Wrapping up 2025:  Offshore wind

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The Future of US Offshore Wind – Capacity Growth Outlook & Litigation Risks

Key insights 

• Expert says US offshore wind capacity growth has dimmed, with previously projected 25-30% growth per annum slashed to 12-15% over the next five years due to political risk and project delays
• Expert believes continued federal intervention potential is "extremely high", despite state-level support. Stop work orders cause significant damage regardless of court outcomes, as Ørsted's Sunrise Wind divestment process was "irretrievably negatively impacted", despite the Empire Wind stop work order being lifted
• Expert thinks projects post final investment decision face liability exposure of up to 50-60% of total project cost if cancelled, with developers bearing most contractual risks
• Many US developers entered supply contracts pre-final investment decision due to supply chain tightness, leading to greater exposure than for European projects that typically wait until final investment decision
• Recent precedents, such as Ocean Wind, show players such as Ørsted can reverse large impairments through negotiated settlements, demonstrating suppliers prefer speed over maximising legal recovery

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Ørsted – Is Hornsea 4 Really No More?

Key insights 

• Ørsted's decision to discontinue Hornsea 4 was primarily due to the low Contracts for Difference strike price accepted in 2024, which surprised the industry and likely wouldn't provide a good return. GBP mid-60s Contracts for Difference strike price is more likely to meet return expectations
• Specialist expects Hornsea 4 will be pushed back two years, with breakaway costs inline with announcements. Ørsted will then weigh up savings costs on preparation resources and resubmit project or spend resources on a new project with more efficient new turbines
• As a result of the discontinuation, the UK government may increase the budget for offshore wind auctions and relax certain parameters, such as adjusting the unrealistic load factor assumption
• Cost inflation is decelerating, including price decreases due to reduced demand and project cancellations. Long-term levelised cost of electricity won't see declines, as offshore technology is mature now

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Siemens Energy & US Offshore Wind – Will US Winds Blow Offshore Completely Off-course?

Key insights 

• Expert believes courts will likely rule against the US administration's permit revocations, finding them "arbitrary and capricious" due to weak legal grounds presented
• On permit revocations, if upheld by courts, no new offshore wind additions are expected in the US post 2028, creating a binary outcome scenario
• C15-20GW of US offshore wind projects are fully permitted and could proceed with construction once developers make final investment decisions
• OEMs face minimal financial risk from project cancellations as contracts typically protect suppliers from costs incurred through established payment milestone structures. Projects such as Revolution Wind, at 80% completion when stopped, would have minimal revenue impact since turbines were already built and delivered
• US offshore wind turbines cannot be redeployed to Europe due to different electrical grid frequencies – 60Hz vs 50Hz – limiting mitigation options significantly

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