Political Impacts on Offshore Wind

Jamie Bernthal-Hooker (00:18)

Hello from 4C Offshore, the market leaders in offshore wind intelligence and a proud part of TGS New Energy Solutions. I'm Jamie Bernthal-Hooker and I work with the market research team at 4C Offshore. Today I'm joined by two of our expert analysts, Dan Wiseman and Benedict Cooper.

 

Dan Wiseman (00:35)

Hi, I'm Dan Weisman. I'm the North American Analyst at 4C TGS.

 

Benedict Cooper (00:40)

Hi, I'm Benedict Cooper and I'm an analyst for Northern Europe and the Baltics.

 

Jamie Bernthal-Hooker (00:46)

Awesome. We're going to be talking today about elections. Last year has been called by some the biggest year in election history, with around half the globe going to the national polls. And this resulted in quite a few changes of government, including key offshore wind markets like the UK, the US and Japan. 2025 is also proving a milestone year. And this month we saw the much-anticipated federal elections in Germany. Now, how does a change of government or and upset in the polls affect offshore wind policy, especially when the industry is facing political uncertainty already. Let's get into it. Starting with the more recent news, Benedict, can you talk us through the current state of offshore wind in Germany and what impact, if any, this election will have on it?

 

Benedict Cooper (01:32)

Yeah, so offshore wind in Germany is certainly a bit of a bit of a crossroads right now. So, on the one hand, things are looking good with thanks to the ease of permitting, a healthy pipeline and the potential of the country too. But at the same time, the political uncertainty and grid delays are certainly leaving some question marks as to its current future. I mean, in regard to the elections, have they have come earlier than planned after the previous government collapse last year, which was a coalition of the SDP, Greens and the FDP as well. So, in regard to the recent elections, they have come earlier than planned after the previous government collapse last year, which was a coalition of the SDP, Greens and FDP and have been won by the center-right, so the CDU-CSU party receiving about 29 % of the vote.

So, there will need to be a coalition in the new government which will be arranged over the next couple of months. Despite getting the worst post-war election result, this coalition is likely to be with the SDP. Although outgoing Chancellor Olaf Scholz has said that he won't be a part of the new government. And with a couple of parties falling below the 5 % threshold to enter parliament, the two parties together will have a seat majority should they decide to form a coalition.

The Far-right AFD party has also made some significant gains coming second in the vote with approximately 21 percent although all parties have ruled out a coalition with the AFD. And then relating it to offshore winds, I think it's hard to see offshore wind development continuing at its current pace especially considering the amount of advancement in recent years has been down to previous Vice Chancellor and Economics and Climate Minister Robert Habeck of the Green Party. The incoming Chancellor also previously described wind energy as a transitional technology and called turbines ugly, hoping that one day they could be dismantled. But he did later soften this rhetoric in a TV debate with the SDP calling them necessary following a pushback from business groups.

But there is still a stronger desire in that CDU, CSU party to make a return to nuclear power. The SPD is still pushing for renewables expansion, but I think this will be interesting to see the force of this without the Green Party, especially considering this push for expansion wasn't necessarily the case when they were part of Angela Merkel's coalition.

And if they were to get some concessions in other areas, it could be something they could potentially not push as hard as other aspects. So, the general political focus in the country at large as well, at the moment, surrounding immigration, security in Ukraine. So offshore wind may potentially be something that's just allowed to continue on its current path for now to enable the prioritization of other areas.

The chairman of the BWE have come out, so the German Wind Energy Association have come out since the election results and have also said that this doesn't mark a change of course the results of election. So particularly from their point of view, they're seeing it still continue as planned, but I think it will be something that is not, you know, it's going to have some slight effects on the way that it it is moving forward, just because of the amount of political change that there is going to be. There's currently auctions in progress at the moment in Germany which are due to conclude in the summer, so it'll be interesting to see how these play out under the new landscape as well as any potential policy shifts too.

