind, a vital renewable energy technology. will be

As of 2022, only about 800 MW (0.8 GW) of generating capacity has reached final investment decision (FID) across a small number of small projects. This is according to analysis published in the Global Market Overview report released today by 4C Offshore, a leading offshore wind intelligence provider. They add that between 2015 and 2021, the average annual FID rate will be six times that, approaching 5 GW per year.

On a positive note, the report notes that 2022 was the best ever year for exclusive offshore wind farm allocations. Governments around the world have awarded project development rights totaling 72.5 GW to offshore wind developers. That number has more than tripled since last year, well above the 10 GW average over the past six years. Additionally, floating offshore wind will make significant inroads in 2022, accounting for more than half of the total awarded capacity (40 GW).

Most of the projects installed at sites awarded this year will not generate electricity until the 2030s. The average development cycle time from site award to first power is about 8 years.

Project development and FID delays are caused by a combination of factors, including permit delays, offtake auction delays, supply chain bottlenecks, and extended negotiations with the supply chain due to price uncertainty. Faced with rising costs of investment and debt, developers are struggling to remain profitable for projects that have not yet secured funding.

“Developers typically secure offtake agreements (issued by power purchasers) before the project costs are fully fixed. There are exposure timeframes: price escalation clauses in offtake contracts are insufficient to meet the increased investment and debt costs, reducing project profitability,” said Richard Aukland, research director at 4C Offshore. explains Mr.

The result is the supply and demand pinch point for 2024-2025 that 4C Offshore has highlighted in its previous vessel forecast. Increasingly, projects are being delayed by up to two years, demand is flattening, and developers are looking to secure installed capacity early. One of his major suppliers is bidding for the 2026/2027 project even before the project’s final design is known.

The developer also posted significant revenue growth (year-on-year) due to higher electricity prices, maintaining projected revenue. But volatility works both ways. A combination of construction delays, weak winds and price differentials has put some developers in a hedging position, requiring them to buy back power at high market prices.

“2022 has been a complicated year for offshore wind,” said Ivar Slengesol, Vice President of New Energy Solutions at 4C’s parent company TGS. “In the short term, project delays have delayed offshore wind construction and obscured supply chain visibility. In contrast, the impressive jump in site awards this year is very good news, demonstrating broad support for offshore wind power and It bodes well for the industry in the long run.”

About TGS
TGS provides scientific data and intelligence to companies operating in the energy sector. In addition to a global, extensive and diverse energy data library, TGS offers cloud-based data applications and solutions as well as professional services such as advanced processing and analytics.

Media Inquiries:

Jaclyn Townsend
Vice President, Marketing

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