Offshore Wind Faces Transformation as Tenders Move Away from Price-Only Criteria

OSLO (Reuters) – A recent report from energy research firm Wood Mackenzie indicates that factors beyond the bidding price are becoming increasingly influential in the global tender process for awarding offshore wind farm licenses. These new criteria will be crucial in determining the winners and losers in this competitive industry.

Chris Seiple, vice chairman for Energy Transition at Wood Mackenzie, highlighted that the focus is shifting towards a range of criteria to determine the outcomes of tender and lease auctions. He noted that the criteria can vary considerably across different markets.

While cost competitiveness remains a key aspect in the offshore wind sector, its importance has diminished as project returns decline due to new entrants, increased lease payments, and reduced subsidy levels. Competitors will now need to emphasize local content— the economic value a project can provide to local, regional, or national economies—as well as elements like systems integration, ecological mitigation, and sustainability in their bids. This shift necessitates a more strategic approach and enhanced collaboration among stakeholders, as explained by Soren Lassen, the head of offshore wind research at Wood Mackenzie.

Lassen mentioned, "Companies that are able to establish the right partnerships during bidding will gain the most advantage. However, no single company is expected to excel across all tenders and lease auctions."

The offshore wind sector is poised for significant growth, with Wood Mackenzie projecting that by 2030, 24 countries will have large-scale offshore wind farms, an increase from the current nine. The total installed capacity is expected to rise to 330 gigawatts (GW) from 34 GW in 2020, and cumulative global capital expenditure in the offshore wind segment is anticipated to reach $1 trillion by 2031.