Posted on May 23, 2022
Wood Mackenzie expects that offshore wind is going to be a trillion-dollar business opportunity for the offshore sector by 2030. As installation costs fall and political commitment rises in nations around the world, the sector is taking flight, and it is drawing attention from oil majors and new market entrants alike.
“By 2030, as much money will be invested in offshore wind as in onshore wind,” wrote WoodMac in an advisory. “We project that almost $1 trillion will flow into the offshore wind industry over the next decade.”
By the end of the decade, the consultancy expects that 24 countries will have large-scale offshore wind farms installed. Total capacity will increase ten-fold, from 34 GW in 2020 to 330 GW in 2030. And as Europe makes a push to free itself from dependence on Russian gas, there is “further upside potential” for more development, too.
This growing opportunity is attracting more bidders, and the project development landscape is becoming more competitive. WoodMac noted that the giant ScotWind lease auction round held earlier this year attracted more than 60 bidders – 60 times as many as the world’s first commercial lease tender in 2010. As auctions become more competitive, lease payments for development rights have skyrocketed into the billions – the kind of territory reserved for large, well-capitalized corporations.
Competitive bids require more than just money, though. Governments are looking for more local content to secure approval, including commitments to workforce development and local manufacturing. In addition, regulators are sensitive to the environmental and social impact of wind farm installations, both during construction and throughout the operating lifespan.
“Addressing environmental impact and coexistence with fishing and aquaculture will be critical to quelling stakeholder opposition to projects,” noted WoodMac.
Lifecycle sustainability is also of growing interest, including recyclability. The vast majority of each wind turbine structure is recyclable at end of life, but until recently, the composite turbine blades have not been. That is changing with recent technology, and recyclability is going to be part of the bid evaluation in some future offshore wind tenders in Europe.
All of these factors require tradeoffs, and as government regulators get to set policy on which elements matter the most when conducting lease auctions, the winning combination for any one project depends on national priorities. “Crucially, policymakers also need to consider the impact that introducing new parameters may have on the number of competitors who show up for auctions or tenders and the overall cost impact on customers,” WoodMac cautioned.
