160 vessels? The offshore wind power market is expected to see a surge in orders in the next 5 years

The offshore wind power market experienced another year of strong growth in 2022, with new orders for wind power vessels reaching a new high. As wind turbines rapidly increase in size, the shortage of wind power installation vessels may become a bottleneck for future growth in both global and Chinese markets. It is estimated that the next five years will see a surge in orders totaling up to US$26 billion.

A total of 49 vessels! Global wind power vessel new orders hit a historic high in 2022.

According to Clarkson's latest report, 2022 was a record-breaking year for newbuild investment in dedicated offshore wind vessels (wind turbine installation vessels, O&M vessels, and crew transfer vessels). Among these, new orders for Wind Turbine Installation Vessels (WTIVs) reached a record 25 vessels, a year-on-year increase of 9%, with a total estimated investment of US$4.1 billion, a year-on-year increase of 32%. With the increasing size of wind turbines, all WTIVs ordered in 2022 will be equipped with a crane with a Safe Working Load (SWL) greater than or equal to 1200 tons.

Clarkson stated that Chinese shipowners accounted for most of the WTIV orders last year, ordering a total of 21 vessels, and demand is expected to further increase by the end of 2025. Some European shipowners, including Cadeler, are also ordering new vessels. Furthermore, this sector continues to attract new companies, with Maersk Supply Service ordering a WTIV for the first time last year.

On the other hand, in the offshore wind O&M vessel (C/SOV) sector, new orders also reached a record 24 vessels last year, a year-on-year increase of 60%. Order activity for Commissioning Service Operation Vessels (CSOV) was particularly strong, with 20 new vessel orders throughout the year. Notably, all C/SOVs ordered last year will be equipped with batteries, and Windcat also ordered 2 hydrogen-powered dual-fuel CSOVs.

Meanwhile, the offshore wind vessel market further strengthened in 2022. The average global WTIV fleet utilization rate in 2022 was 69%, a year-on-year decrease of 14 percentage points due to slowing activity in China; nevertheless, the average European WTIV fleet utilization rate increased by 11 percentage points to 84%, and even reached 93% throughout the summer. As a result, the assessed daily charter rate for third-generation WTIVs in Q3 2022 was €172,500, a year-on-year increase of 6%.

Similarly, the "Walk-to-Work (W2W)" vessel market also experienced a clear supply squeeze. With increasing demand for offshore wind farm construction support, W2W vessel supply is limited, and some W2W vessels have returned to the improving offshore oil and gas market. In Q2 last year, the average daily charter rate for W2W vessels in Europe with a capacity of over 40 passengers and meeting SPS specifications was €44,000, a year-on-year increase of 42%.

Looking ahead, Clarkson forecasts that from now until the end of 2028, global investment in new offshore wind vessels is expected to exceed US$26 billion. This includes US$21 billion for building 70 WTIVs, and an additional US$5 billion for building 90 C/SOVs and transfer vessels.

It is particularly emphasized that China is expected to remain the dominant independent market, but Clarkson believes that other hot regions will also become drivers of investment. Northwest Europe will continue to be the main demand area for WTIVs, with over 7,000 wind turbine units expected to be installed across Europe by the end of 2030. Emerging industry markets such as the United States will also require a large number of vessels.

Last year, China's orders hit the second highest in history, but the Chinese market will still lack large installation vessels in the future.

After the "rush to install" trend in recent years, the activity in China's offshore wind power market saw a certain decline in 2022, but the overall trend of market development has not changed. Clarkson's data shows that in 2022, China continued to consolidate its leading position in the offshore wind power market, with its operational capacity accounting for 48% of the global market share. As of early 2023, China has achieved full capacity grid-connected operation for a total of 114 offshore wind farms, covering nearly 5,700 offshore wind turbines, with a cumulative installed capacity of 28.6 GW. This installed capacity is more than double that of the world's second-largest offshore wind market, the UK (13.7 GW).

In 2022, the size of China's offshore wind fleet continued to expand. To meet the construction and O&M demands of offshore wind farms, the number of offshore wind vessels owned by Chinese shipowners increased by 13.3% in 2022, reaching 290 vessels, accounting for 23% of the global fleet. Among them, the number of wind turbine installation vessels, crane vessels, and offshore wind O&M vessels has significantly increased since early 2021.

In 2022, China's offshore wind vessel orders saw a year-on-year decrease but still reached the second-highest level in history, with a clear trend towards larger vessels. Chinese shipowners signed orders for 20 wind turbine installation vessels, 5 crane vessels, and 9 offshore wind O&M vessels. These new vessels will be delivered between 2023-25 to participate in potential large-scale wind farm construction operations in 2024-25. Additionally, with the gradual increase in the operational scale of domestic deep and far-offshore wind farms, Chinese shipowners' investment interest in W2W vessels has strengthened. Besides 2 construction/O&M mother vessels currently under construction, 2 offshore support vessels have entered the Chinese market after being retrofitted with motion-compensated gangways.

Nevertheless, China's offshore wind power market will still face the dilemma of installation vessel shortages in the future. Chinese wind turbine manufacturers are continuously introducing larger offshore wind turbines. In 2022, Chinese manufacturers successively unveiled and rolled off the production line the world's largest single-unit capacity 16 MW offshore wind turbines, with the record for maximum single-unit total capacity increasing to 18 MW. Furthermore, several Chinese manufacturers are conducting R&D for large units exceeding 20 MW, with rotor diameters set to exceed 300 meters.

These new wind turbines are significantly larger than the average size of turbines currently deployed on Chinese projects. Data shows that the average turbine deployed in Chinese offshore wind projects put into operation in 2023 is 8 MW, with a maximum rotor diameter of approximately 185 meters, which is far smaller than the new 18 MW units. This undoubtedly poses a significant challenge to the existing domestic installation vessel fleet.

Industry analysis indicates that China is a relatively closed market, where most WTIV lifting heights are between 100 and 130 meters, unable to meet the demands of other markets. Only one vessel, the "Baihetan" delivered in September 2022, possesses the lifting capacity for 15 MW wind turbines.

In terms of vessel supply, among the currently active new WTIVs, Floating Installation Vessels (FIVs), and barges in China, only 36 are capable of installing 8-10 MW turbine foundations. Of these, 5 are capable of installing 15-16 MW turbines, but none can install 18 MW turbines. Analysts predict that the Chinese offshore wind market will require approximately 10 large turbine and foundation installation vessels in the next 10 years, meaning at least 5 to 10 more large vessels will be needed.

Will WTIV shortage become a market growth bottleneck? Two major factors hinder shipowner investment.

Not only in the Chinese market, but the global offshore wind industry will face a severe shortage of installation vessels. Industry insiders point out that the explosive growth of the offshore wind market and the increasing size of wind turbine units have put considerable pressure on the supply chain, and WTIVs are likely to become one of the bottlenecks for market growth. The current focus for major project developers is to ensure that WTIVs can install 15 MW or larger single-unit capacity wind turbines within the next decade, which has also raised concerns among some industry insiders about whether there are enough WTIVs on the market.

Based on current data, there will be 26 WTIVs globally capable of installing wind turbines exceeding 8 MW in 2025, with only 15 capable of handling 15 MW turbines. Considering that WTIV construction generally takes 3-4 years, or at least 2.5 years at the fastest, if we look at the current vessel supply situation, some wind farms may not be able to use the desired size of wind turbines from 2025 due to a shortage of compliant WTIVs. On the other hand, shipowners are still observing the market, with oversupply and unclear progress in wind turbine upsizing being factors of concern for shipowners.