 

Jamie Bernthal-Hooker (05:33)

So, I guess it's partly about the ongoing issues that the German offshore wind market is having anyway with the grid and so on. I quite like the idea of ugly but necessary. I think I might put that on business cards. We all saw the press when the alternative for Germany, AFD's Alice Weigel said she'd tear down the windmills of shame and there was I think some genuine concern at that time earlier in the year that this rhetoric would break through and influence the other parties. The far right is increasingly powerful in European politics, even when it doesn't win when it becomes the opposition and influences those in power.

 

Benedict Cooper (06:14)

Yeah, so I think interestingly this comment was sandwiched in between Friedrich Mertz's slight shift in offshore wind outlook. So, in a way, I think this, the kind of severity of this comment has almost worked in the other way in the sense that Mertz has used this narrative to try and win over some of the other parties with a more positive stance on wind energy.

But still, AFD have finished the election as well and there'll be a sizeable portion of the German government now supporting this idea. I mean, this narrative is something that we're not just seeing in Germany but across the world at the minute. I think Dan's going to talk about some more high-profile examples shortly. But I mean, closer to home as well. We've seen in the Netherlands recently that a far-right party have won the majority of votes in an election and have ended up forming a coalition too.

So, for example, over there as part of the coalition, the climate and green growth minister, that position is currently occupied by Sophie Hermans, who's also the second deputy prime minister and ran for the People's Party for Freedom and Democracy, who's pro-green growth and wants to continue with existing plans for wind energy development. So, there's still a lot of push for that in the Netherlands, but obviously with other aspects of government being controlled by a more right leaning party, it'll be interesting to see how that develops as well.

But going back to Germany, I think as well with these comments, and with how well the AFD did in the elections, the voice of anti-wind rhetoric in German parliament is certainly going to be much louder than it previously was. I do think with a lot of these comments as well, the main target of these is in particular onshore wind just because they're just slightly more prominent and if you look at a lot of the comments, they're based around like visibility and like cooling turbines ugly, so I think maybe the location of onshore wind doesn't help that and I think sometimes offshore wind it kind of benefits from a bit of a out of sight out of mind mentality.

But yeah, as I say, think it will be interesting to particularly in Germany to see how the next few months progress with auctions and political changes.

 

Jamie Bernthal-Hooker (08:44)

Yeah, I think that's a really good point, especially considering what we've seen with onshore wind in Germany. And part of the power of that line, other than the sheer frustration of hearing a turbine called a windmill, was that it sounded an awful lot like cancel all the windmills on day one, which is a line from Donald Trump's campaign for the US presidency.

So, we'll bring Dan in now and we're just over a month on from day one in the US, a definite impact on renewables generally. I don't think it's an understatement, but especially offshore wind, would you say?

 

Dan Wiseman (09:19)

Absolutely. I think if you want a prime example of how a change in federal policies will affect offshore wind, Donald Trump has proven that it can have such massive, massive effects. It feels like in the US that the offshore wind has just come to a complete stop at this point with his policies on cancelling future leases and investigating existing leases to determine the necessity of having stuff offshore and how that aligns with federal policies on climate and energy and just finding any loopholes to try to cancel them. It's put offshore wind in a very precarious place where you have developers who are now no longer interested in offshore wind. I mean, we've seen recently the Atlantic Shores projects.

We saw Shell come out of them in January and EDF just over the last couple of days has marked down the value of the project. So, essentially these are, are, excuse the pun, dead in the water. We're finding that that seems to be the common theme with the US at the moment, is just continuous developer uncertainty. If they're in a climate where leases aren't going ahead, but you have European countries and European markets or markets in the Asia Pacific region that are moving forward, then that's going to be the pull of developers to those areas as opposed to the US. So, it's weathering a four-year storm in the US for a lot of developers.

Other policies that affected things like federal tax credits and the disbursement of those funds being frozen and halted with a view to roll back some of the Inflation Reduction Act investment tax credits that were awarded to developers for building their projects. It's an important tax credit for them to have. Thes is around about 25 to 30 % of their total project cost comes from these investment tax credits. Luckily, if they've been awarded, they can't then be repealed. You can't un-award something.

