Can Europe’s offshore wind industry weather the storm?

The offshore wind industry has been buffeted from several directions in recent times. This has dented project economics, slowed development and reduced capacity forecasts. But are there any signs the sector can recover? 

Pandemic, war, soaring costs 

The first blow came from the pandemic. Covid‑19 disrupted global supply chains and delayed projects, not least because China’s lockdowns hit component availability. Then Russia’s invasion of Ukraine compounded the pressure – Europe rapidly reduced gas imports, inflation rose, while commodity and financing costs surged. This has resulted in the levelised cost of energy (LCOE) – which estimates the lifetime cost per megawatt hour of a power project – for offshore wind rising by an estimated 40-60% across Europe since 2020, with roughly 60% of projects facing delays or cancellations compared with the 2022 pipeline.

Investors felt it. The stocks of major companies have tumbled, reflecting the sector’s bruised economics. Vestas and Orsted are prominent examples. Their stocks have dropped 55% and 76%, respectively, over the past four years.

Security concerns and safe havens 

Developments in recent months have shown that the struggle continues. Failed auctions in Germany and Denmark underline the fragility of investor appetite even in historic offshore hubs. Security worries are growing too – cyber and physical risks have prompted Sweden to cancel 13 projects, with bodies such as Nato and lobby group WindEurope warning that offshore infrastructure could be targeted. 

Still, not all markets are equally exposed. Poland is emerging as a relatively safe haven, moving to install its first full offshore farm by end‑2026 and targeting 5.9 GW by 2030. The Polish model combines administrative support, inflation‑shielding mechanisms and auctions with lease awards to large utilities – creating a more bankable environment for developers such as RWE, Engie, EDPR and PGE.

Small wins, big caveats 

There are other tentative successes. A US federal court recently allowed Orsted and Skyborn to press ahead with the 704 MW Revolution Wind project off Rhode Island. France awarded support to a 1.5 GW Normandy project – although RWE subsequently withdrew from the consortia. The Normandy tender also exposed weakness elsewhere as neighbouring Oleron attracted no bids. 

The Netherlands has put EUR 1bn on the table to back its offshore sector, partly aimed at the forthcoming 1 GW Nederwiek I‑A site. The industry will be watching closely when results are announced. 

The chart below contrasts selected government 2030 targets with Montel Analytics’ assessment of likely connected capacity, highlighting the gap between policy goals and expected delivery. Most targets are not expected to be met due to significant project delays and a bearish development outlook.

Offshore wind may also open new doors for flexibility markets. Montel Analytics estimates 1 GW of additional wind increases the automatic frequency restoration reserve (aFRR) market size by about 3.5 MW. aFRR is a short‑term balancing service that automatically adjusts generation or demand to restore grid frequency after disturbances. It is rising in value as system flexibility becomes more important. Providers are paid for capacity and energy, which in this case creates a potential business case for smaller battery energy storage systems and flexibility providers to participate in ancillary services.  That creates a route for value capture beyond merchant energy sales.  

No quick fixes 

Recovery won’t be instant. Developers must contract key components years in advance, locking in higher costs amid elevated interest rates. Countries still early in their offshore journey – Poland, Lithuania and others – face especially steep upfront bills. 

But despite five years of headwinds, there’s still potential for the industry. Offshore wind could be another building block for the energy transition – boosting system diversity with higher capacity factors than other renewables, attracting less local opposition than onshore projects and offering a more balanced risk‑sharing model between public and private investors than large nuclear schemes. It remains an important piece of the clean energy puzzle. 

Offshore wind has been caught in a perfect storm of pandemic disruptions, geopolitical shocks and rising costs. The path to calm waters will be uneven. Yet, sheltered harbours exist – targeted state support, pockets of resilience and growing flexibility markets can chart a course back to growth, if policy and finance reduce the risks for developers and investors.

This article originally appeared as a column on www.montelnews.com