The global offshore wind sector has experienced significant growth in its mature pipeline despite supply chain disruptions and escalating prices, Wood Mackenzie said.
Late-stage mergers and acquisitions (M&A), turbine orders, and project financial investment decisions (FIDs) reached unprecedented levels in 2023, setting the stage for strong momentum in 2024, according to insights from Wood Mackenzie’s Offshore Wind: 2023 in Review report.
Despite a barrage of negative headlines stemming from inflation and rising component costs, the wind power sector rebounded towards the end of 2023.
Wood Mackenzie Senior Analyst Finlay Clark noted that 8 gigawatts (GW) of secured offtake were canceled, and the UK’s non-participation in AR5 — the world’s largest offshore wind market excluding China— raised concerns.
As the year progressed, wind energy developers focused on tangible near-term opportunities, resulting in record FIDs, turbine orders, and increased tender volumes.
The report highlighted a 61 percent year-on-year drop in net annual pipeline growth in 2023, primarily driven by diminished project ambitions in emerging offshore wind markets. Developers shifted to a more risk-averse strategy, concentrating on immediate opportunities in core markets and reducing alliances and early-stage project M&A activity.
Despite the challenges of 2023, the offshore wind sector concluded the year with a robust development pipeline for late-stage projects, with an awarded support scheme comparable to the capacity at the beginning of the year, even amid record FIDs and offtake cancellations.
Key Highlights:
Final Investment Decisions (FIDs): The offshore wind sector closed 2023 with a remarkable 14 GW of FIDs, marking an 11-fold increase from 2022. Nearly half of the FID capacity in Europe was achieved in Q4, driven by heightened activity in the UK and Polish markets, setting the stage for continued industry momentum in 2024.
Tender Activity: A new record was set for awarded tender capacity in 2023, with 31 GW awarded, reflecting a 13 percent year-on-year increase. Despite offtake challenges, competition remained intense, with a 33 percent increase in the number of bidders. Germany led in tender activity with 13.6 GW awarded, while the absence of the UK in AR5 auctions impacted Europe’s overall performance.
Mergers & Acquisitions (M&A): Despite a decline in total exchanged capacity, M&A activity for advanced pipeline projects increased to 10 GW, signifying continued competition and institutional investor interest in the sector. Active M&A facilitated cash flow for developers, enabling them to recycle capital into future projects and sustain offshore wind development.
Turbines: China surpassed Europe in average turbine ratings for the first time, with a global average turbine rating increasing by 15 percent year-on-year. Europe and the Asia Pacific (excluding China) experienced a record year for turbine orders, with 11 markets, including Poland, securing orders.
Grid-Connected Capacity: China added 6.7 GW in 2023, holding 49 percent of the global operational fleet. Outside of China, annual grid-connected capacity fell by 23 percent year-on-year, with Europe connecting 2.9 GW and the Asia Pacific (excluding China) contributing 1.3 GW. Delays in project timelines and permitting challenges pushed capacity into 2024.
Policymaker Ambition vs. Reality: Global targets for 2030 in offshore wind expanded by 28 GW in 2023. However, sector challenges and shifts in energy demand forecasts have widened the gap between Wood Mackenzie’s offshore wind outlook and 2030 government targets by 46 percent year-on-year. If the current trajectory continues, the offshore wind market may only reach 54 percent of 2030 global capacity targets (excluding China).
Finlay Clark emphasized the need for policymakers to fast-track processes, adjust targets, and provide a clear policy framework to ensure the industry can meet ambitious goals. The report urged policymakers to demonstrate political courage and take crucial steps to support the offshore wind buildout in the 2020s.