2024: A Year of Recovery and Challenges for Offshore Wind Sector

As 2024 unfolds, the offshore wind sector continues its journey of recovery from the challenges brought by the Covid-19 pandemic. While facing inflationary pressures, the industry is striving to meet ambitious targets amidst headwinds in the U.S. and EU. Interestingly, the Asia-Pacific (APAC) region emerges as the global leader in wind power installations, accounting for over 51 percent of the total by the end of 2023. Projections indicate that APAC will contribute 61 percent of new installations worldwide from 2024 to 2030.

The Need for Cost Reduction

Despite positive developments, the offshore wind sector encounters significant hurdles that impede its deployment rate. To achieve the industry’s goal of reaching approximately 500 GW by 2030, cost reduction must be a top priority.

“After 22 years in the industry, I am deeply concerned about our future. Offshore wind costs remain elevated post-Covid, with a staggering 30 percent increase from pre-pandemic levels. A notable example is the Hornsea contracts for difference (CfD) prices. In contrast, our primary competitor, solar PV and battery energy storage systems (BESS), have witnessed cost reductions of over 50% during the same period,” remarked Chris Lloyd, a seasoned offshore wind expert based in the UK.

Addressing Cost Drivers

Experts suggest that several factors contributing to the cost escalation in offshore wind development could be effectively addressed through policy streamlining. One critical issue is seabed access, which presents a significant barrier for many developers. Reports indicate that the costs associated with seabed lease agreements have been on an upward trajectory over the past decade and should be reevaluated to foster cost efficiency.

Chris Lloyd advocates for governments to refrain from imposing unique burdens on the offshore wind sector. For instance, requirements such as installing offshore bird boxes for rare gulls pose additional costs and complexities for developers. Lloyd argues that such regulations compel the sector to address broader environmental, economic, and social issues, unlike other technologies.

As the offshore wind industry navigates through challenges and opportunities in 2024, stakeholders must collaborate to drive innovation, enhance efficiency, and overcome barriers to cost reduction. By fostering a conducive regulatory environment and promoting technological advancements, the sector can realize its full potential and contribute significantly to the global renewable energy transition.