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Offshore wind industry faces challenges and oppertunities as global growth continues

By: Chloe Emanuel 21/09/2023 Allianz Commercial

Cables General Windfarms

The offshore wind industry is on the cusp of substantial growth, presenting both opportunities and challenges. In a comprehensive report titled 'A Turning Point for Offshore Wind,' Allianz Commercial delves into the industry's outlook, highlighting key areas such as technological innovations, risk trends, and growth prospects.

The global offshore wind sector is experiencing remarkable expansion, driven by increased investments, rising power capacity, and a surge in technological advancements. These innovations encompass diverse areas, from multi-purpose wind farms and floating installations to advanced connectivity solutions and drone-based maintenance.
However, developers and insurers must navigate a complex landscape marked by prototypical technologies, economic pressures, severe weather conditions, cable damage, collision risks, and environmental concerns. As the offshore wind sector prepares for worldwide expansion, it faces several critical considerations.

Damage to cables stands out as the leading cause of insurance claims, with cable issues accounting for a significant portion of offshore wind losses. Turbine failures follow closely behind as another common claim. These challenges underscore the importance of effectively managing cable risk, ensuring quick access to replacement components, and maintaining rigorous quality assurance during installation.

The offshore wind sector is witnessing a shift in global markets. While over 99% of installed offshore wind capacity is currently in Europe and the Asia-Pacific region, China has surged ahead to become the world's largest market for offshore wind installations in 2023. The industry has added 8.8GW of new offshore wind capacity in 2022, bringing the global installed capacity to 64.3GW. Projections suggest that approximately 380GW of offshore capacity will be added across 32 markets over the next decade.

Despite these ambitious growth plans, developers face challenges stemming from rising costs, inflation, capital expenses, increased interest rates, and geopolitical uncertainties. Supply chain bottlenecks, permitting delays, and grid connection setbacks add to the sector's challenges. Collaboration among financial institutions, corporations, and governments is essential to expedite the required expansion of manufacturing facilities and port infrastructure.

Offshore wind projects are embracing emerging technologies, including 'energy islands' that share power across grids and multi-purpose wind farms that produce green hydrogen or house battery storage. Innovations like offshore logistics drones are being explored to reduce reliance on traditional maintenance methods.

The size of wind turbines has significantly increased over the past two decades, presenting new risks. Turbines now reach towering heights of up to 260 meters, nearly three times taller than the Statue of Liberty. With larger turbines and rotor diameters, the industry faces heightened exposure. New and unproven technologies, often lacking technical maturity and data, require close monitoring.

The industry faces challenges related to the availability of specialist vessels. A global expansion of the vessel fleet beyond Europe is necessary. Additionally, the report highlights concerns about vessel collisions with turbines and offshore infrastructure, with recent incidents involving both small and large vessels. Given that 2,500 wind turbines are set to be installed in the North Sea by 2030, collision risks must be addressed.

As the offshore sector expands into new territories, it must contend with diverse weather conditions and natural catastrophes. From the East Coast of the United States to Taiwan, wind farms will operate in regions prone to more significant wind speeds and wave action. Climate change may further heighten risks, emphasizing the need for thorough risk assessment and mitigation strategies.

Despite its crucial role in the global transition to net-zero emissions, the offshore wind industry must uphold responsible development and environmental stewardship. This includes managing impacts on biodiversity, marine wildlife, and the responsible sourcing of raw materials.

Allianz is deeply involved in offshore developments as both an investor and insurer. The company's commitment to renewable energy and low-carbon technology aligns with its Net-Zero Transition Plan, which targets substantial revenue growth and significant investments in climate and clean-tech solutions.
As the offshore wind sector charts its course amid rapid expansion, it will continue to rely on the expertise of industry leaders and insurers like Allianz to navigate the evolving challenges and seize opportunities on its journey toward a sustainable future.

For more information about offshore wind farm projects across the globe, click here.

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Offshore wind industry faces challenges and oppertunities as global growth continues

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