Offshore wind’s late-stage pipeline mergers & acquisitions (M&A), turbine orders, and project financial investment decisions (FIDs) saw record activity in 2023, according to new Wood MacKenzie analysis.
This has boosted the sector’s momentum into 2024, according to Wood Mackenzie’s Offshore wind: 2023 in review report.
Finlay Clark, senior analyst at Wood Mackenzie, said: “Negative headlines for offshore wind were rife across much of 2023, as inflation and rising component pricing reversed the industries trend of continual cost reductions.
“With 8GW of secured offtake cancelled, and zero participation in AR5 in the UK – which is the world’s largest offshore wind market excluding China – many would consider this a reality check for offshore wind.
“Yet going towards the end of the year, the sector gained momentum as developers doubled down on more tangible near-term opportunities – FIDs and turbine orders reached record levels, and both tender volumes and acquisition of advanced pipelines also increased compared to 2022.
“More importantly for 2024, governments across the globe offered the sector much needed tailwinds by announcing new and strengthened policy frameworks in Q4 2023.”
2023 experienced a Year-on-Year (YoY) drop of 61% in net annual pipeline growth, driven by a fall in project ambitions in emerging offshore wind markets, according to the analysis.
Fuelled by falling technology costs in a rapidly globalising market, capacity proposed in emerging markets ballooned in 2021 and 2022, stated the report.
Yet leading up to 2024, developers’ strategy became increasingly risk averse, placing a renewed focus on immediate tangible opportunities on core markets, it added.
This resulted in a drop in the number of alliances and early-stage project M&A activity, as fewer international developers and investors sought to establish links with new local players in higher risk markets, according to the report.
Clark said: “The necessary action taken by developers to target what is in front of them has increased the execution of established opportunities at the expense of those further afield.
“However, despite a turbulent 2023, the sector finished the year with a healthy development pipeline of late-stage projects with an awarded support scheme, which was on par with the capacity at the start of the year, even with record FIDs and offtake cancellations.”
The sector finished 2023 strong with a record 14 GW of FIDs, according to the analysis.
This was an 11-fold increase from 2022 to 2023, according to the report and nearly half of FID capacity in Europe was reached in Q4 alone as a flurry of activity in the UK and Polish markets drove activity to an all-time high by the end of the year.
Clark added: “This is important as it increases the momentum for the industry going into 2024 and places an emphasis on delivering on these projects through secured contracts with suppliers and adhering to project timelines.”