Cost inflation could add around $280bn in capital expenditure for the offshore wind sector, according to the latest EY Renewable Energy Country Attractiveness Index.
Offshore wind is crucial to achieving net zero, but has experienced a difficult 12 months, challenged by a squeezed supply chain and escalating costs.
Global project costs have risen by 39% since 2019 and the next decade could see cost inflation adding around $280bn in capital expenditure for the sector.
Against this backdrop, around 80% of the 15 markets with offshore wind targets for 2030 are predicted to miss their stated goals.
Not least, the UK has conceded its lead position as the most attractive country to host offshore wind projects, falling three places to seventh position on the index overall.
In September 2023, the maximum strike price of £44 (US$54) per megawatt hour for offshore wind in the UK’s fifth allocation round (AR5) was not sufficient to entice developers to bid.
This represents a huge setback in the UK’s goal of reaching 50GW of offshore capacity by 2030.
EY global renewables leader Arnaud de Giovanni said: “The offshore wind sector has reached an inflection point at a time when the climate emergency is demanding urgent investment to meet global net zero targets.
“For offshore wind to fulfil its role in global decarbonisation, it is necessary to mitigate risks that are beyond the control of developers, guaranteeing them a reasonable return on their investments.
“Tensions in the offshore supply chain could be alleviated by standardising technologies, offering greater certainty to manufacturers and developers.
“And governments need to devise strategies that simplify and expedite the consenting process, minimising risks between the issue of offtake agreements and final investment decisions.”