By Oliver Metcalfe, Head of Wind Research, BloombergNEF
Offshore wind investment surged to a new high in 2023, according to BloombergNEF''s Renewable Energy Investment Tracker 1H 2024. The record comes despite rising costs and interest rates forcing some firms to delay or cancel projects last year.
Global offshore wind investment reached a record $76.7 billion, jumping 79%. This offset the 17% year-on-year decline from the onshore segment. China remained the largest offshore wind market, in spite of a down year, followed by the UK and the US.
The offshore wind industry had a tumultuous 2023. Some 6.9 gigawatts of projects in the US and the UK canceled their revenue contracts last year, as rising equipment and financing costs, permitting and grid connection hurdles, and supply chain delays slashed many developers'' expected project returns. Despite the turmoil, firms like Orsted, Iberdrola, Northland Power and Mitsui & Co were among those that reached final investment decisions on major projects in 2023.
BNEF predicts that governments will be willing to pay more for offshore wind and include more risk-sharing mechanisms in auction deals in 2024, while interest rates could also start to fall, decreasing the cost of borrowing. This could push more struggling projects to financial close in 2024.
A high-level summary of the Energy Transition Investment Trends 2024 report is available here.
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BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
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Casey Murphy has fanned his passion for finance through years of writing about active trading, technical analysis, market commentary, exchange-traded funds (ETFs), commodities, futures, options, and forex (FX).
General Electric Company (GE) and Vestas Wind Systems A/S (VWDRY) supplied turbines for 87% of U.S. wind power capacity installed in 2020. In 2020, GE captured 53% of the U.S. market for turbine installations, followed by Vestas at 34%, Siemens Gamesa Renewable Energy at 9%, Nordex at 3%, and Goldwind at 1%.
Office of Energy Efficiency & Renewable Energy. "Wind Energy Basics."
U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. "Land-Based Wind Market Report: 2021 Edition," Page 13.
Office of Energy & Renewable Energy. "Wind Vision: A New Era for Wind Power in the United States."
U.S. Energy Information Administration. "Wind explained. Electricity Generation From Wind."
U.S. Department of Energy, Office of Energy Efficiency & Renewable Energy. "Utility-Scale Wind Energy."
U.S. Department of Energy, Office of Energy Efficiency & Renewable Energy. "Wind Energy Market Sectors"
U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. "Land-Based Wind Market Report: 2021 Edition," Page vii.
Businesswire. "Santander Corporate & Investment Banking Has Acted as Financial Advisor for Vineyard Wind 1 – the First Large-Scale Offshore Wind Farm in the U.S."
Office of Energy Efficiency & Renewable Energy. "Production Tax Credit and Investment Tax Credit for Wind."
SEB Group. "The Green Bond Report," Page 5.
SEB Group. "The Green Bond Report," Page 6.
As the push to move to a clean energy economy in the U.S. accelerates, the offshore wind (OSW) industry has the potential to advance the transition by creating jobs, improving infrastructure, and stimulating local economies. With a national goal of developing 30 gigawatts (GW) of energy from OSW by 2030, a U.S.-based industry could attract $12 billion in direct private investment annually while reducing overall emissions, according to the Department of Energy (DOE). Generating 30GW of energy from offshore wind would power approximately 10 million homes annually.
Although there is growing demand, without accessible, predictable, and affordable supplies to complete these projects, the promise of the domestic offshore wind industry is at risk. To better realize OSW potential in the U.S., the market will need to see enabling policy and infrastructure investments necessary to fortify the OSW supply chain. This could lead to the creation of up to 49,000 manufacturing and supplier jobs, according to the DOE''s National Renewable Energy Laboratory (NREL)—a significant increase from the just over 1,000 workers the industry employed in 2022.
In fact, as of mid-2023, current and planned OSW projects amounted to 52GW of energy—nearly double the 2030 goal.
According to NREL''s analysis, $22.4 billion in public and private investment is needed by 2030. This includes funding for upgrading ports to prepare and stage wind components, building new vessels to facilitate turbine transfer and installation, and facilities to make and assemble turbine components. To hit the 30GW-by-2030 goal, the U.S. would need 2,100 OSW turbines operating and transmitting power to the grid, NREL says. To reach that number will require 58 crew transfer vessels, four to six turbine installation vessels, and 23 more major component manufacturing facilities.
Building out a robust domestic supply chain—from the massive blades that power the wind turbines to the nuts and bolts that hold them together—will be key to the success of the OSW industry and the continued growth of the American clean energy economy. As the OSW industry navigates through current headwinds caused by global supply chain constraints and inflation, the U.S. government can alleviate pressure and streamline efficiency by doubling down on the domestic supply chain.
As the U.S. domestic supply chain grows from infancy into full-fledged viability, there are ways states can attract industry development with tax incentives, grants, workforce training programs, and more. These incentives, coupled with substantial federal support—including the Department of Transportation''s (DOT''s) Port Infrastructure Development Program grant and the investment and production tax credits for offshore wind—are already helping some states make the OSW market far more attractive to industry.
Already, through May 2023, industry and government invested $2.6 billion in 12 offshore wind ports and manufacturing facilities across the country, as summarized by the DOE. These facilities will produce wind turbine components such as blades, towers, floating platforms, and cables for years to come. Even more supply manufacturing facilities have been announced across a dozen states, which will boost economies from Massachusetts to Texas once they come online.
With smart policies and forward-looking infrastructure investments, coastal and inland states can benefit from the burgeoning multibillion-dollar OSW industry. Taking this route would spur job gains and economic development and help build a domestic OSW supply chain that can power the U.S. toward a fully clean energy future.
Laura Lightbody directs The Pew Charitable Trusts'' energy modernization project. Courtney Durham Shane works on the project.
Founded in 1948, The Pew Charitable Trusts uses data to make a difference. Pew addresses the challenges of a changing world by illuminating issues, creating common ground, and advancing ambitious projects that lead to tangible progress.
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