Offshore wind is taking a bigger share of the global energy market as nations go low carbon. However, schemes are competing against a backdrop of rising costs, supply chain capacity constraints and the war for talent, say Turner & Townsend’s David Whysall and Morten Søjborg.
Wind power has been a fixture for communities across the globe for thousands of years, but it wasn’t until 1991 that the idea of putting a windmill in the sea came to fruition.
The Vindeby farm in Denmark was built with a modest 11 turbines and a capacity of 5MW, but it inspired a global market that is now rapidly accelerating. Total offshore capacity globally was estimated to be over 75GW at the end of 2023, according to the Global Wind Energy Council, with a remarkable 410 GW expected to be created within the next decade.
While ambitious targets have been set, the offshore wind (OSW) industry and national governments need to work together to create the right circumstances to invest. The OSW industry is focused on affordability, capacity and performance, while the state is focused on strike price, grid availability, local supply chain development and jobs.
The countries where this partnership works most successfully will be the winners in the global offshore wind market.
Managing viability
Political support for offshore wind is increasing as the benefits of affordability and energy security accrues. Offshore wind is an important measure to reduce carbon emissions and deliver on global commitments, but not the only option. The industry is susceptible to similar prevailing macroeconomic and inflationary pressures as other industries which can be seen through the lens of wages, materials and the cost of borrowing. This pressure can be witnessed in a spike of costs across the board for components and vessels globally.
Therefore, the market’s ability to compete and provide a compelling argument for investment is heavily dependent on supply chain capacity, innovation and efficiency to reduce cost and reliability of energy delivery.
Supply chain relationships
Growth in global demand for offshore wind and the time required for investment to deliver new capacity, means that supply chains are becoming an increasing pinch point in delivery.
Furthermore, the industry draws on a comparably small pool of specialist skills and services for the design, manufacturing, logistics and construction of offshore windfarms. Examples of investment decisions being held or slowed down are now common and such constraints are becoming significant enough for the GWEC to downgrade its forecasts for the sector’s growth between 2024-28 by 10% compared to this time last year. Careful planning is therefore needed to prioritise the most significant supply chain bottlenecks.
This issue is perfectly illustrated by competition for a relatively small number of vessels capable of delivering large turbines in deep water, which are also in demand to service other industries. The complex multi-contract nature of offshore wind is driving developers to mature their relationships with their supply chains, with long term procurement strategies and government commitments required to underpin supply chain investment. The success of the industry is dependent on the pace that this can be achieved while remaining sustainable within the context of future industry targets.
Setting up global programmes for success
The OSW industry continues to spread across Europe and Asia and is increasingly progressing into the Americas and Australia. This geographical growth is creating opportunity for developers to expand their global footprints and for new entrants to participate in the market. With rapid growth, technological advances and an increasing geographical footprint, the OSW sector is still maturing and on the early part of a journey to become industrialised and efficient. This harbours opportunities for those establishing the blueprint for development while staying flexible and innovative.
The use of digital solutions to improve communication, build local capability and utilise data to drive better outcomes is increasingly important. Partnership strategies are also evolving, with international developers teaming up with local players, to take advantage of local knowledge which can be combined with proven delivery experience to achieve successful outcomes and manage delivery risk.
After all, the clean energy transition is one of the greatest priorities of our time. We are committed to playing our part in delivering affordable, sustainable and secure energy globally.
David Whysall is global managing director for energy and natural resources at Turner & Townsend and Morten Søjborg is chief executive officer at Turner & Townsend JUMBO.