But it means that projects that aren't hitting financial close or are still looking to cover the costs of their projects, 30 % is a big deal, It's a lot of money. So, the policies that have directly impacted future leases, where the Bureau of Ocean Energy Management have had this pipeline for the next five years of all of these leases that were going ahead now aren't going ahead. You have all of the lease areas that have just been bought out like the Gulf of Maine in the last few months.

Those are areas that are just going to be empty really, for God knows how long until they either sell it on or developers go in and start working on the area. So, it's easy to think that offshore wind in the US is dead. It's not dead, it is heavily wounded. There's the chance for some sort of bounce back, but there are a lot of things going against it where if it does bounce back, it's going to take a very, very long time for it to get back on its knees and kind of get things moving again for sure.

 

Jamie Bernthal-Hooker (12:56)

I think it's a sign of the current times we live in as well as something I've noticed in this industry quite a lot when it's covered in the mainstream news is there can be a lot of catastrophizing. So, with the Atlantic Shores stuff, we've headlines about Atlantic Shores has been cancelled, EDF has pulled out and EDF hasn't, it's devalued at stake, as you say. But of course, it's not positive, overwhelming delightful news is certainly not a rosy picture.

 

Dan Wiseman (13:30)

Yeah, I agree. think media has had a direct effect on how the world sees the offshore wind industry in the US. With Trump on his rallies saying, you know, they kill the whales, they send the birds crazy, they're killing bats. And the media constantly kind of putting this negative spin on it. It's mostly negative. It's hard to get away from that, but there are, it isn't all bad.

And I think this is when you look at a deeper value, it's easy to kind of see, well, hold on, there are these pluses and there is a little bit of a shining light at the end of that tunnel, but it's a very long tunnel and it's a very dark tunnel that the US offshore wind has to endure before it picks back up.

 

Jamie Bernthal-Hooker (14:20)

Yeah, and there's still a pipeline, isn't there? I mean, we talk about how we've revised our forecasts for the US downwards pretty consistently in recent times, but it's still there in the top 10 of countries by 2040.

 

Dan Wiseman (14:39)

Yeah, absolutely. I think the one thing that has always gone for the US is they aren't afraid of offering large lease areas. If anybody has ever seen our interactive map, if you look on the East Coast of the US, you'll see the Central Atlantic lease area and it covers pretty much the entire East Coast. it's a very American thing, go big, go home.

You know, they do. Like you said, they do still have a pipeline. It's not a fact that all offshore wind has come to a halt and must stop. It's not the case. Projects that are under construction, projects that have got their construction and operation plan approval from BOEM, they can still go ahead. The Trump administration will be doing everything they can to try to stop that and find any loophole or any policy change or employ lawyer after lawyer after lawyer to try to get these things to stop, but they're going to have a tough time. It's not impossible, but it's not very likely.

 

Jamie Bernthal-Hooker (15:43)

And how is the German pipeline looking now, Benedict?

 

Benedict Cooper (15:46)

Yeah, so I think the pipeline is looking healthy still, but I think overall we still expect the build out to come in slightly below target due to these reasons previously mentioned. And it just feels like a lot of aspects need to go right in order for these goals to be achieved. The German BSH, which is the Federal Maritime and Hydrographic Agency, brought out an updated site development plan in January.

And as part of this, some of the sites were reduced in capacity in order to make some of these sites more attractive for developers. So, I think the three auctions this year will certainly be a good barometer for the impact that that will have moving forward on developer interest. And it's also just going to be interesting to see the timelines for sites such as Borkrom, Riftgun 3 coming online. So obviously this is one that is fully built and just waiting now for a grid connection.

So that was finished in January and we're kind of expecting the grid connection to become live in December now. So just be interesting to see the timeline and whether that timeline can still stick to kind of what's being outlined and how that goes and just how this kind of compares to current government or TSO plans and forecasts.

 

Jamie Bernthal-Hooker (17:01)

Yeah, it's an interesting time. We're seeing a lot of different conversations going on at the moment. And we've talked a few times today already about this increased caution we're getting from developers, these problems with the supply chain, the grid, tariffs and localization requirements that slow things down. And then on the other hand, we're seeing that massive push to get things leased or consented in time to hit, well, currently 20, 30 targets.

