Profitable Offshore Wind Energy

aerial photo of wind turbines near field

Over the past two decades, the world of renewables has changed dramatically. The latest category to become a popular asset class and undergo considerable de-risking is offshore wind.

Currently leading the way is Europe, accounting for roughly 80% of the world’s operational offshore wind capacity. The U.S. sector, too, is showing signs of promise, with tremendous investor interest presenting a positive outlook for future growth. Yet with a limited infrastructural track record for venturing offshore, barriers to growth are significant.

Europe Leads

Europe’s offshore sector has seen significant value creation over the past decade. Construction and operation costs have been markedly lower than anticipated due to favorable pricing mechanisms, lower costs of capital and excellent operator execution, and development is expected to further accelerate off the back of the EU’s policy target of upping installed capacity from 20 gigawatts to 90 gigawatts by 2030.

Europe’s industrial pioneers have thus far dominated the sector. Indeed, Orsted, Vattenfall and EnBW have granted Europe significant competitive advantage across project construction, maintenance optimization and supply-chain management. Additionally, technological advancements have led to declining operations and maintenance (O&M) costs and have contributed to an economically favorable industry climate.

And, in line with the EU’s net-zero carbon target by 2050, offshore investment is now being supported around the continent in more advanced ways. For instance, it is now commonplace to award project contracts through reverse auctions in which bidders compete by accepting lower and lower subsidies.

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