Our review of offshore wind in over twenty countries shows that the sector has grown rapidly in recent years, with an accelerating trajectory in 2022 after a record-breaking 2021 in which:
- Installed offshore wind capacity increased by 21 GW globally to 56 GW.
- Global investment reached US $46 billion.
- 82 projects went into operation, raising to 260 the number of operational offshore wind projects worldwide.
Prospects for long-term growth remain strong through this decade, driven by the twin imperatives of energy transition and energy independence.
Russia's unlawful invasion of Ukraine made producing clean power without importing gas or coal more appealing than ever, especially in Europe.
As the most scalable source of renewable energy globally, offshore wind leads other candidates to drive the transition to a greener, more energy secure future.
What to Expect in 2023
Leaders worldwide have set ambitious renewable-energy growth targets that will increase interest in offshore wind. In some countries, such as Germany, new laws take effect in 2023 that fuel continued growth. Additional projects will come online in the next year or so, but significant headwinds lurk, including:
- Inflation: Prices have risen fast across the supply chain, fed by a commodity super-cycle and the effects of COVID-19. This has squeezed suppliers and investors, tempering appetite for the sector (at least for some) and calling into question the deliverability of projects.
- Skills / availability gap: Demand for offshore wind specialists across the supply chain is high, but supply is not keeping up. The International Renewable Energy Agency has warned that skills shortages will increase globally without more proactive steps. In addition, key assets like vessels are sometimes unavailable due to high demand. This can lead to delays and exacerbate inflation.
- Competitive auctions. Competition remains high to participate in greenfield auction processes. Option fees run into the hundreds of millions of dollars, putting increased pressure on the investment case.
- Transmission infrastructure. Some countries which have bold offshore wind targets lack the necessary transmission infrastructure once the power comes onshore. Such grid infrastructure will need to be upgraded in order to efficiently distribute the power generated offshore, onshore.
Offshore Wind Enjoys Strong Prospects for Long-Term Growth
- Widening geographies: Although the expansion of offshore wind in Europe is accelerating, particularly among North Sea nations, the rise of offshore wind in Asia is remarkable. Taiwan has completed an auction for a further 3 GW of power, and in the U.S., 2022 saw record-breaking lease auctions for areas off the coasts of California, New York and North Carolina.
- Emerging technologies: The momentum behind floating offshore wind continues to build, with major developers announcing a number of projects in the past year, including in Asia, where deeper sea waters make some fixed bottom projects impractical and local industry is well-placed to provide floating platforms. France also saw the first project financing of a floating offshore wind project. We expect to see a much faster progression than we saw in the fixed bottom evolution from demonstration-size to commercial size (300MW+) floating projects.
In addition, the combination of offshore wind and electrolysis to produce green hydrogen has caught the imagination of the industry and a number of pilot projects are in progress. There is real hope that power-to-X based on offshore wind will displace the more carbon intensive fossil fuels and provide a reliable supply of renewable energy not subject to intermittency.
We explore these trends in the pages that follow. We also address various legal/regulatory points and provide general market updates, building on our 2021 report (Orrick Offshore Wind Energy Update and Outlook) and drawing on our experts’ direct experiences over the past year. If you have any questions, please get in touch with us or the authors of the respective country reports.
Orrick’s Global Offshore Wind Practice
Our global offshore wind team is collaborating on a range of mandates across Asia, Europe and the United States. Some of our credentials are included on the pages that follow. We are proud to be active participants in the offshore wind sector and look forward to working with our clients and others to move the sector forward in the decade to come.