With the global installed offshore wind capacity expected to exceed 250 GW by 2030, the combined capital and operational expenditure (capex and opex) for the decade is set to reach USD 810 billion (approx. EUR 670.2 billion), signaling an increasing shift of investments from oil and gas to renewable energy technologies, according to a report from Rystad Energy.
The offshore wind industry has nearly tripled its size since 2016, with global installed capacity expected to grow to an estimated 109 GW by 2025 and rise further to 251 GW by 2030, amounting to a 22 per cent growth a year on average. This massive boost in capacity will involve a steep increase in global spending, Rystad Energy said.
The analyst estimates that total expenditure will amount to USD 56 billion (approx. EUR 46.3 billion) this year with almost 13 GW of new capacity to be commissioned, resulting in a cumulative global installed capacity to 46 GW. Yearly spending will continue to rise to USD 126 billion (approx. EUR 104.3 billion) in 2030, after a short-lived dip in 2022 and 2023.
“In fact, 2030 will be the year of the inflection point when offshore wind capex will be on par with offshore oil and gas greenfield capex (excluding exploration work), at about $100 billion”, Rystad Energy states.
Europe, as the most mature market, is expected to continue dominating in offshore wind spending this decade, totaling about USD 300 billion (approx. EUR 248.3 billion).
Some of the European assets with the largest expenditures are located off the UK, including Ørsted’s 4.8 GW Hornsea Two, Three and Four projects, which are lined up for more than USD 14 billion (approx. EUR 11.6 billion) in capex. The giant Dogger Bank projects, to be developed in three 1.2 GW phases by SSE Renewables, could see more than USD 11 billion (approx. EUR 9.1 billion) in capex, while Scottish Power Renewables’ 3 GW East Anglia Hub will likely involve capex of beyond USD 8 billion (approx. EUR 6.6 billion).
China dominated annual spending between 2019 and 2021 due to its substantial annual capacity additions, according to Rystad Energy. This decade, the country is forecast to spend about USD 110 billion (approx. EUR 91 billion). Outside of China, Asia is expected to see significant investments this year, driven by Vietnam and Taiwan. Spending in South Korea and Japan will also increase beginning in 2023 as more projects are lined up.
According to the report, the Americas region is falling behind due to the US Jones Act and delayed permitting processes for the US offshore wind industry, which are pushing back the expected start-up years for a number of wind farms. The region is expected to spend just over USD 70 billion (approx. EUR 57.9 billion) this decade on offshore wind projects – still a significant sum, but well below that of other global regions, Rystad Energy said.
In March, the US set a target of 30 GW of installed offshore wind capacity by 2030 and embarked on speeding up its environmental review and permitting processes to be able to reach the target.
Rystad Energy expects North and South America will only start spending substantial amounts on offshore wind in 2023. The first large-scale project in the US will be the 800 MW Vineyard Wind 1 project developed by Avangrid and the Copenhagen Infrastructure Partners (CIP) off the coast of Massachusetts, with an estimated investment of USD 2.8 billion (approx. EUR 2.3 billion).
Capex Share to Decline by 2030 with More Operational OWFs
Capex today accounts for 95 per cent of the total expenditure, with opex representing only 5 per cent. The capex share is expected to decline to about 80 per cent by 2030, as all the new installed capacity will require more operational spending to run and maintain.
Turbine manufacturing costs represent the largest share of capex for offshore wind developments with almost 40 per cent of total investments. This trend is expected to continue as countries, especially European ones, are increasingly deploying large turbines, Rystad Energy writes.
Foundation manufacturing is the second major cost element for building an offshore wind farm, with a share of about 15 per cent of overall capex during towards 2030. The share of foundation spending to capex should remain at the same level since a significant influx of floating foundations is not expected for this decade.
Cable manufacturing, consisting of array and export cables, accounts for about 14 per cent of the total capex. Combined with the cable installation cost, the segment weighs in at about 20 per cent of capex. This cost is not expected to increase by 2030, as larger turbines help reduce cable and installation costs despite projects moving increasingly further from shore.
“The colossal level of investments anticipated in the offshore wind industry this decade reflects the ambitious targets set by companies and governments alike. As the market matures and economies of scale are achieved, investments could surge further, sparking even more installed capacity”, said Petra Manuel, offshore wind analyst at Rystad Energy.