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Climate change and energy

What’s next for offshore wind

New projects and financial headwinds will make 2024 a bumpy year for the industry.

January 10, 2024
an Orsted wind turbine off the coast of Block Island
AP Photo/Julia Nikhinson

MIT Technology Review’s What’s Next series looks across industries, trends, and technologies to give you a first look at the future. You can read the rest of our series here.

It’s a turbulent time for offshore wind power.

Large groups of turbines installed along coastlines can harness the powerful, consistent winds that blow offshore. Given that 40% of the global population lives within 60 miles of the ocean, offshore wind farms can be a major boon to efforts to clean up the electricity supply around the world. 

But in recent months, projects around the world have been delayed or even canceled as costs have skyrocketed and supply chain disruptions have swelled. These setbacks could spell trouble for efforts to cut the greenhouse-gas emissions that cause climate change.

The coming year and beyond will likely be littered with more delayed and canceled projects, but the industry is also seeing new starts and continuing technological development. The question is whether current troubles are more like a speed bump or a sign that 2024 will see the industry run off the road. Here’s what’s next for offshore wind power.

Speed bumps and setbacks

Wind giant Ørsted cited rising interest rates, high inflation, and supply chain bottlenecks in late October when it canceled its highly anticipated Ocean Wind 1 and Ocean Wind 2 projects. The two projects would have supplied just over 2.2 gigawatts to the New Jersey grid—enough energy to power over a million homes. Ørsted is one of the world’s leading offshore wind developers, and the company was included in MIT Technology Review’s list of 15 Climate Tech Companies to Watch in 2023. 

The shuttered projects are far from the only setback for offshore wind in the US today—over 12 gigawatts’ worth of contracts were either canceled or targeted for renegotiation in 2023, according to analysis by BloombergNEF, an energy research group.

Part of the problem lies in how projects are typically built and financed, says Chelsea Jean-Michel, a wind analyst at BloombergNEF. After securing a place to build a wind farm, a developer sets up contracts to sell the electricity that will be generated by the turbines. That price gets locked in years before the project is finished. For projects getting underway now, contracts were generally negotiated in 2019 or 2020.

A lot has changed in just the past five years. Prices for steel, one of the most important materials in turbine construction, increased by over 50% from January 2019 through the end of 2022 in North America and northern Europe, according to a 2023 report from the American Clean Power Association.

Inflation has also increased the price for other materials, and higher interest rates mean that borrowing money is more expensive too. So now, developers are arguing that the prices they agreed to previously aren’t reasonable anymore.

Economic trouble for the industry is global. The UK’s last auction for offshore wind leases yielded no bidders. In addition, a major project that had been planned for the North Sea was canceled by the developer in July. Japanese developers that had jumped into projects in Taiwan are suddenly pulling out as costs shoot up in that still-developing market.

China stands out in an otherwise struggling landscape. The country is now the world’s largest offshore wind market, accounting for nearly half of installed capacity globally. Quick development and rising competition have actually led to falling prices for some projects there.

Growing pains

While many projects around the world have seen setbacks over the last year, the problems are most concentrated in newer markets, including the US. Problems have continued since the New Jersey cancellations—in the first weeks of 2024, developers of several New York projects asked to renegotiate their contracts, which could delay progress even if those developments end up going ahead.

While over 10% of electricity in the US comes from wind power, the vast majority is generated by land-based turbines. The offshore wind market in the US is at least a decade behind the more established ones in countries like the UK and Denmark, says Walt Musial, chief engineer of offshore wind energy at the US National Renewable Energy Laboratory.

One open question over the next year will be how quickly the industry can increase the capacity to build and install wind turbines in the US. “The supply chain in the US for offshore wind is basically in its infancy. It doesn’t really exist,” Jean-Michel says.

That’s been a problem for some projects, especially when it comes for the ships needed to install wind turbines. One of the reasons Ørsted gave for canceling its New Jersey project was a lack of these vessels.

The troubles have been complicated by a single century-old law, which mandates that only ships built and operated by the US can operate from US ports. Projects in the US have worked around this restriction by operating from European ports and using large US barges offshore, but that can slow construction times significantly, Musial says. 

One of the biggest developments in 2024 could be the completion of a single US-built ship that can help with turbine installation. The ship is under construction in Texas, and Dominion Energy has spent over $600 million on it so far. After delays, it’s scheduled to be completed in late 2024. 

Tax credits are providing extra incentive to build out the offshore wind supply chain in the US. Existing credits for offshore wind projects are being extended and expanded by the Inflation Reduction Act, with as much as 40% available on the cost of building a new wind farm. However, to qualify for the full tax credit, projects will need to use domestically sourced materials. Strengthening the supply chain for those materials will be a long process, and the industry is still trying to adjust to existing conditions. 

Still, there are some significant signs of progress for US offshore wind. The nation’s second large-scale offshore wind farm began producing electricity in early January. Several areas of seafloor are expected to go up for auction for new development in 2024, including sites in the central Atlantic and off the coast of Oregon. Sites off the coast of Maine are expected to be offered up the following year. 

But even that forward momentum may not be enough for the nation to meet its offshore wind goals. While the Biden administration has set a target of 30 gigawatts of offshore wind capacity installed by the end of the decade, BloombergNEF’s projection is that the country will likely install around half that, with 16.4 gigawatts of capacity expected by 2030.

Technological transformation

While economic considerations will likely be a limiting factor in offshore wind this year, we’re also going to be on the lookout for technological developments in the industry.

Wind turbines still follow the same blueprint from decades ago, but they are being built bigger and bigger, and that trend is expected to continue. That’s because bigger turbines tend to be more efficient, capturing more energy at a lower cost.

A decade ago, the average offshore wind turbine produced an output of around 4 megawatts. In 2022, that number was just under 8 MW. Now, the major turbine manufacturers are making models in the 15 MW range. These monstrous structures are starting to rival the size of major landmarks, with recent installations nearing the height of the Eiffel Tower.

In 2023, the wind giant Vestas tested a 15 MW model, which earned the distinction of being the world’s most powerful wind turbine. The company received certification for the design at the end of the year, and it will be used in a Danish wind farm that’s expected to begin construction in 2024. 

In addition, we’ll likely see more developments in the technology for floating offshore wind turbines. While most turbines deployed offshore are secured in the seabed floor, some areas, like the west coast of the US, have deep water offshore, making this impossible.

Floating turbines could solve that problem, and several pilot projects are underway around the world, including Hywind Tampen in Norway, which launched in mid-2023, and WindFloat Atlantic in Portugal.

There’s a wide variety of platform designs for floating turbines, including versions resembling camera tripods, broom handles, and tires. It’s possible the industry will start to converge on one in the coming years, since standardization will help bring prices down, says BloombergNEF’s Jean-Michel. But whether that will be enough to continue the growth of this nascent industry will depend on how economic factors shake out. And it’s likely that floating projects will continue to make up less than 5% of offshore wind power installations, even a decade from now. 

The winds of change are blowing for renewable energy around the world. Even with economic uncertainty ahead, offshore wind power will certainly be a technology to watch in 2024.

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