Downgraded, But Not Out: The Future of Offshore Wind

Intro (00:00):
Welcome to PowerPod, the renewable energy podcast from TGS 4C, a leading provider of offshore wind intelligence. In each episode, we explore the key developments shaping the offshore wind market and bring clarity to the biggest trends shaping the industry and the wider energy transition.

Dan Wiseman (00:15):
Hello and welcome to another episode of PowerPod with me, your host Dan Wiseman, market analyst here at TGS 4C. Today I'm joined again by my colleague Jason Benchapongwimon, fellow analyst on the research and insight team here at TGS 4C.

Today's topic is going to be our latest release of our market overview report, which was released just a couple of weeks ago at this point. We're going to go over a couple of topics that we pick up and highlight the key takeaways from the report itself.

So Jason, before we begin with any individual markets, what do you think are the headlines from this quarter's report? Is it a case that offshore wind is recovering, still slowing, or is it just somewhere in between at the moment?

Jason Benchapongwimon (01:15):
I would say that offshore wind still hasn't fully recovered from the effects of 2025, where a global economic headwind really assaulted the offshore wind market. Current geopolitical events in the Middle East have pushed prices of everything astray, so developers are reeling and reconsidering their ambitions. Their auction ambitions are wavering; only off-take auctions have seen success in the last 18 months, and developers have really taken on new risks with site or site-and-offtake auctions.

Dan Wiseman (01:51):
Is it a case that we're just looking at a temporary slowdown, or is this something more structural?

Jason Benchapongwimon (01:53):
In the short term, we're going to see a slowdown of developers' ambitions. What this does mean is that as we move closer to 2040, more projects are going to be building up and wanting investment, supply, and vessels. That will make supply chains even tighter and could introduce a lot of bottlenecks in our supply.

Dan Wiseman (02:26):
Yeah, I think those are two key words that we see quite often when we talk about offshore wind: investment and bottlenecks. But one of the numbers that jumped out to me, and most likely readers of the report, is our downgrade to our 2040 outlook. What do you think is driving that decrease?

Jason Benchapongwimon (02:46):
From TGS 4C's perspective, it's not so much a global thing; we start at the market level. It's not one huge number cut from one market, we really go through and consider credible capacities for every market to 2040. This has been a collective cut for various reasons, mainly technology or infrastructure readiness, as well as the supply chain being the driving factors.

Dan Wiseman (03:15):
With offshore wind, it's quite easy to be optimistic about targets, especially when there's so much positivity coming from different markets about investing in offshore wind and looking at more renewable energies. Does cutting that forecast mean that we're becoming a bit more bearish on offshore wind, or is it just more realistic about the timing of things?

Jason Benchapongwimon (03:47):
We try to be more realistic with where the capacity is going to come from. With so many countries vying for investment from private investors, their ambitions clash with countries' ambitions, especially with the topic of homegrown energy coming up a lot this year.

With only so much supply chain being ready, whether turbine capacity or vessels being ready to build them. we see a large difference between the two.

Dan Wiseman (04:20):
Absolutely. Governments certainly aren't short of offshore wind targets. In your opinion, why aren't those ambitions translating into projects faster?

Jason Benchapongwimon (04:32):
It's a situation of an immovable object meeting an unstoppable force, where we see governments asking developers to help them develop homegrown energy, but developers are uncertain of the financial returns, which is their main role and job.

Where subsidies aren't being offered right now, we'll see ambitions be more hesitant compared to markets that have subsidies for offshore wind. Subsidies are a great way to start an industry in a market, and it's how the industry has started for many countries that are now developing, like the UK for example.

Dan Wiseman (05:15):
We've seen it all over different markets: we are seeing that change in developer behavior. Is it simply a case now that developers are becoming much more selective about where they deploy this capital?

Jason Benchapongwimon (05:30):
Yeah, the developer's job really is to seek those profitable returns. Where subsidy is not there or not high enough, they're not going to invest. But in some countries like the Netherlands and Germany, subsidy was not there for a long time back when developers could bid negatively and still make a profit.

We're now seeing them introducing subsidies through good communication between developer and government to say, 'Hey, this is what we'll need to really make these targets seem credible.'

Dan Wiseman (06:15):
At the end of the day money talks, and there's no point in putting money into something where you can't guarantee you're going to get an investment return back. At this point, if you're a utility CFO, what makes you choose the next offshore wind project over putting that same capital into the grid, battery storage, onshore wind, or any other renewable energy source? What is keeping offshore wind a viable option?

Jason Benchapongwimon (06:49):
For our larger utilities, we see it a lot with our corporate catch-up in our top 10 developers, the more utility-sided developers such as Iberdrola and SSE have been prioritizing grid investment simply due to the competition surrounding the grid.

