Ørsted Sounds the Alarm: Europe Must Act Now to Prevent Wind Energy ‘Downward Spiral’

Europe’s offshore wind sector, once a beacon of renewable energy success, now faces a critical crossroads as escalating costs, supply chain challenges, and policy uncertainties threaten to stall growth. Ørsted, the world’s largest offshore wind developer, has issued a stark warning: without urgent, coordinated action from European governments, the industry risks entering a damaging downward spiral that could imperil the continent’s clean energy future.

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Europe’s Offshore Wind Industry at a Critical Juncture

Offshore wind has been one of the fastest-growing and most competitive renewable energy technologies in Europe. Between 2015 and 2020, costs for offshore wind electricity plummeted by roughly 70%, driven by technological advances, larger turbines, and favorable financing conditions. This rapid cost reduction propelled ambitious offshore wind targets across Northern Europe, helping to shape a cleaner energy landscape.

However, recent developments have reversed much of this momentum. Rising raw material costs, inflation, supply chain bottlenecks, and increased capital costs have combined to severely impact the commercial viability of new projects. This has led to declining investments from original equipment manufacturers (OEMs) and developers, with some delaying or canceling plans, scaling back turbine production, or shifting to onshore wind where economics are more favorable.

The result is a dangerous cycle: reduced investments lead to slower supply chain growth, which increases costs and project risks, further discouraging investment and threatening the delivery of Europe’s energy transition goals[2].

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Ørsted’s Call to Action: Preventing the Downward Spiral

In an emphatic appeal ahead of the WindEurope 2025 conference, Ørsted executives urged European policymakers to take swift, decisive steps to stabilize and revitalize the offshore wind sector. The company emphasized three key actions to prevent the industry sliding into an irreversible downward spiral:

1. Commit to Long-Term Deployment Targets and Financial Support

Ørsted calls for Europe to commit to deploying at least 10 gigawatts (GW) of offshore wind annually over the next decade with robust financial backing, such as Contracts for Difference (CfDs), to guarantee revenue stability for investors. This would restore confidence across the supply chain and among developers, ensuring that planned capacity translates into actual installed turbines offshore[3].

2. Coordinate Deployment Schedules Across Europe

The industry suffers from fragmented and uncoordinated national deployment plans, creating uncertainty and inefficiencies. Ørsted urges harmonized planning and scheduling to avoid market imbalances and maximize economies of scale, allowing suppliers and manufacturers to optimize production and reduce costs[1][3].

3. Recalibrate Auction and Regulatory Frameworks

Recent auction designs that require high upfront payments and complex criteria have deterred developers. Ørsted stresses the need to redesign these mechanisms to balance risks and rewards more equitably, preventing excessive financial burdens that undermine project bankability and investor appetite[2][4].

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Why the Downward Spiral Matters: Europe’s Energy Security and Climate Goals at Risk

Europe is heavily reliant on offshore wind for meeting its ambitious renewable energy and climate commitments. The sector is integral to:

• Energy security by reducing dependence on imported fossil fuels.
• Decarbonization to meet EU climate targets and mitigate climate change.
• Economic growth and jobs, particularly in manufacturing and supply chain industries.

If the downward spiral continues, up to 54 GW of offshore wind capacity currently planned in Europe could be at risk of delay or cancellation[3]. This would not only slow the EU’s clean energy transition but also jeopardize energy affordability and independence at a time of geopolitical uncertainty and volatile fossil fuel markets[4].

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Challenges Fueling the Crisis in Offshore Wind

Several interconnected issues underpin the crisis facing offshore wind in Europe:

Rising Costs and Inflation

Escalating raw material and labor costs, combined with inflationary pressures, have pushed project budgets well beyond initial forecasts. The increased costs reduce expected returns and strain project economics[2].

Supply Chain Bottlenecks and Investment Reticence

After years of rapid expansion, supply chain players are now cautious, delaying capacity expansions due to uncertainty over project pipelines and financial returns. Some OEMs have announced scaling back offshore turbine production to focus more on onshore projects[2].

Increased Revenue Risk and Capital Costs

Volatility in electricity markets and unclear pricing mechanisms increase revenue risk for projects. This, coupled with higher interest rates, raises the cost of capital and makes financing new projects more difficult and expensive[2][4].

Complex and Burdensome Policy Designs

High upfront concession fees, rising seabed leasing costs, and complex auction requirements have discouraged participation by developers, further shrinking the project pipeline[2].

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The Path Forward: Securing Europe’s Offshore Wind Future

Ørsted’s comprehensive analysis and warnings are a call to arms for European leaders and policymakers. The industry needs a clear, stable, and supportive policy environment that restores confidence and unlocks sustained investments.

Key Recommendations Include:

• Stable Long-Term Targets: Clear and ambitious deployment goals with guaranteed support mechanisms to reduce investment uncertainty.
• Simplified and Fair Auction Systems: Policy designs that lower barriers and promote bankable projects without excessive financial burdens.
• Cross-Border Cooperation: Coordinated planning to synchronize deployment schedules, maximize efficiencies, and integrate grids.
• Funding and Incentives: Increased public funding and incentives to offset rising costs and stimulate supply chain investments.

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Conclusion

Europe’s offshore wind industry stands at a pivotal moment. The dramatic cost reductions achieved over the last decade are at risk of being reversed by the compounding effects of financial uncertainty, rising costs, and policy hurdles. Ørsted, the sector’s leading player, has issued a clear warning: without urgent coordinated action to stabilize the market and de-risk investments, the industry could enter a downward spiral that delays crucial renewable energy capacity and undermines Europe’s energy and climate goals.

The next few years will be decisive. Europe must act boldly to secure the future of offshore wind — a cornerstone of the continent’s clean, secure, and affordable energy transition.

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By addressing these critical issues head-on, Europe can safeguard its offshore wind leadership and drive forward toward a sustainable energy future.