Global offshore wind energy targets at risk
Published on 31 January 2023
The International Marine Contractors Association (IMCA) has published an update to its contracting principles in the marine renewable energy industry. This major piece of work has been essential due to progressively poor market conditions created by unrealistic expectations of the capital costs and risks of developing offshore wind energy. The new publication IMCA Renewables Contracting Principles (IMCA LCIC 014) reviews in detail the contractual challenges faced by industry.
IMCA’s CEO Allen Leatt explained the challenges:
“Marine contracting in offshore renewables has become increasingly unsustainable, which in turn places the long-term sustainability of the offshore wind energy industry at risk. This situation can only be reversed with a fairer allocation of risks and the shared alignment of project goals between government, investors, developers, and the supply chain.
“An allocation of risk that recognises the reality of offshore construction and reflects the need to encourage the development of increasingly technologically advanced project solutions. Greater flexibility and fairness is needed by allocating the risk to the Party who created it, or is best placed to manage it, and take responsibility for it.”
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“Solutions are readily possible by developers and contractors working to achieve a common alignment on project cost, schedule, and quality objectives; and thereby allocate the risks and rewards fairly and responsibly. Without this sort of approach, which we have seen in several business cycles within the offshore construction industry, we will be unable to address the inevitable inflationary cycle, which will place project investment decisions at risk. “Our member companies play a vital role in the global offshore wind energy industry and have been heavily engaged with pretty much all the major offshore wind farms outside of China. Without a significant change in contracting strategy, the ambitious targets set by governments, investors, and developers, will not be achieved.”
Throughout the year IMCA will continue to engage with key industry stakeholders globally, including relevant government departments, industry bodies and trade associations, offshore clusters, developers, investors, and the insurance market; believing it is imperative they understand the challenges faced by the industry and the need for collaborative solutions to unlock investment opportunities on a sustainable basis.