They'll be able to identify countries where there will be more profitable returns for investing in the grid compared to a renewable project. What may be the deciding factor between investing in the grid and offshore wind would probably be how competitive the grid may be for a certain country and how much subsidy is available for the offshore wind market.

Dan Wiseman (07:35):
Would you say it's a case where governments need to look away from reaching for higher targets and maybe look at something that's a bit more sustainable, creating more mechanisms that actually make these projects financeable?

Jason Benchapongwimon (07:50):
Yeah, mechanisms are probably the much more developer-friendly method of propelling your offshore wind energy further. The only country we're seeing that we believe is going to meet their targets for offshore wind is France.

It's not because their target is low or anything like that; it's simply because of their subsidy, infrastructure readiness, and supply chain.

Dan Wiseman (08:25):
Is that a case where more markets in Europe, or perhaps globally, just need to take a page out of France's book and see how prepared they've been for what they want to accomplish, instead of getting to a point where their eyes are too big for their belly, looking at high targets without doing anything to ensure that when built, it will integrate properly into the grid and give back to developers?

Jason Benchapongwimon (08:58):
It depends. With the Philippines, they recently delayed their inaugural offshore wind off-take auction because they believed their port wasn't ready enough to attract the investment required to build offshore wind.

So looking at a country like France, or most of the Western European countries that have a very developed supply chain, and asking, 'Are we as ready as them? What would drive a developer from a country like France or the UK to the Philippines, and what can we do to make ourselves more ready for them?'

Dan Wiseman (09:35):
Yeah, absolutely. Readiness has been an issue in a couple of markets. Even in my own area with North America, when looking at the US, especially on the West Coast, states have had to appeal to their local governments to say, 'Look, stop making these targets for offshore wind and stop trying to put these auctions in place because we're simply not ready for it. We need to update a grid that is decades old, we have no infrastructure to build anything, and we certainly don't have the infrastructure to bring it onto land as well.'

It's good having optimism, but there's always that danger of putting the cart before the horse.

Something you touched on earlier as well, which we talk constantly about when discussing pipelines, leases, and auction awards: should our listeners or subscribers be looking less at the auctions and maybe more towards the FIDs?

Jason Benchapongwimon (11:00):
As an indicator of a market's health, FID is a good indication as it shows developer willingness to commit capital, reflecting investor backing in the technology right now.

One thing to consider is that projects reaching FID now have been surveyed and developed for years, long before offshore wind's first real downturn that we saw in 2025. Some of that off-take helping that FID may change. A greater indication of a market's health cost-wise, especially, would be off-take awards happening now and seeing what LCOE developers are looking at now compared to three or four years ago.

Dan Wiseman (11:57):
With FID as well, that's the turning point for a project. We track every stage of a project from conception to commissioning. We get the stages where they put in their consent application, and then there's a big turning point where they have that application approved. But it's not really until they get that investment decision where they've got the money and it becomes real at that point.

It's very easy to think once they've got approval to build a wind farm that they're all good and we can see it being commissioned in a few years, when that's not the case. Going back to my markets in the States, at the end of the Biden administration, several projects had their consent applications approved by what is now the Marine Minerals Association (previously the Bureau of Ocean Energy Management).

Nothing's happened since then! Since the Trump administration came in, there's been a massive slowdown in offshore wind in the US. All of those approved applications mean nothing until the money is there to actually start building something. That's a very plausible benchmark for things being built out.

Another thing we've introduced into our report, a new piece of analysis in this edition, is turbine foundations. What are we finding that information and analysis is telling us?

Jason Benchapongwimon (13:50):
This quarter, our analysis shows that for our main foundation types, meaning monopiles and jackets, which are the most common, most tried and tested, and most mature, we see no shortages in that supply from now until 2040, which is a good thing.

All of the main and publicly available information about foundation manufacturing matches or exceeds the demand for foundations, i.e., what we forecast will be needed to 2040 matches up.

Dan Wiseman (14:30):
That's probably one of my favorite findings in that, because we're forecasting just over 350 gigawatts of capacity additions over 2026 to 2040, which is roughly three times the 122 gigawatts that is commissioned, decommissioned, or currently under construction. But the number of foundations required only increases by about 8%. That's the impact of turbine scaling, showing us that three times the capacity doesn't necessarily mean three times the opportunity for foundations, does it?

Jason Benchapongwimon (14:10):
No. As we forecast turbine sizes to increase, we're going to see larger turbines. You have prototypes from China where it's one foundation for two turbines and things like that. With more technological advancements, we could see even fewer foundations.

Dan Wiseman (15:30):
The other number on the flip side that becomes a lot more attractive on the supply chain side is that 91%. Only 9% of forecast foundation demand is currently being awarded, which leaves 91% unawarded, a massive commercial opportunity, although from a developer perspective, it can be a procurement risk as well when having to find the source for such a large amount of opportunity.

