ANALYSIS - Offshore wind in 2024, 10 predictions to help you navigate the future

The last 12 months in offshore wind have seen a fair amount of turbulence. The market narrative has at times been very negative, but the actual situation is always more nuanced with plenty of positive news.

To help you prepare for how the offshore wind sector will respond over the next 12 months (and beyond), we present the TOP 10 predictions for 2024 by Norwegian company Esgian. A team of analysts sifted through extensive data in Esgian's Wind Analytics platform to formulate these predictions. Enjoy!

Prediction 1: Heightened uncertainty from elections

National elections in more than 40 countries in 2024 will lead to short-term uncertainty in the offshore wind sector, and in some countries cause delays and potentially affect long term policy stability. Elections in the US will take the headlines, but other important elections will occur in existing offshore wind hotspots such as Belgium, South Korea and Taiwan. New entrants such as Bangladesh, Finland, India, Lithuania, Portugal and Uruguay will also hold national elections. In addition, EU parliamentary elections are scheduled for June and the UK will hold a general election in the second half of the year.

The uncertainty around forming a governing coalition in the aftermath of the Spanish elections in 2023 illustrates how elections can lead to a significant slowdown in the development of an offshore wind framework. With so many offshore wind-relevant countries hosting elections in the next 12 months, we see a significant downside risk of offshore wind development plans being delayed in 2024 and beyond due to time-consuming political horse-trading in the aftermath of the elections.

Prediction 2: Possible renaissance of near-term US projects

Negative sentiment around US projects dominated headlines in 2023. But all is not lost and we expect some projects to be revived, potentially quite quickly. There may be some permanent casualties, but it takes a lot for offshore wind projects to completely disappear. If they are revived, we will be looking at project delays rather than project cancellations.

The consequences of delays (and not cancellations) will also be felt in Europe. Developers and OEMs have certainly been hit financially. In the short term, there may be factory capacity in Europe that was expected to be utilised for US-projects that now opens up. In the medium-term, any delays (as opposed to outright cancellations) will lead to a potential compression of projects resulting in more stress on the supply chain.

Prediction 3: Asian manufacturing growth engine

Many Asian countries and companies greatly expanded as offshore wind supply hubs in 2023, and we expect them to further cement their positions in the coming 12 months. South Korean companies have already been successful in the export market and are well positioned as their domestic market moves into the fabrication mode. They will continue to target the export market, firstly elsewhere in Asia but subsequently in Europe and the USA. To date, Japanese companies have focused on building new installation vessels, but we will now see concrete moves to develop their manufacturing capabilities. And Vietnam will further mature as a key market serving both Europe and other Asian export markets.

Prediction 4: Retail companies buying direct stakes in wind farms

Retail companies looking to decarbonise their own operations have started entering the offshore wind sector, and this trend will accelerate further in 2024. Rather than PPAs favoured by industrial offtakers, in 2023 IKEA, H&M, Bestseller and ASKO all acquired direct equity stakes in planned offshore wind projects. This opens an enormous pool of potential equity owners as there is practically no end to companies that need to decarbonise their operations.

For these retail companies, offshore wind is an attractive market as project economics tend to be appealing and the market is open to small-stake equity partners. These companies also tend to have ambitious climate targets reflecting their climate-conscious consumer base. Thirdly, it provides the larger retail companies the opportunity to hedge against volatile power prices by being exposed to the power market both as a producer and consumer. Japanese utilities have applied a similar strategy for decades, operating both as LNG importers and LNG exporters by holding small equity stakes in LNG liquefaction facilities.

For traditional offshore wind developers, such equity partners provide the opportunity to financially de-risk their project portfolios while still retaining control of the projects.

Prediction 5: Adjusting to a phased buildup of floating

Floating wind project sizes will reduce in 2024. Initial announcements from developers suggested minimum project sizes for floating wind would be multiple GWs. This is not achievable. We will see a much-needed realistic approach coming to the fore. A reduced appetite for large-scale projects will see a focus on projects that have the option of gradual expansion and build up. Faced with the time and cost consuming reality of adopting a new technology to a commercial scale, developers need the option of a step-by-step approach, to be able to mature the supply chain, develop the technology and gain experience. After all, boasting about size only works for so long.

Prediction 6: 2035 becomes the new 2030. Expect targets to be adjusted, but the details matter

Many countries (and a selection of states and provinces) have adopted offshore wind targets for 2030. The deadline for meeting these targets is quickly approaching, and the window for projects to be permitted and built in time for a COD before the end of the decade is closing. Countries may start adjusting their targets, setting goals for 2035 instead of 2030. These targets are likely to be higher but run the risk of masking missed promises, so that a higher target at a later date does not necessarily reflect more ambition.

Prediction 7: De-risking of project portfolios

Developers will seek to focus on projects in familiar markets and reduce risk in their development pipeline. After a turbulent 2023, having a lower-risk, secured pipeline of profitable projects will be a focus area for developers and their shareholders. Recent industry headlines on stalled or abandoned projects in new offshore wind markets will shift developers to focus on operations in specific areas. Portfolio concentration allows for a focus on core regional and / or strategic competencies. 2024 will be a year of trimming the fat.

Prediction 8: Cautious start to harmonising offshore wind carbon emissions estimation

An increasing number of countries, including France, Norway, the Netherlands and the UK, are including circularity and carbon footprint assessments as part of offshore wind tender requirements. The EU Wind Power Action Plan from October 2023 clearly states that sustainability should become a non-price criterion in future European lease rounds. All countries have, however, so far pursued their own approaches to methodologies and frameworks, and the consequence has been low degree of consistency and comparability.

While there is still a long way to go for full harmonisation of carbon footprint assessments, we expect the offshore wind sector to slowly start inching towards a shared framework in 2024. The largest wind farm developers, OEMs, academia and other relevant stakeholders will continue to work on standardisation and a common framework for life-cycle analysis (LCA).

--- The first eight predictions seem distinctly plausible in our opinion, whereas the following two are considered less likely. Although the likelihood of the two coming true is lower, their impact on the sector would undoubtedly be considerable. ---

Prediction 9: Cyberattack creates havoc in European energy markets

The European fear of a cyberattack on critical energy infrastructure could come true when an undisclosed hacker group takes control of and/or shuts down an offshore wind farm. The hijacking of the power plant would send shockwaves through the region and lead to soaring power prices and major concerns around the vulnerability of the European power infrastructure.

Beyond this immediate impact the consequences are very unclear. But it is certainly possible to imagine a more protectionist response from the EU. This might include restrictions on sourcing equipment and components and concerns around ownership of assets by “unfriendly” states. Might this snowball to countermeasures and a subsequent lack of key equipment and components, causing major disruptions to projects under development and to existing projects that require spare parts?

Prediction 10: Italy finally improves permitting track, unblocking huge project pipeline

Italy is currently the European country with the highest number of proposed projects, spanning well over 100 projects, totaling around 96 GW. However, proposed projects in Italy have been met with fierce local opposition and developers have been stuck in a complicated and lengthy permitting process. While this might be considered a major roadblock, experience from South Korea shows that a complicated permitting system can be unlocked. In the latter half of 2023, South Korea has seen a significant increase in activity. A similar trajectory in Italy, with a streamlined and clear permitting track, could revitalise offshore wind ambitions in the region. This could also move some of the focus in Europe from the North Sea to large-scale floating wind in the Mediterranean.

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