WoodMac: rising costs threaten investment in wind power

The wind energy sector, particularly offshore, has faced rising costs for building new capacity in recent months and years. According to an analyst at Wood Mackenzie (WoodMac), the situation is particularly evident in regions that lack experience in offshore wind. Last year, some major developers even suspended offshore wind farm projects that were no longer financially viable due to rising costs.

The recent rise in the cost of building offshore wind farms has significantly complicated developers’ plans. According to Finlay Clark, senior renewables analyst at WoodMac, the slowdown in investment is particularly evident in emerging markets. Spain is one example: Clark says it planned to use floating offshore wind farms because the deep waters there are often unsuitable for conventional fixed-bottom turbines.

One recent example of the challenges is Orsted’s suspension of offshore projects off the US coast. Similarly, last year Vattenfall suspended a project off the coast of the United Kingdom. In both cases, the cause was sharply rising costs. The wind energy sector has generally been beset by rising costs in recent years, partly due to higher demand. Clark says that developers no longer have the upper hand in negotiations; technology suppliers do.

Wind power remains competitive

Clark says wind power remains competitive. He advises investors to invest early, which can help them bring their projects to completion. As an example, he cited RWE and its long-term investments to reduce the cost of building wind farms.

"They were so concerned that their wind projects would be delayed or perhaps never built that they chartered vessels for nine years," Clark told Montel.

Meanwhile, governments are trying to tackle rising costs by increasing the prices developers can bid at auctions, Clark says. Recent experience has shown waning investor interest, driven by higher risks and rising costs for wind farms.

According to Montel, citing data from the WindEurope association, investment in wind power in the EU reached 48 billion euros last year, with roughly two-thirds of that amount going to offshore wind.