OFFSHORE WIND ENERGY MARKET ANALYSIS

Global offshore wind energy market size is expected to reach US$ 70.38 Bn by 2031, from US$ 33.98 Bn in 2024, exhibiting a compound annual growth rate (CAGR) of 12.9% during the forecast period (2024-2031)

The market is predicted to expand as a result of rising demand for renewable energy sources and growing interest in lowering the world's carbon footprint. The main factor accelerating market expansion is the increased efforts that are made by governments and electrical providers to reduce carbon emissions. Also, it is anticipated that the installation of turbines would rise globally, thus driving the market growth.

Global Offshore Wind Energy Market Regional Insights:

• Europe is expected to be the largest market for offshore wind energy during the forecast period, accounting for over 47.0% of the market share in 2023.
• Asia Pacific accounted for over 20% of the market share in 2023. The growth of this market in Asia Pacific is due to the region has experienced significant economic growth.
• North America accounted for over 18% of the market share in 2023, due to increasing demand for renewable energy.

Figure 1. Offshore Wind Energy Market Share (%), By Region, 2023

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Analyst’s Views:

Increasing global investments in renewable energyThere has been a noticeable shift in the energy sector toward renewable and green energy due to factors such as the need to reduce carbon emissions, depletion of fossil fuels, climatic change, and others. Various government policies are in place to support the initiative toward greener energy. Many multinational companies are taking initiatives to cut down their carbon footprint to contribute to a greener planet and sustainability. For instance, in 2021, Equinor (Norway) aimed to cut its carbon emissions by half by 2050. A part of the plan is to develop its renewable energy businesses, particularly offshore wind, which may reach 6,000 megawatts in six years and 16,000 megawatts in 15 years.

Highly fragmented market dominated by major market players: The offshore wind energy market has been witnessing significant growth over the past few years due to increased policy support and commitments toward renewable energy adoption around the world. The market is highly fragmented with several small and large market players operating globally. While a handful of major developers have dominated the market, there has been a rise in new entrants from the oil and gas industry as well as other renewable energy sectors trying to tap into this high growth area.

The fragmented nature of the market has led to intense competition amongst market players. To gain a competitive advantage, developers are increasingly focusing on developing newer and advanced technologies to optimize offshore wind power generation and reduce costs. This has propelled heavy investments in research and development (R&D) of larger turbines, floating turbines, advanced foundation designs, and smart monitoring systems.

Market Opportunities:

Supportive renewable portfolio standards and carbon emission reduction targets: Supportive renewable portfolio standards and carbon emission reduction targets present a major opportunity for growth in the global offshore wind energy market. Many countries have set ambitious mandates to increase their usage of renewable sources and lower greenhouse gas emissions over the coming decade. This creates a very favorable policy environment for the offshore wind sector to thrive.

Europe in particular has been at the forefront of the offshore wind transition. Countries like Britain, Germany, Denmark, and the Netherlands have implemented carbon pricing mechanisms and require electricity providers to source a rising percentage of their power from renewables each year. As a result, Europe installed a record 6.1 GW of new offshore wind capacity in 2021 alone. This was 50% higher than the 2020 and brought Europe's total installed offshore wind to over 30 GW. Several large projects came online such as the 1.5 GW Hornsea 2 in the U.K., which is the world's largest offshore wind farm.

In Asia Pacific, China has enormous offshore wind potential along its long coastline and is striving to meet its carbon neutrality pledge by 2060 through tremendous renewable expansion. China added 3 GW of new offshore wind capacity 2022 and has set a target of 50 GW total by 2025. Governments across Asia Pacific like Vietnam and Taiwan are supporting pilot projects as they work towards more aggressive renewable goals this decade. Even countries like Japan and South Korea are ramping up plans for their inaugural multi-GW offshore wind installations according to economic development targets and carbon reduction commitments submitted under the Paris Agreement.

Emergence of offshore wind tenders and leasing rounds: The emergence of offshore wind tenders and leasing rounds presents a great opportunity for growth in the global offshore wind energy market. Many countries are increasingly focusing on harnessing the potential of offshore winds by facilitating new offshore wind projects through tenders and leasing of wind sites. This provides developers a standardized process to secure new development rights. For example, in 2021, the U.K. launched the largest ever renewable energy auction which included up to 9 GW of new offshore wind capacity. Germany too held its first tender for offshore wind development in over a decade and allocated areas that could accommodate 5 GW of new capacity.

The tenders and leasing rounds signal long term commitment of nations towards achieving their offshore wind and clean energy targets. According to the International Renewable Energy Agency (IRENA), over 500 GW of offshore wind could be installed globally by 2030 and over 3 terawatts by 2050. This massive scale up will be enabled through continuous tenders and leasing rounds by major markets.

