Offshore Wind Projects Face Increased Risk for FIDs in 2023
Posted 11/07/2023 12:02
A significant number of potential offshore wind projects worldwide, set to make final investment decisions (FIDs) this year, are facing increased risk, according to industry analysts. Approximately 30-32 gigawatts of offshore wind development remain in the pipeline for potential FIDs in 2023, but concerns have arisen over the viability of some projects. The head of Energy Transition at Westwood Global, David Linden, stated during a recent webinar that "a chunk of that is starting to look more at risk." Although there have been strong FIDs in the first half of the year, with 9.4 gigawatts approved in China, Taiwan, and Europe, there have also been project cancellations and delays, including in the UK.
Orsted's £8 billion Hornsea Three wind farm is a notable example of a project facing uncertainty, as several tax breaks crucial to its viability have not been granted. The recent imposition of the Electricity Generators Levy by the UK Government has affected the project's construction and financing terms. Linden highlighted other instances of offshore wind setbacks, such as the postponement of the Trollvind project, which impacted floating wind developments, and several North American projects requiring route-to-market renegotiations.
Westwood also mentioned specific projects to watch for key FIDs in 2023, including the Hornsea Three wind farm in the UK, scheduled for Q4. The Inch Cape wind farm, a 1-gigawatt project located off the coast of Angus in Scotland, and ScottishPower Renewables' East Anglia Three, a 1.4-gigawatt development off the Suffolk coast, are also expected to make FIDs in Q3. Despite the challenges, the approval of Orsted's Ocean Wind One project in New Jersey provided a glimmer of hope for the industry.
The offshore wind sector faces reassessments and reevaluations, with projects being restructured and portfolios refocused. However, the potential for growth and success remains, and key FIDs in the coming months will be closely monitored to gauge the industry's trajectory.