S&P Global Ratings – Offshore Wind – A Changing Sea Of Risk

October 9, 2017

Costs for offshore wind development continue to fall, fueling projects to expand capacity globally. Indeed, the three winning bids of the Sept. 11, 2017, U.K. contracts for difference auction of offshore wind projects saw a drop in offered tariff prices of 50% on average since the last competitive auction in 2015. The maturation of the industry, particularly in Europe, has enabled greater transparency and a better understanding of the key risks, especially during the construction phase, which in turn has supported further cost reductions. We believe investment grade ratings are possible for projects under construction with strong contractors and suitable construction schedules, together with appropriate warranties for technologies without a sufficient track record. A robust pipeline of new projects is growing to leverage the vast untapped potential of offshore wind around the globe (see “Offshore Wind Projects Take off as Technology Improves and Costs Fall,” published on June 2, 2017). Here, S&P Global Ratings explores some of the key risks that offshore wind projects face and how we factor them into our ratings analysis. First, we briefly discuss trends in the types of risk involved in project finance. Then, we delve in depth into how we assess each kind of risk.

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