The global offshore wind power project pipeline is strong, with a total capacity of about 409GW across 444 projects in the construction and pre-construction phases. With such an extensive number of projects and total capacity, offshore wind has the fourth largest power project pipeline of all the power types globally. This strong pipeline can be attributed to falling costs related to installation, operations, and maintenance of offshore wind power projects, which has increased the attractiveness of the power type to developers. According to the International Renewable Energy Agency, when comparing 2021 to 2010, offshore wind’s total installed cost and levelised cost of electricity (LCOE) dropped by 54% and 109% respectively. In 2021, the total installed cost stood at USD2.86/MW and the LCOE at USD0.075/kWh.
Additionally, developments in offshore wind technology have encouraged investor uptake for the power type, shortening construction times, increasing turbine capacities, and unlocking previously unconsidered areas for offshore wind power. This includes the ongoing global fleet expansion of offshore wind turbine installation vessels. Notably, in August 2022, Goldwind commenced the construction of a vessel, while Japanese companies Penta-Ocean Construction and K Line Wind Service partnered to explore the construction of vessels. We highlight that the current fleet of such vessels stood at an estimated 16 in 2020.
The North America and Western Europe (NAWE) region is leading the world in the development of offshore wind power projects, consisting of about 53% of all projects in development. Of the 444 offshore wind power projects in the construction and pre-construction phases our Key Projects Database (KPD) captures, 235 of them are located in NAWE. The total power capacity of these 235 projects is about 209GW. As seen from the column chart below, NAWE outshines other major regions including Central & Eastern Europe (CEE) and Latin America for its offshore wind power project pipeline. Asia is the only region that comes close, with a total of 168 projects in the pipeline, with a total power capacity of about 142GW.
We believe this strong pipeline of projects in NAWE is mainly due to increasing regulatory support for the sector within the markets in the region. Major markets in the region already have been commissioning offshore wind power projects, notably the UK and Germany, with the former being the largest offshore wind market currently. The resolve of the region to grow offshore wind power sectors has also strengthened, prominently in the North Sea. Germany, Belgium, the Netherlands, and Denmark have all announced an offshore wind power capacity target of 65GW by 2030 and a 150GW target to be reached by 2050. The move comes at the same time that the UK government also expanded its 2030 offshore wind power capacity target and reduced the planning period from four years to one. In August 2022, we also highlighted further policy clarity in Greece for the offshore wind sector following the market’s first legislation to enable and simplify the licensing and development processes of offshore wind power projects.
Across the Atlantic Ocean, the momentum in the US for offshore wind development is picking up, with the majority of projects being concentrated in states lying on the East Coast. States in the West Coast will also ramp up offshore wind developments toward the latter half of this decade, with the Bureau of Ocean Management (BOEM) announcing, in May 2022, new lease areas for offshore wind power project developments. Further in September 2022, BOEM announced efforts to use data and modelling to optimise the process of identifying new lease areas. Also in September 2022, the Biden administration launched a new initiative to encourage the development of the market’s floating offshore wind power sector to meet a goal of 15GW by 2035. This indicates increasing support from the public sector for offshore wind power development, presenting an upside for the power sector’s growth.
Despite the strong pipeline of offshore wind power projects, about 88% are still in the pre-construction phases, reflecting the uncertainty of realising offshore wind power projects currently. Additionally, out of all 36 markets that our KPD have captured with offshore wind power projects in the pipeline, only 12 have projects in construction. While we initially highlighted that the advancement of offshore wind technology is encouraging pipeline strengthening of the sector, not all markets can capitalise on offshore wind for renewable power generation. This largely stems from geographical constraints, mainly deep waters and a lack of coastal areas that are located near demand centres. This is evident through our KPD, as it highlights that markets with a strong offshore wind power project pipeline have shallower waters near coastal cities, such as the UK, Vietnam, and Taiwan, China.