No company currently wants to build a new offshore wind farm on the terms of the British government. Vattenfall has even canceled an ongoing project off the British coast. Meanwhile, wind turbine manufacturers are suffering billions in losses. These are three recent developments that show one thing: the revenue model for offshore wind farms is under pressure.
According to various companies, costs for the wind industry have increased by at least 30 percent. Materials have become much more expensive, interest rates on loans have risen sharply and turbine manufacturers are experiencing growing pains.
A very strange situation.
“A very strange situation,” says Pieter van Oord, chairman of the Dutch offshore company of the same name. “Offshore wind will become a key driver of the energy transition in Northwestern Europe. And the three major producers of offshore wind turbines; General Electric, Siemens Gamesa and Vestas are all making major losses.”
Windmills are already as tall as the Eiffel Tower and the end of their growth is not yet in sight. Due to the demand for even larger wind turbines, manufacturers do not have the opportunity to recoup the development costs of the current turbines. The trade association of companies active in the wind industry, NWEA, is therefore trying to make agreements in the Netherlands and the rest of Europe to slow down growth somewhat.
In the near future, three quarters of our energy must come from wind farms in the North Sea. The Netherlands wants to reach 21 gigawatts in the next seven years, which is four times as much as has been built in the past 20 years. Europe wants the member states to make haste to tighten climate goals and to accelerate their independence from Russian gas.
According to the director in the Netherlands of the Scottish SSE Renewables, the situation in the United Kingdom is a signal that governments should not count on getting rich when tendering for wind farms: “The sector has also warned about this in Great Britain: beware, the costs have increased, so if you want to realize those wind farms on time, you will have to accept that you have to pay more,” says director Jasper Vis.
At the end of this year, the Dutch government will present the final tender rules for the largest Dutch wind farm in the North Sea, called IJmuiden Ver, 62 kilometers off the coast. The Scottish SSE Renewables, among others, wants to build this together with pension fund ABP. The Ministry of Economic Affairs and Climate says it is not yet concerned about the construction of wind farms in the Dutch part of the North Sea.
Van Oord also has no doubts about the future of offshore wind. In the Netherlands, the government does not set a target price for electricity as in the United Kingdom. Although costs are also rising here, energy companies in the Dutch system also benefit more from the increased electricity prices, says Pieter van Oord: “In the Dutch system, energy companies pay the government for the right to build a wind farm. In addition to the costs for construction, electricity prices have also risen, so I don’t expect any problems here.”
His company is investing half a billion euros in the development of new ships to lay electricity cables and install the largest future wind turbines of 20 megawatts.