BAKU, Azerbaijan, Dec.23
By Leman Zeynalova – Trend:
On average, offshore wind projects coming online in 2021 are getting revenues that are on a Eur per MWh basis 55 percent lower than in 2014, Trend reports with reference to Wood Mackenzie.
“Based on the most recent bids and our projection of power prices, in 2025 revenues will be 25 percent lower than 2021. As projects are weaned off subsidies the structure of revenue is also fundamentally changing as projects become more exposed to power prices, according to our recent Global Offshore Wind Revenue Dynamics report and dataset. For the mature top six markets, we found that capture prices’ share of revenues doubled from a weighted average of 30 percent in 2014 to 50 percent in 2021. By 2026, we forecast more than 80 percent of revenues will be driven by wholesale power prices,” reads the report released by Wood Mackenzie.
The company notes that first, the lower revenue is putting pressure on investor returns.
“The 55 percent drop in revenue between 2014 and 2021 has been matched by only a 45 percent reduction in the levelized cost of energy (LCOE). Similar to the historic trend, we are forecasting through 2025 revenues will decline by 25 percent while costs only fall by 15 percent, challenging project returns. Accordingly, we have seen some of the major offshore wind players reduce their guided IRR. Second, the reductions in subsidies are likely to help drive accelerated growth in the offshore wind industry. 70 offshore wind targets have been announced since 2016 by governments across the world. There are many examples like the Dunkerque offshore wind tender in 2019 where record-low costs released additional tenders. More recently, the competitive bids of Thor led the Danish government to release an additional 2-3 GW of offshore wind, as they learned that instead of utilizing government funding, the projects would improve government finances. Similarly, Netherlands and Germany are also proposing significant upgrades to their offshore wind targets,” the report says.
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