'Risked' project list hits $353bn as 'oil and even fashion houses' pile into offshore wind: analyst

Nearly 40% of a 380GW global pipeline of pre-sanctioned offshore wind capacity could be vulnerable to cancellation or delay, according to a new report by Westwood Global Energy Group.

Research group Westwood focused on an $883bn pipeline of offshore wind projects forecast to reach final investment decisions between 2024 and 2030 and claimed that 40% of this currently comes under the "risked" category.

Its analysis claims oil giants BP and TotalEnergies are among those with the highest risk profiles, due to their possessing substantial pipelines but limited or no operational capacity. The sector is also attracting investors from new sources as diverse as the fashion business, such as clothing giants H&M and Bestseller which have pledged to back Bangladesh's first offshore wind farm.

At the other end of the spectrum, Westwood noted that companies such as Orsted and RWE have a track record across a range of projects and possess a less at-risk unsanctioned portfolio.

"Contributing a further uncertainty in the market is the growing diversity of developers in the marketplace accompanied by evolving development and commercialisation approaches. Having the ability to interrogate a developer’s pipeline from a risked lens provides a starting point for opportunity scouting and asset allocation," the report stated.

It added that investors benefit from tools that allow them to choose levels of pipeline risk.

Westwood added that increased diversity, complexity and uncertainty is not just about developer profile but are also driven by "a range of factors, including diverse jurisdictional policies regarding project development and financial support, the difficulty of matching a supply chain with the needs of growth targets... as well as the clarity around grid availability and port infrastructure readiness".

Diversity, uncertainty, opportunity

Bahzad Ayoub, Westwood's senior analyst for Offshore Wind, stated: “Offshore wind market uncertainty is rife. Growing diversity of developers in the marketplace, combined with evolving development and commercialisation approaches has created a complex landscape.

"This is compounded further by the diversification of the investor landscape, with oil and gas majors, public investment funds, and even fashion houses entering the sector. However, despite this uncertainty, there is significant opportunity ahead to be capitalised on, but we must first understand the risk.”

Viewing these projections collectively, Westwood highlighted a pipeline "that faces sizeable risks before reaching FID, with only 9% of capacity ‘Probable’, 51% ‘Possible’ and 40% ‘Risked’.

Using what it says is a new research tool, Westwood formulated three scenarios to estimate the potential offshore wind capacity that could reach FID by 2030, with additional assessment of knock-on effects in supply chains

The High scenario arrives at 504GW of cumulative sanctioned capacity by 2030, with the Medium and Low cases reaching only just over 351GW and 157GW respectively.

The project certainty gauge also showed strong regional differences.

In any scenario, Europe will remain dominant for the foreseeable future, with a cumulative capacity of 208GW that will reach FID by 2030, and a large proportion (47%) of this within the ‘Possible’ status.

Offshore wind projects in the US account for 67% of the region’s total pipeline capacity. "Despite the delays and cancellations that the US has been facing – due to the mismatch between rising costs and expected revenues – the number of 'Risked' projects remains relatively small," Westwood stated.

The Rest of Asia and Rest of the World categories reflected the highest extent of ‘Risked’ capacity within the share of the region’s pipeline due, in part, to what Westwood called the "immature and evolving offshore wind markets and limited developer track record".

Mainland China accounted for the second highest amount of cumulative capacity (166GW) expected to be sanctioned by 2030 and only 28% of this pipeline was found to be‘Risked’, with 38% currently assigned a certainty status of ‘Possible’.