Market Trends:

Gradual shift towards large wind turbines with higher capacity: The global offshore wind energy market has been experiencing a gradual shift towards the adoption of large wind turbines with higher capacities. Developers and manufacturers have been installing turbines with greater blade lengths and rotational diameters to capture more wind. This allows them to generate more electricity per turbine and helps to reduce the levelled cost of energy. For example, the largest offshore wind turbines being installed have blade lengths over 100 meters and capacities around 0.010-0.012 GW each. The common turbines had ratings around 0.006 GW. This shift is due to advances in turbine technology that have made it feasible to manufacture and transport much taller towers and longer blades offshore. It has also been driven by commitments from various governments and companies to increase renewable energy usage. By opting for fewer but higher capacity turbines, project developers are able to reduce installation and cable laying costs on a per Giga Watt basis. This helps improve project economics and lowers the risk profile for investors. It also decreases operational and maintenance costs over the lifetime of wind farms. For turbine manufacturers, the demand for these large turbines allows them to benefit from economies of scale in production.

Increasing adoption of floating offshore wind technology: Increasing adoption of floating offshore wind technology is significantly influencing the global offshore wind energy market. Floating offshore wind is an emerging renewable technology that enables the installation of offshore wind turbines in deep waters, where bottom-fixed foundations are not feasible. This allows offshore wind farms to be set up further from the coast and in areas with stronger and steadier wind speeds. As a result, floating offshore wind farms have the potential to harness more energy. Several pilots and demo projects have already shown the technical and economic viability of floating wind technology.

Many large offshore wind markets are investing heavily in floating wind as the next stage of their offshore developments. According to the International Renewables Agency, floating offshore wind capacity worldwide will grow to over 25 GW by 2030. This is led by major European markets like France, Spain, Portugal, and Norway that have announced large commercial-scale projects. The U.K. Government has set a target of 1GW of floating wind by 2030. Several wind turbine makers are developing larger multi-GW turbines that are optimized for floating installations.

Market Restraints:

• High capital cost and logistics issues: Offshore wind is one of the most promising and eco-friendly energy-producing technologies. Though it has a high-capacity factor as compared with related technologies such as solar and onshore wind, its huge capital cost is deterring its implementation. Offshore wind turbines are susceptible to erosion, as they operate for decades in harsh marine environments. Sometimes, even the most advantageous features, such as high wind speeds, become a negative factor for offshore wind turbines. As the size of offshore wind farms has increased over time, challenges that are related to construction, transportation, installation, and operation have also increased. Challenges associated with logistics, in general, are a greater task in offshore wind farms. Wind farms are usually located very far from the shore and are difficult to access, especially in bad weather conditions. Hence, rectifying even the smallest technical issue could be tricky and costly. Other challenging factors in offshore wind power deployment relate to resource characterization, grid interconnection and operation, and the development of transmission infrastructure, which are much simpler in other technologies, such as solar and onshore wind. Thus, the high capital costs and issues associated with operations, maintenance, transportation, and logistics restrain the global market.
• Counterbalance: To overcome this restraint, the key market players need to use eco-friendly energy-producing technologies, which might drive the market growth.

Recent Developments:

New Product launches:

• In October 2021, Ørsted AS and Jan De Nul Group announced the signing of the final contract for the transport and installation of 107 monopile foundations and one offshore substation topside at the Gode Wind 3 and Borkum Riffgrund 3 offshore wind farms. The transport and installation are likely to start in 2023. Ørsted AS is a leading clean energy company that develops, constructs, and operates renewable projects, including wind and solar farms, battery storage, and hydrogen facilities.
• In May 2021, Hecate Independent Power Limited , a U.S.-based renewable power project company, introduced its Hecate Independent Power Limited Atlantic Project to deploy about 10 GW of floating and fixed wind power in the North Atlantic, U.K. The project with a total expenditure of around US$ 30 Bn or GBP 21 Bn is projected to connect offshore farms with the national grid network. Hecate Independent Power Limited (HIP) is a joint venture between Hecate Wind LLC (Hecate) and UK-based Independent Power Corporation PLC. The company was formed to develop the HIP Atlantic Project, which aims to install 10 GW of offshore wind capacity in the North Atlantic Ocean, with the power being dispatched to the UK through high-voltage direct current (HVDC) submarine power transmission cables.
• In April 2021, Siemens Gamesa Renewable Energy SA secured a firm order to supply turbines for the 1.4 GW Sofia Offshore Wind Farm set in the North Sea. A total of 100 turbines are set to be deployed in the project, and this is the first time that SGRE has installed its 0.014GW Direct Drive offshore wind turbines.

Mergers and Acquisition:

• In February 1, 2021, Mitsubishi Heavy Industries, Ltd. acquired 2.5% of Vestas and was nominated to a seat on the company's board of directors. The transaction was valued at approximately US$ 0.70 Bn. Mitsubishi Heavy Industries, Ltd. (MHI) is a global industrial and engineering company.

 Figure 2. Offshore Wind Energy Market Share (%), By Location, 2023

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Top Companies in the Global Offshore Wind Energy Market

• MHI Vestas Offshore Wind
• Siemens Gamesa Renewable Energy, S.A.
• J Cole Collections
• Sinovel Wind Group Co., Ltd 
• Erndtebrücker Eisenwerk Gmbh & Co. Kg
• Northland Power Inc.
• Ming Yang Smart Energy Group Limited
• Adwen GmBH
• General Electric Company
• A2SEA A/S
• Nexans

*Definition: The offshore wind power or offshore wind energy is the generation of electricity through wind farms in bodies of water, usually at sea. There are higher wind speeds offshore than on land, so offshore farms generate more electricity per amount of capacity installed.