In a recent analysis by Wood Mackenzie, the offshore wind sector experienced a notable surge in late-stage pipeline mergers and acquisitions (M&A), turbine orders, and financial investment decisions (FIDs) throughout 2023. This has set the tone for a strong momentum expected to carry into 2024. Despite facing challenges such as inflation and escalating component prices, the industry witnessed a shift in focus towards more immediate opportunities towards the close of 2023, leading to record levels of FIDs and turbine orders.
“Negative headlines for offshore wind were rife across much of 2023, as inflation and rising component pricing reversed the industries trend of continual cost reductions,” noted Finlay Clark, senior analyst at Wood Mackenzie. The cancellation of 8GW of secured offtake and the absence of participation in AR5 in the UK, a major offshore wind market, prompted concerns within the industry. However, governments worldwide provided crucial support by announcing new and reinforced policy frameworks in Q4 2023.
The analysis also revealed a 61% YoY drop in net annual pipeline growth in 2023, driven by diminished project ambitions in emerging offshore wind markets. Developers adopted a more risk-averse strategy, concentrating on core markets and immediate tangible opportunities. This shift resulted in a decrease in alliances and early-stage project M&A activity, with fewer international developers and investors establishing links with new local players in higher risk markets.
Despite the challenges, the sector concluded 2023 on a positive note, maintaining a healthy late-stage project pipeline with awarded support schemes, equivalent to the capacity at the beginning of the year. The offshore wind sector closed the year 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.
“This is important as it increases the momentum for the industry going into 2024 and places an emphasis on delivering on these projects through secured contracts with suppliers and adhering to project timelines,” emphasized Clark.