Hesitancy and hope: Ireland’s offshore wind journey so far

Ireland's offshore wind market is 'brimming with potential', writes Sorcha Versteeg... yet there are challenges ahead

The Irish offshore wind market has seen significant developments and changes in recent years. Numerous large players have entered the arena to tap into new possibilities, and others departed for a perceived lack thereof.

Set against the backdrop of an impending National Industrial Strategy for Offshore Wind in 2024, and an ambitious target of 37GW operational by 2050, these fluctuating market dynamics present both challenges and opportunities for developers and government bodies involved in shaping the industry's future in the country.

Ireland's market dynamics

The sizeable wind resource potential off the Irish coast has been the subject of hesitancy and hope in equal measure.

One key challenge that developers have faced is the uncertainty surrounding future leasing rounds in the Offshore Renewable Energy Support Scheme (ORESS), and the inclusion of specific geographical ‘areas of interest’ in these rounds.

Only the projects which fall under the purview of the zones, which are decided significantly in advance of being publicised, will be considered for applications to connect to the grid.

This means that many developers have been investing considerable time and resources in identifying and developing wind turbine sites — on the scale of years and tens of millions — only to later discover that their projects do not fall under the designated areas for upcoming rounds.

This has resulted in potentially wasted effort and financial investment, as developers have had to progress projects without knowing if they would be eligible for future auctions.

And even then, the rewards are not guaranteed: as per the results of the ORESS-1 auction, which concluded early this May, only four (totalling 3.074 GW) of six projects were successful in their application to the scheme and will reach full operational maturity.

The other two (totalling 1.175 GW) will have to find other routes to market. The auction’s low-weighted price of €86.05 MW/h, around 30% cheaper than wholesale electricity’s €120 MW/h and 43% down from the theoretical auction maximum of €150 MW/h, also show a lower level of profitability than expected.

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We have seen this come to fruition as the details of upcoming ORESS rounds have been announced. ORESS-2 will be exclusively focused on the South Coast, while ORESS-3 permits floating wind projects only, and is limited to the West Coast.

Developers who have invested in projects outside these regions, or in projects of the wrong type, may find their efforts uncompensated for years to come unless future rounds cover them.

This means that some have intentionally delayed their project timelines, unwilling to commit fully until they have more certainty about what will be leased, where, and when.

The limited validity of offshore survey data adds another time-sensitive factor to the equation. Developers must ensure that their survey data remains valid within a set window, typically lasting 12 months, to obtain insurance coverage.

This time constraint has prompted some developers to shift their focus toward predicting the future areas of interest, aiming to align their projects accordingly — or once again, staying their hands until further certainty can be assured.

On the other hand, there are developers who have chosen to take a more risk-prone approach, forging ahead with their projects despite the uncertainty.

This "developing at risk" strategy is a gamble, as they cannot be certain if they will be included in future leasing rounds. Such companies may have to bear the consequences if their projects fall outside the designated areas, but they might also be able secure a strong head start on development if the strategy pays off.

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Looking ahead, Ireland's National Industrial Strategy for Offshore Wind is expected to be publicised in the first quarter of 2024, solidifying and ratifying plans that were unveiled in 2022.

The strategy aims to empower the government to reach its expanding green targets (including 80% renewables reliance by 2030) and streamline the process of offshore development from boardroom to seabed.

Previously, developers had expressed a desire for greater inclusion in the decision-making process, as they felt that government bodies have not fully considered the valuable insights and experience of companies with a proven track record in offshore wind development in other markets.

This call is now being answered.

At the end of June, the Department of Transport held the first Offshore Facilitation Forum, bringing port companies, developers, investors, and governmental departments together to discuss ongoing issues such as port infrastructure and project finance while reaffirming their commitment to collaboration.

Another challenge facing the market in Ireland is that although government departments are working to upskill, the offshore wind sector is new to the country — therefore, the necessary level of expertise required to deliver these projects must rapidly be met if we are to meet the ambitious timelines which have been set out.

As with most jurisdictions, local content remains a high priority in developing offshore wind markets, and The Department of Enterprise, Trade and Employment (DETE) is making efforts to attract and bring back Irish offshore wind professionals who departed the country to look for opportunities elsewhere.

However, as Ireland is new to the sector, it may be necessary to relax local content requirements and invite the expertise of independent, third-party players from abroad to contribute in a more significant way to the industry's growth.

Thankfully, there is already progress being made here, particularly between Enterprise Ireland and the Scottish supply chain.

Another area for consideration in the Irish market is grid infrastructure and planning. EirGrid, which is ultimately responsible for delivering grid access to the country, has adopted a strategy of providing grid capacity ‘parcels’ in instalments, with emphasis on the specific ‘areas of interest’.

While this approach helps directly support ongoing offshore wind development by focusing on locations that align with the approved project pipelines, it may result in a reduction in overall grid capacity.

The trade-off between supporting development and optimizing capacity poses a challenge that requires careful consideration.

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New market actors

That may sound like a lot of challenges, but recent developments seem to have brought a renewed belief in the Irish offshore wind market, in the form of large new market actors.

After the departure of O&G and renewables giants Equinor and Shell in late 2021 and 2022, understood to be due to a lack of regulatory clarity and delays in the setting up of the Maritime Area Regulatory Authority (MARA) respectively, confidence in the market slumped and hit a low.

In late May and early June this year, however, EDF Renewables and Ørsted burst onto the scene with plans to take the reins on those projects which had been left behind.

Hopefully, the arrival of these new players signifies growing interest in the promise of Irish offshore wind, which may influence the government to reassess its strategies and focus on rapidly increasing valued developer input.

As the market evolves, addressing the challenges swiftly and fostering collaboration between stakeholders will be crucial for realizing Ireland's ambitions.

The operative word will be “flexibility”: that is what will counteract the skill shortages, ease the uncertainty of developers who are hesitating to stay in or even enter the market, and continue to ensure that the voices of the experts are heard.

The industry is brimming with potential, and there are many paths forward to success — but as momentum builds, we need a stronger and bolder sense of direction.

Sorcha Versteeg is Country and Sales Director for UK & Ireland at technical advisory company K2 Management.