The wind industry is experiencing significant growth, and stakeholders are quickly competing to increase their market share, but challenges are appearing that need addressing to ensure continued progress in the industry.

The cost of developing and managing wind sites, particularly offshore wind, has been very high compared to profit, with the previous contracts-for-difference (CfD) auction failing to deliver after years of added pressure on the industry. Despite the challenges, investors are confident in the potential of the wind industry’s long-term progress, and the value of renewables M&A transactions remains high. Major agreements, including the sale of Correll Group to SPIE and Boston Energy to LDC, highlight the growing investor interest in the wind industry. Offshore wind will continue to be a growing market, but there will need to be a shift in industry structure and priorities.

Offshore wind development

According to Iain Gallow, the director of due diligence and strategy consultancy Calash, business management teams and investors ensure that the capacity targets for 2030 and 2050 will continue to drive orders and capital flow in the industry. Gallow explains that a large portion of inbound enquiries in 2023 were associated with the wind supply chain, and the consultancy anticipates a similar level of interest during 2024.

Subsidy auctions typically generate competition to the bottom on power offtake price, defining the capital available for the entire value chain. There is reduced scope for equipment and service providers to allocate costs to developers if the price for materials and other resources increases. This cost is starting to reduce as inflation structures are factored into CfDs and some costs are covered within the value chain. The margin is, however, impacted by the seasonality of offshore work, with much activity ending in the winter or if a disruptive event impacts the movement of people.

These issues are accentuated by the potential delays for larger contracts, which has become more of an issue today with the current offtake prices for new wind farms impacting commissioning plans for some major developers.

All of these factors combined have impacted the commercial investment aspect of the offshore wind market, and this could be highlighted by a downgrade of M&A valuations throughout this year.

Yet with all of these challenges, investor confidence remains high, and the potential commercial risk is overlooked due to concerns of losing out to competitors. Patrick Harris, the associate director at Calash, believes there are ways businesses can focus on M&A to manage risks. GEV Wind Power, a wind blade maintenance firm in the North East, recently acquired an Australian company, Rigcom Group. Intelligent moves like this to balance the seasonality of work will strengthen investor confidence. Being agile and creative could be critical to keeping momentum with the wind industry during challenging periods.

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