Offshore wind ambitions 'largely unscathed' despite 2023 setbacks

Setbacks suffered by some offshore wind projects last year may have resulted in a “shifting to the right” on pipelines but overall global ambitions for the sector remain “largely unscathed”, according to the latest quarterly global outlook report on the sector produced by TGS - 4C Offshore.

Final investment decisions were made by eight European projects in 2023, with the recent financial closing of Hornsea 3 taking the year-end total to 9.3GW.

In Asia-Pacific, 2.3GW closed across Taiwan and South Korea, and 704MW in the US at Revolution Wind.

In its previous quarterly report, published in October, the offshore wind specialist slashed its four-year global build-out forecast by 25% after assessing the impact of soaring supply chain and capital costs on projects.

But overall momentum in the sector is so strong that in its final quarterly report of the year the firm stated that global offshore wind capacity – defined as either installed or with construction underway – is still expected to reach 267GW by the end of this decade, with floating wind forecast to make up 9.5GW of this.

Growth challenge

Only 67GW of this global capacity is fully commissioned at present and, while this is nearly 3GW up on last quarterly report, TGS - 4C Offshore acknowledged that accelerated growth rates are required to meet these ambitions.

Globally, the report stated, a cumulative 104.2GW is either operational, in construction or has made FID.

In order to meet the 2030 forecast for growth, an increasing FID rate of 4.74GW per quarter, excluding China, is needed, the report stated.

The global outlook report concluded that the growth rates required to fulfil these ambitions are achievable,

“Currently, 4C’s, (Project Opportunity Pipeline) index plots a top-end credible growth of an additional 163GW by 2030, with a (compound annual growth rate) of 14.4%, taking the total global offshore activity to 267GW by end-2030,” the report stated.

The forecast for global offshore was unchanged from the previous last quarter’s forecasts, while 7GW of low and medium confidence projects shifted to the high confidence spectrum, the authors added.

In terms of installed capacity, the report shows that China holds a clear leads with 32.5GW fully commissioned, followed by the UK (14.8GW) and Germany (8.2GW).

China also has the most under construction (7.9GW), which was up on last quarter, followed by the UK (5.2GW).

The report shows that China (4GW) has the most capacity in pre-construction after a final investment decision, followed by the UK (2.6GW), and Taiwan (2.2 GW).

The headwinds affecting the sector were evidenced by a slowing in the rate of projects reaching full commissioning in 2023. The global total of 9.6GW was down 760MW on 2022.

Excluding China from this calculation, the numbers were down 283MW to 4.3GW, the TGS - 4C Offshore report showed.

Chinese projects reaching commissioning are forecast to increase 75% next year to 7.6GW but European additions will be 4.6GW in 2024, which was described as "way below the 11-12GW needed to reach North Seas goals".

Europe is expected to reach a peak in buildout around 2030 after a major policy push by governments, influenced by the fallout of the invasion of Ukraine and resulting energy crisis.

The report added a note of caution: "Timeframes are tight and most countries are aiming for regulatory reform to streamline processes. There may also be increased pressure on supply chains and transmission grids, and heightened risk associated with variable market dynamics and inflation."

The report states that offtake contracts were down almost 2GW to 9.5GW in 2023, driven by a no-show in the UK's Contracts for Difference auction as well as cancellations in the US.

However the report also described the US as currently experiencing record offtake activity, with five auctions in process. Candidates include new and existing projects, vying for more favorable terms, the report stated. Another 47.5GW in offtake is slated for 2024, mainly in Europe, where the UK and France alone could account for 10GW each.

Richard Aukland, director of research at TGS - 4C Offshore, commented, "Despite ongoing project delays and cancellations, 2023 has still managed to produce record progress in offshore wind.

"With high activity and a significant year of offtake auctioning expected in 2024 as countries work to hit their 2030 installation targets, a positive scene is being set for the next twelve months, and this will translate into record construction activity later in the decade."

The report showed that 33.5GW of leases will go under the hammer in 2024 in locations including Australia, Belgium, Colombia, Denmark, Estonia, Finland, France, India, Japan, Lithuania, Netherlands, Norway, Portugal, Spain, the UK, Uruguay and the U.S.

"The rate of lease activity has ramped up in the last two years, with 43.8 GW-worth of sites awarded in 2023, one-third of which was for floating wind," TGS | 4C Offshore stated.