The global offshore wind supply chain will require $27bn of secured investment by 2026 if it is to meet a fivefold growth in annual installations (excluding China) by 2030, according to Wood Mackenzie.
The figure is based on Wood Mackenzie’s base case outlook which forecasts annual capacity additions to hit 30GW by 2030, but is dwarfed by policymakers’ offshore wind targets, which would require nearly 80GW a year.
To hit this goal set by governments across the world, the supply chain is estimated to require more than $100bn in investment.
These findings come from: ‘Cross currents: Charting a sustainable course for offshore wind’, Wood Mackenzie’s analysis of current offshore wind supply chain constraints, investment barriers and what is required to scale up.
“Governments have made clear their commitment to offshore wind as an important pillar of decarbonisation and energy security,” said vice chair power and renewables at Wood Mackenzie and co-author of the report Chris Seiple.
He added: “However, the supply chain is struggling to scale up and will be an impediment to achieving decarbonisation targets if change does not happen.
“Nearly 80GW of annual installations to meet all government targets is not realistic, even achieving our forecasted 30GW in additions will prove unrealistic if there isn’t immediate investment in the supply chain.
“Adjustments and new policies by governments and developers will be required to transform the supply chain to deliver offshore wind projects at industrial scale.”
The oversupply that resulted from the 2015 supply chain buildout is one of the factors depressing profitability, which saw the industry boost its capacity to supply around 800 turbines, compared to the yearly average of 500 since then, said Seiple, adding suppliers are now also having to cope with the inflation of the past two years and higher commodity input costs.
Seiple said: “Burned once, current suppliers are cautious in their investment plans and the lack of profitability is hampering their ability to fund manufacturing capacity expansion – ultimately stalling innovation in the sector.”
Some 24GW of projects scheduled to come online between 2025 and 2027 have secured a route to market, through either some form of subsidy or power purchase agreement, but not yet made a financial investment decision.
Delaying projects at this stage will shift the anticipated equipment demand from 2025-27 to 2028-30. While the result would be less need for manufacturing expansion in the shorter term, there would be an even greater need for investment to expand to meet the demand from 2028-30.
Senior research analyst at Wood Mackenzie and report co-author Finlay Clark said: “In reality, if this occurs, certain projects might not get built at all in 2028-30, meaning governments will risk falling further behind their targets.
“The uncertainty surrounding project timing is a large reason why supply chain participants hesitate to expand further.”