Wind industry blown off course

After a year of cancelled projects, broken turbines and abandoned lease sales, the global offshore wind industry no longer has much chance to hit the targets set by governments in the US, Europe and elsewhere, marking a setback for efforts to fight climate change.

The technology forms a big part of government strategies to advance renewable energy and decarbonise the global power industry because it can generate vast amounts of electricity near densely populated coastal regions.

Reuters spoke to 12 offshore wind companies, industry researchers, trade associations and government officials in six countries to come up with a global picture of the state of the industry and its outlook. It found soaring costs, project delays and limited supply chain investment were hobbling installations.

“We’re pretty far away from these targets,” Soren Lassen, the head of offshore wind research at energy research firm Wood Mackenzie, said.

He said offshore wind farms had a global average cost of $230 (R4 100) per megawatt-hour (MWh) – up 30% to 40% in the past two years and more than triple the average of $75/ MWh for onshore facilities.

That had companies retreating, last month, BP said it was considering selling a stake in its offshore wind business. Earlier this year, Equinor abandoned investments in Vietnam, Spain and Portugal.

GE Vernova, one of the top turbine suppliers, is not taking new orders.

World governments had set a global target last year of tripling overall renewable energy use by 2030, something the International Renewable Energy Agency (Irena) said would require offshore wind capacity to surge to 494GW by the end of the decade, from 73GW currently.

Irena director-general Francesco La Camera said offshore wind was projected to fall short of its target by a third. Estimates by three other prominent research firms projected that the world would not reach 500GW of offshore wind installations until after 2035.

Governments in Europe, the Americas and Asia have sought to prop up the sector with national targets aimed at attracting deep-pocketed developers including major global energy companies Equinor, Orsted and Iberdrola IBE.MC.

The US, for example, set a goal in 2021 of 30 gigawatts of offshore wind by the end of the decade, but had less than 200MW operating as of May of this year, according to the National Renewable Energy Laboratory.

US offshore wind has been roiled since last year by cancelled projects and contracts, suspended government auctions and a construction accident at the country’s first major commercial project. The industry is worried that Biden’s replacement, President-elect Donald Trump, will follow through on an election campaign promise to dismantle the progress.

Energy research firm Rystad said it expected the US to reach less than half its 2030 target. Representatives of the Biden administration and Trump’s transition team did not provide comment for the story.

Carl Fleming, a partner at law firm McDermott Will & Emery who advises the White House on renewable energy policy, said the US would struggle to miss its target regardless of who was in the White House, given market conditions.

In Europe, Petra Manuel, offshore wind analyst at Rystad, expects countries with the highest offshore wind targets – the UK, Germany and the Netherlands – to reach about 60% to 70% of their goals. Nations with less ambitious targets, including Belgium, Denmark and Ireland, are also expected to come up short, he said.

Industry trade group WindEurope, said it expected the EU to have 54GW of offshore wind capacity by 2030, about half of the 120GW North Sea countries pledged.

Britain, the second-biggest offshore wind market after China, will also miss its goal of 60GW by 2030, said Damien Zachlod, the managing director of offshore wind developer EnBW Generation UK.

China, the global leader in offshore wind, is bucking the global trend.

Beijing has supercharged its industry with subsidies and low financing costs. Most of the players are state-owned. China accounted for more than half of 2023 offshore wind installations, with 6.3GW.

The Global Wind Energy council trade group estimates the country will install 11 to 16GW annually in the next two to three years.

Vietnam, Japan, South Korea and Taiwan have sought to expand offshore wind but also face difficulties linked to soaring costs and regulatory uncertainty.

Rebecca Williams, the deputy CEO of the Global Wind Energy Council trade group, said that hitting the target was possible with the right policies.

Cape Times