What crisis? | Governments must show world they have faith in offshore wind, says ETC

Governments must work together with the offshore wind industry to overcome persisting perceptions of an industry in crisis, according to a new report by the Energy Transitions Commission (ETC), a global think tank.

The ETC report drew encouragement from a 60% reduction in offshore wind costs achieved in Western Europe between 2015 and 2022 and a six-fold increase in global capacity from 12GW to 74GW in 2015-2023, describing “vast potential to scale further”.

But it also took a close look at the difficulties faced in 2022-2023, when inflation, supply chain bottlenecks, and higher interest rates led to rising offshore wind costs in some markets.

“A perceived offshore wind 'crisis' ensued, in the UK and US markets in particular, as many projects and contracts were cancelled,” the ETC stated.

More positively, the report suggested that most cost increases, while significant, are expected to be short-term, with the possible exception of the still-prevailing uplift in the cost of capital.

“Costs in Western markets are already coming back down as most drivers were temporary in nature, the report said, referring to supply chain bottlenecks due to the Covid-19 pandemic and a 200% increase in steel costs.

Confidence

“Offshore wind is vital for the clean energy transition…. Now is a critical period to rapidly accelerate wind capacity if the world is to achieve net-zero emissions by mid-century," said ETC chair Adair Turner.

"Governments should act now to restore market confidence by setting ambitious offshore wind targets and design auctions and contracts which provide market certainty and drive costs down.”

Citing International Energy Agency (IEA) data on offshore wind potential, the ETC report said annual wind generation needs to grow ten-fold from 2,000 TWh in 2022 to over 20,000 TWh by 2050 if the world is to meet net zero targets.

The ETC report warned that most countries are not on track to install enough offshore wind capacity by 2030 to align with their stated net-zero emission trajectories.

“To fully realise (wind power) technology’s potential, policymakers, system operators, regulators and the industry need to re-focus on scaling up the sector’s capacity. Those that move fastest will unlock significant and lasting economic benefits,” said Alistair Phillips-Davies, CEO, of UK utility SSE.

The ETC describes itself as a global coalition of energy leaders committed to achieving net-zero emissions by mid-century. It said its latest report was developed in collaboration with members from across industry, financial institutions, and environmental advocacy.

It said auctions and government-backed contracts should be designed to reduce the risks of non-delivery.

“Changes should include inflation-indexation to reduce developer risks and greater penalties for withdrawing from contracts to reduce contracts being treated as options. Governments must accept paying somewhat higher prices to remove this optionality,” the report stated.

The report called for streamlined planning, permitting and grid connection processes and reinforcing grids to reduce waiting times for offshore wind to connect and working to ensure that wind turbine and component production can achieve economies of scale-based cost reductions by encouraging harmonisation of turbine components and sizes.

The ETC called for governments and international bodies to continue to set ambitious targets and predefine auction schedules to ensure large-scale volumes are committed and delivered year by year.

The report suggested that supply chain bottlenecks could be addressed by providing guarantees and subsidies for new installation vessels to carry larger turbines while policy makers and developers should balance the desire to encourage local supply chain content with the need to achieve high production volumes across different regions and nations.

"This briefing from ETC reinforces the reality that, despite blips in the UK and US last year, the offshore wind industry is on a fundamental global growth trajectory,” commented said Rebecca Williams, chief strategy officer (offshore wind), with GWEC.