Westwood: 40 Pct of Pre-FID Offshore Wind Projects Potentially at Risk

Market Outlooks

January 29, 2024, by Adrijana Buljan

A new analysis from Westwood Global Energy Group found that nearly 40 per cent of the 380 GW of pre-sanctioned offshore wind projects that are expected to reach a final investment decision (FID) between 2024 and 2030 may be at risk.

The offshore wind farms currently in the pre-FID stage, totalling 380 GW in generation capacity, are valued at USD 883 billion (approximately EUR 816 billion), meaning USD 353 billion (approx. EUR 326 billion) in projects is considered “risked”, leaving a sizeable portion in a vulnerable position, according to the consultancy firm.

The analysis provides three scenarios leveraging project certainty statuses to estimate the potential offshore wind capacity that could reach FID by 2030, with one potential High scenario reaching 504 GW of cumulative sanctioned capacity by 2030, with the Medium and Low cases reaching only just over 351 GW and 157 GW respectively.

Bahzad Ayoub, Senior Analyst – Offshore Wind, Westwood, said: “When viewed collectively, our current projections reveal a pipeline that faces sizeable risks before reaching FID, with only 9% of capacity ‘Probable’ with the remaining 51% ‘Possible’ and 40% ‘Risked’.”

Europe dominates across all three scenarios, forecast to account for the highest amount of cumulative capacity (208 GW) that will reach FID by 2030, of which a large proportion (47 per cent) sit within the ‘Possible’ certainty status. The Rest of Asia (RoA) reflects the greatest extent of ‘Risked’ capacity within the share of the region’s pipeline, with the Rest of the World (RotW) next in line, in large part due to immature and evolving offshore wind markets and limited developer track record.

In the Americas, offshore wind projects in the US account for 67 per cent of the region’s total pipeline capacity. Despite the delays and cancellations that the US has been facing, the number of ‘Risked’ projects remains relatively small, Westwood says.

Looking at developer portfolios, the analysis shows developers such as TotalEnergies and BP as having the highest risk profiles, with substantial pipelines but limited or no operational capacity, compared to Ørsted and RWE who have sizeable track records and less “risked” unsanctioned portfolios.

“Offshore wind market uncertainty is rife. Growing diversity of developers in the marketplace, combined with evolving development and commercialisation approaches has created a complex landscape. This is compounded further by the diversification of the investor landscape, with oil and gas majors, public investment funds, and even fashion houses entering the sector. However, despite this uncertainty, there is significant opportunity ahead to be capitalised on, but we must first understand the risk,” Westwood’s Senior Analyst Bahzad Ayoub said.

Westwood published the results of the analysis in a Project Certainty White Paper, which is related to the new Project Certainty feature that the consultancy developed for its WindLogix tool.