Roaring figures for offshore wind energy in 2023: a record number of 4.2 GW of new offshore wind farms came into operation in 2023, an increase of 40% compared to 2022.
If all European countries implement their plans for 2024 as planned, at least 40 GW will be tendered this year. Germany, Denmark, the United Kingdom, France and the Netherlands are the top five countries for capacity to be auctioned for the next two years. The supply chain is also undergoing a turnaround, with new factories in Poland , Denmark, Germany, the Netherlands and Spain. Yet there are also risks.
Scale up and invest
Germany alone will tender 8 GW in 2024. By comparison, Europe will have auctioned 13.5 GW of new offshore wind capacity in 2023. Europe will build approximately 5 GW of offshore wind annually over the next three years. However, this is not sufficient to achieve the European objectives in the field of climate and energy security. European countries will need to build 24 GW per year in the period 2027-2030 to meet the 2030 targets. But the current offshore wind supply chain can only produce about 7 GW per year.
Investments in expanded and new factories, such as those now announced by Vestas , are therefore indispensable. At the same time, Europe must ensure that the supporting infrastructure for offshore wind energy is in place. This means investing in networks, ports and ships. The first signs of this can now be seen. Europe's leading offshore power cable manufacturers are all expanding their factories, ensuring they can meet the growing demand for cables to connect offshore wind farms in Europe. For example, Bladt Industries is building a new factory for offshore substations in Denmark. Smulders and Neptun Werft are building a new facility in Rostock (Germany) to make converter platforms. And Dragados is expanding production of offshore substation platforms in Cadiz (Spain).
Risks
In addition to the good figures, there are also risks. As many as 70% of all auctions in 2023 used unlimited negative bidding, asking wind energy developers to pay for the right to build an offshore wind farm.
Unlimited negative bidding entails a number of major risks that can jeopardize the realization of projects:
- Developers must cover the additional costs of negative bids. They can either pass this on to electricity consumers, who are already suffering from high prices, or to the wind energy supply chain, which is already struggling with inflation and cost increases.
- Negative bids also add to the overall project risk, driving up the cost of capital. This is especially challenging with higher interest rates now.
In Germany, for example, it appears that none of the major projects awarded in 2023 with unlimited negative bidding auctions have so far seen a final investment decision.
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