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Figure 1 Cost Inflation Source Westwood offshore wind cost inflation survey 2023In an offshore wind cost inflation survey of industry players by Westwood Global Energy Group (Westwood), nearly three quarters of respondents indicated that they had begun to review the viability of their projects in light of recent cost increases, with over 90% indicating that decision making had slowed as a result. The survey and market analysis explores the impact of inflation on global offshore wind development.
The market study in 1H 2023 explored three potential themes: the extent of cost inflation, the causes of cost inflation and its possible consequences. A plurality of respondents (32%) indicated that they had seen cost inflation of 11-20% since 2021, with a smaller number reporting cost increases north of 30%. In addition, some reported that financing and commodity prices specifically had risen by over 40%.
In response, Westwood’s internal analysis suggests that recent cost inflation could add roughly $280bn in capital expenditure for the offshore wind industry (ex-China) over the next decade. Financing this expenditure gap could ultimately take the form of higher offtake prices funded directly by consumers or indirectly through additional fiscal and tax incentives.
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