It opens that floodgate for a lot of the supply chain and manufacturers to move in and get contracts out of it. Is there anybody in particular that we think is best positioned to win that demand, or is it going to be a free-for-all where several manufacturers come out of the woodwork to produce these foundations?

Jason Benchapongwimon (16:35):
The largest manufacturer would be Sif, and they produce XXL monopiles, which has more versatility for certain depths of seabed and expands their market reach.

Having seen all of the unawarded foundation demand from now to 2040, you might see either new companies come to fruition or expansion of current manufacturing suppliers to corner that market.

Dan Wiseman (17:20):
When looking at the size of wind farms, especially nowadays, it's very difficult to estimate the number of foundations needed, because as turbines get larger, fewer foundations are needed. If you look at 10 or 15 years ago, for a gigawatt-sized project, you were looking at hundreds of monopiles; nowadays, that number is being cut massively because of turbine scaling.

We spent years hearing about supply chain bottlenecks, yet the foundation analysis itself doesn't actually point to a structural shortage. Is that surprising?

Jason Benchapongwimon (16:38):
Offshore wind isn't the only use of foundations; we see foundations used in other energy sectors. Seeing that there are a lot of foundations doesn't really surprise me. The larger bottlenecks would be offshore wind-capable vessels and offshore wind turbines, which are much larger and different compared to onshore turbines.

Dan Wiseman (18:27):
It's been a bit of a double-edged sword in terms of our outlook on things from this report. Obviously we're downgrading our capacities, but it's very difficult not to see it going any other way, especially where we're seeing developers change their approach and having to be very careful with their capital.

Offshore wind and renewables in general isn't the free-flowing cash generator that people assumed it was going to be. Back in Germany, where you had negative bidding and markets essentially paying developers to put steel in the water, those days are gone. It's becoming more expensive due to geopolitical situations around the world, steel prices forever changing, and fuel costs affecting vessel capabilities.

It seems like one thing after another is pushing against industry in general, with hundreds of other industries impacted.

Jason Benchapongwimon (20:45):
Offshore wind has a larger profit margin compared to something like onshore wind, which has much tighter margins. If offshore wind is having a hard time, then onshore is feeling it even more.

Dan Wiseman (20:57):
Yeah, absolutely. But it's important to note that we still have these pipelines, and it's a very positive pipeline. We're seeing markets doing well, and it's very easy to cherry-pick the doom-and-gloom arguments which get yelled a lot louder than the positive side. But we are seeing positive steps, and hopefully that will continue into the future.

Let me finish up by looking forward then. When we sit down and record this again in three months, what would you say are your top three things that we should be watching in the period between now and then?

Jason Benchapongwimon (21:50):
In three months, I'd like to look at what has changed in our market indicators. We've consistently brought down our FID forecast for this year quarter-on-quarter as we see some markets slip into next year.

It will be interesting to see how correct we were about which projects and markets have more financial investments. This quarter only saw one, with Genneker in Germany. It will be interesting to see how much more reaches that stage in the coming quarters and what the outlook looks like for 2027.

Dan Wiseman (22:35):
Interesting. For me, number one is obviously going to be FID activity, seeing if we're getting closer to the run rate needed to sustain our predictions. Number two for me would probably be auction design, and whether governments are actually responding to higher project costs and adapting accordingly, like France having something in place to make a viable market. The last thing will be developer behavior: are companies looking to invest in offshore wind starting to commit capital beyond their pipelines, or are they going to remain conservative and bid on smaller or more lucrative projects going forward?

Let me finish with a quick question. If you had to choose one part of the market in offshore wind in general that you're most positive about over the next few years, geographic, technological, or supply chain, what would it be?

Jason Benchapongwimon (23:50):
I think it would be the emerging markets in offshore wind. We forecast them to have some construction activity between now and 2040, but there are others that have offshore wind ambitions that we haven't included yet. I'd like to see them put steps in place that turn into construction over the next 14 years.

Dan Wiseman (24:30):
I completely agree. Emerging markets are probably the most exciting ones to keep an eye on, especially with smaller countries. Before I dealt with North America, I had the Baltic states, Latvia, Lithuania, and Estonia. Talking to people in the offshore wind industry in Estonia, there's always this excitement of getting offshore wind off the ground.

The fact that they are so open to ideas, collaborating with established markets and taking those lessons, is a far cry from some other markets that have been stoic and staunch in their own approach. So I'm really positive about emerging markets that are serious about renewable energy, foregoing trial and error to let other markets do it first and take those positives.

Cohesion and oneness across Europe and globally make a big difference in offshore wind.

I think that about wraps us up for another report edition of our podcast. Thanks again, Jason, for joining me to chat about offshore wind! Until next time, thank you very much for listening to this podcast, and I'm sure we'll have much more to talk about next time here at TGS 4C.