Challenges Pile Up for Offshore Wind Industry as Costs Rise and Supply Chain Disruptions Continue

The offshore wind industry is facing significant challenges that threaten its ability to contribute to countries’ climate change goals. These challenges include disruptions in the supply chain, design issues with wind turbines, and rising costs. The pressure to reduce dependence on fossil fuels is urging manufacturers and component suppliers to meet the growing demand for cleaner energy.

The European Union (EU) is particularly affected, as it has a binding target to obtain 42.5% of its energy from renewable sources by 2030. To achieve this, the EU needs to more than double its wind energy capacity from 205 gigawatts (GW) to 420GW, and significantly increase offshore wind energy production from 17 GW to 103 GW. However, several offshore projects in the UK, the Netherlands, and Norway have been delayed or canceled due to high costs and supply chain constraints.

The disruption caused by the COVID-19 pandemic has been exacerbated by the conflict in Ukraine. Wind energy producers are also experiencing squeezed profits due to rising transportation and raw material costs, as well as increased interest rates and inflation. This has raised concerns among industry experts that the offshore wind sector may not be able to meet climate change targets.

The rapid growth of offshore wind energy has made it cost-competitive with fossil fuels in some countries. However, some executives and analysts argue that the race to make turbines bigger and more efficient may have been rushed. The larger the turbines, the more likely they are to experience failures, as they require stiffer reinforcement to accommodate the increased flexing of the blades.

Quality issues have also emerged with newer wind turbine models, leading companies like Siemens Gamesa to invest billions in addressing these problems. Insurance claims from wind energy producers have increased in number and severity, leading to concerns about the risks associated with entering the offshore wind market.

While governments worldwide are increasing their bids for offshore wind permits, some wind producers argue that the electricity prices offered in tenders are too low to support new projects given the industry’s rising costs. For example, the UK aims to triple its offshore wind capacity by 2030 but has recently seen a lack of bids at a recent auction.

In conclusion, the offshore wind industry is grappling with a range of challenges that hinder its expansion and ability to contribute to climate change targets. Supply chain disruptions, design issues, and rising costs have led to project delays and cancellations, posing a risk to the industry’s growth and the achievement of renewable energy goals.

(September 28) The offshore wind industry is facing a host of headwinds from a combination of supply chain disruption, problems with wind turbine design and rising costs. Photo taken in May 2022 at the construction site of an offshore wind farm foundation in Le Havre, France (2023 Reuters/Pascal Rossignol)

[ロンドン ２８日 ロイター] – The offshore wind industry is facing a host of headwinds due to a combination of supply chain disruptions, design issues with wind turbines, and rising costs. This has disrupted dozens of development projects and threatens to affect the ability of countries to achieve their climate change goals.

The race to reduce dependence on fossil fuels is putting pressure on manufacturers and component suppliers to meet the growing demand for cleaner energy.

The pressure is particularly serious in the European Union, which has completed a binding legal target for 42.5% of its energy to come from renewable sources by 2030.

For the EU to raise its renewable energy share from the current 32% to the new target of 42.5%, the EU will need to increase its wind energy capacity from 205 gigawatts (GW) to 420GW, according to an industry association WindEurope It is necessary to more than double the amount and significantly increase the capacity to produce offshore wind energy from 17 GW to 103 GW.

However, this year offshore projects in the UK, the Netherlands and Norway have been delayed or shelved due to high costs and supply chain constraints. In addition, in the UK, there were no applications from offshore wind energy developers for renewable energy subsidies.

“If this leads to an extended period of project downtime, it will be more difficult to meet many of the 2030 renewable energy targets,” said John Wallace, investment manager at Jupiter Asset Management.

Even before the EU agreed new renewable energy targets this year, companies such as Orsted (ORSTED.CO), Shell (SHEL.L), Equinor (EQNR.OL) and wind turbine maker Siemens Gamesa were investing in wind on the sea. industry was not large enough to meet climate change targets.

The disruption in the supply chain caused by the coronavirus pandemic has become even more serious due to the war in Ukraine. Meanwhile, some wind energy producers are seeing profits squeezed by rising transport and raw material costs, rising interest rates and inflation.

Markus Klebber, CEO of German energy giant RWE (RWEG.DE), posted on a social networking site (SNS) that the offshore wind industry is facing various problems at a time when rapid expansion is expected. He expressed the opinion that the This overlap puts the achievement of climate change goals at risk.

Offshore wind energy has grown rapidly over the past two decades, reaching costs equal to or lower than fossil fuels in some countries. However, some executives and analysts note that the race to make turbines bigger and more efficient may have been too hasty.

Turbine size doubles almost every decade, with the largest turbines commissioned in 2021 and 2022 having blades of 110 meters in length and outputs of 12 to 15 megawatts (MW).

But the more they get, the more likely they are to fail, says Rob West, an analyst at consultancy Thunder Side Energy. The larger the blade, the more it flexes and the need for stiffer reinforcement.

Siemens Gamesa announced in June that it would spend 1.6 billion euros ($1.7 billion) to address quality issues with two of its newest onshore wind turbines.

Fraser McLachlan, CEO of G-Cube Insurance, which provides insurance for renewable energy businesses, said that although the number of insurance claims from wind energy producers has decreased over the past year, the number of claims has increased significantly and the severity of the claims has varied. It is increasing. “Entering the offshore wind market has become a risky business not only for insurance companies but also for manufacturers, developers and suppliers, with some companies facing an existential threat.”

Jochen Eichhold, CEO of Siemens Gamesa, said his company’s offshore wind business faces different challenges than onshore wind, including delays in building production sites, supply chain disruptions and a lack of quality Ta components.

Vestas, a major turbine maker, is also struggling to clear its backlog of orders and expects supply chain disruption to continue throughout the year.

Meanwhile, governments around the world are stepping up bidding for offshore wind permits. According to Bloomberg New Energy Finance, by the end of 2024, more than 60 GW of offshore wind energy contracts and leases will be signed worldwide.

But some wind producers have complained that the electricity prices offered in the tenders are too low to allow them to launch new projects, given the industry’s problems with rising costs.

The UK aims to triple its offshore wind capacity to 50GW by 2030. However, experts said there were no bids from wind power generation companies at the auction held on the 8th, and the outlook is clouded.

Renewable energy producers have been banned by major oil and gas companies for green assets in some tenders, and the European Commission said this month it would introduce a comprehensive support package.

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Oversees and coordinates EMEA coverage of power, gas, LNG, coal and carbon markets and has 20 years of experience in journalism. Writes about those markets as well as climate change, climate science, the energy transition and renewable energy and investment.

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