Wind
energy
is
crucial
in
the
transition
to
net
zero.
Its
attributes
as
a
renewable
energy
source,
coupled
with
its
ability
to
produce
electricity
without
emitting
greenhouse
gases,
underscore
its
importance.
But
just
as
the
world
need
more
clean
energy
than
ever,
soaring
costs
are
derailing
offshore
wind
projects,
threatening
to
push
the
climate
change
goals
even
further
away.
Currently,
renewable
energy
supplies
about
20%
of
total
energy
demand
in
Europe,
meaning
the
updated
target
of
42.5%
is
already
ambitious.
However,
several
of
the
tailwinds
that
propelled
it
to
its
current
level
in
the
past
decade
are
shifting
and
becoming
headwinds.
“Global
inflation
and
higher
rates
are
the
most
notable
as
both
substantially
increase
costs,
which
threaten
future
and
current
project
development,
particularly
offshore
wind,”
Morningstar
analysts
concluded
in
a
sector
report
in
October.
“These
are
compounded
by
continued
permit
delays
throughout
Europe
while
the
introduction
of
greater
subsidies
makes
the
US
a
more
appealing
place
to
invest.”
Danish
ESG-giant
Ørsted
(ORSTED),
the
world’s
largest
developer
of
offshore
wind
power,
takes
centre
stage
in
this
unfolding
drama.
With
failed
projects,
multi-billion
impairments,
supply
chain
delays,
increased
interest
rates,
and
a
plummeting
share
price,
Ørsted
exemplifies
the
sector’s
difficulties.
“These
challenges
are
by
no
means
unique
to
Ørsted,
but
some
of
its
competitors
have
more
diversified
revenue
streams,”
Morningstar
analyst
Matthew
Donen
explains.
Vestas
(VWS)
on
the
other
hand,
the
world’s
biggest
wind
turbine
maker,
increased
its
prices
on
the
back
of
higher
raw
material
prices
and
turned
to
profit
in
the
third
quarter.
Soaring
Costs
Offshore
wind
costs
have
soared
50%
because
of
higher
construction
and
capital
costs,
making
it
difficult
for
developers
and
suppliers
to
secure
financing
for
projects
at
profitable
margins.
A
unit
of
Spain’s
Iberdrola
(IBE)
cancelled
a
contract
to
sell
power
from
a
planned
wind
farm
off
the
coast
of
Massachusetts
earlier
this
year.
Ørsted
also
lost
a
bid
to
provide
offshore
wind
power
to
Rhode
Island,
whose
main
utility
said
rising
costs
made
the
proposal
too
expensive.
The
largest
offshore
wind
farm
project
in
the
UK
abruptly
halted
this
summer
when
the
Swedish
state-owned
utility
Vattenfall
suspended
work
on
its
Norfolk
Boreas
site
due
to
a
40%
increase
in
project
costs.
As
a
result,
Vattenfall
will
book
impairment
charges
of
SEK
5.5
billion
(£416
million).
In
September,
an
auction
for
UK
offshore
wind
projects
attracted
no
bids,
a
setback
to
the
government’s
plans
to
increase
offshore
wind
from
14GW
today
to
50GW
by
2030.
Potential
bidders
said
the
economics
of
the
projects
currently
don’t
make
sense
for
developers.
“Companies
across
the
value
chain
are
[…]
writing
down
the
value
of
their
offshore
wind
assets,
projects
are
becoming
onerous
and
there
is
a
genuine
prospect
of
operators
walking
away
from
projects
due
to
poor
economics
which
will
delay
the
much-needed
ramp-up
of
wind
energy,”
says
Andrea
Carzana,
co-manager
of
the
Aviva
Investors
Global
Climate
Transition
Equity
fund.
A
Fair
Wind
Blowing?
While
the
sector
faces
persistent
challenges,
there
is
a
glimmer
of
hope
on
the
horizon.
Global
demand
for
offshore
wind
farms
is
poised
to
surge,
with
governments
worldwide
committing
to
substantial
wind
power
capacity
increases.
In
Europe,
nations
including
the
UK,
Germany
and
the
Netherlands
vowed
earlier
this
year
to
reach
a
combined
120GW
of
wind
power
by
2030,
more
than
quadruple
the
current
capacity.
President
Joe
Biden
aims
to
have
30GW
of
offshore
wind
farms
installed
in
the
US
by
the
end
of
the
decade,
up
from
basically
nothing
today.
But
if
costs
keep
rising,
it
will
ultimately
mean
higher
bills
for
consumers,
who
are
still
reeling
from
the
energy
price
and
inflation
shock
of
2022.
Addressing
the
soaring
costs,
the
UK
recently
took
direct
action
to
help
with
funding,
bumping
up
the
support
price
for
new
offshore
wind
farms.
Germany
will
also
make
it
easier
for
green
energy
firms
to
get
on
the
grid.
The
European
Commission
has
similarly
acknowledged
the
troubling
situation
and
published
an
action
plan
late
last
month
that
unveiled
actions
to
accelerate
deployment
through
faster
permitting
and
access
to
finance.
“Although
the
industry
is
going
through
a
painful
reset,
there
is
little
doubt
offshore
wind
remains
a
vital
tool
for
the
energy
transition,”
Charlie
Thomas,
CIO
at
EdenTree,
said
to
Funds
Europe.
Inflation
figures
around
the
world
are
on
a
downward
trend,
indicating
that
lower
interest
rates
might
be
on
the
near
horizon.
This,
in
combination
with
various
incentives
for
the
offshore
wind
sector,
might
just
be
the
saviour
that
the
sector
needs.
“Both
interest
rates
and
inflation
seem
to
have
reached
a
plateau,
which
provides
some
certainty
in
costs,
favoring
investment,”
says
Carla
Ribeiro,
head
of
offshore
wind
advisory
for
UK
and
Ireland
at
consultancy
firm
Ramboli,
according
to
Bloomberg.
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