Last year was also a record year for offshore wind auctions for leasing and subsidy, although in each case we saw auctions around the world fall short of what they wanted to award.

 

Benedict Cooper (17:40)

Yeah, so that is certainly an interesting point, isn't it? There is the aspect of a lot of countries are trying to almost like get this build out going as quick as possible in order to meet targets. But at the same time, we are seeing a lot of changes, particularly in the markets that I cover, in kind of changing auction parameters and things like that and just slowing down processes slightly.

So, for example, in Europe, lot of auctions took place last year, but interest in most wasn't particularly high. We've got quite a few more set to go ahead this year as well, and a number of countries are making changes to those auctions. So, both Germany and the Netherlands have reduced the size of plots to try and make sites a more attractive proposition for developers. I've also seen Lithuania suspend their current auction for the country's second offshore wind site to improve conditions. So just to make it kind of more viable for the end consumer.

And I think this one is still likely to go ahead after connections to land for both sites were presented to public last week. But still with this one, I know was initially supposed to, after being launched in November, was initially supposed to be finishing this year so it'll just be interesting to see the updated timeline of that. We've also got Poland set for phase two off take auctions beginning later this year. However, with those as well, there are draft amendments to conditions currently going through the legal process. Estonia as well, we're due to have first off take auctions this year but now look to have been pushed back to 2026 in order to apply for a new state aid permit with better conditions. And they're also awaiting the outcome of the EU's clean industry agreement, which is actually, I think, supposed to be due to be released this week. So, there's clearly a lot of changes in European offshore wind auctions. And I think it's really going to be an interesting year to follow these and see whether these reforms can have the desired effect.

 

Jamie Bernthal-Hooker (19:51)

Yeah, and there's Lithuania and the Russian grid, isn't there?

 

Benedict Cooper (19:55)

Yeah, exactly. So, we've seen all Baltic states disconnect from the Russian grid network and onto the European network over the last month as well. So that's something that's going to be another interesting thing to follow, because obviously this is going to become with a lot more energy independence for these countries. So, Estonia, Lithuania and Latvia. So that's obviously a huge change for those countries and a huge amount of investment has gone into kind of totally reforming that grid in order to connect them to Poland and to mainland Europe. So, I think that's another thing that's really going to be kind of a motivation for these countries to really start getting the offshore wind industry off the ground now.

 

Jamie Bernthal-Hooker (20:44)

And US auction trends Dan?

 

Dan Wiseman (20:47)

I don't know if there's been any trends per se. It's been a weird thing to watch because it's very easy to assume that given the sheer amount of consented projects that happened in 2024 in the US, that it's been huge success in all of these auctions left, right in the center, but it's not really been the case.

We've seen failed auctions in Oregon. We've seen failed auctions in the Gulf of Mexico. We've seen unsolicited lease requests by Hecate Energy in the Gulf of Mexico, which has caused them to review whether that auction needs to go ahead again. Of course, in the current climate, the US Offshore Winds, that's going to maybe not happen. But then we've also seen massively successful auctions like the Central Atlantic, where I think in total it was just over 92 million in total, they got over the two sites that were being leased.

And the most recent one was the Gulf of Maine, the East Coast kind of foray into floating offshore winds. They had eight lease areas that were up for auction. Four of them went and in total, I think it was just over 21 million in total for those four areas, which sounds like it's a fair amount, but to put that into a comparison with other auctions. In the Central Atlantic auction, Dominion spent $17.6 million on one small lease area.

So, for four areas in the Gulf of Maine to go for almost as much as a single lease area in Central Atlantic, it shows how developers felt about the incoming administration. So, leases have been a bit hit and miss, quite away from the golden days of the New York bite where we were looking at enormous amounts of money being paid for lease areas, you know, is absolutely ridiculous. And we're just not seeing that anymore because the US is a difficult market, even pre-Trump, it was a difficult market to generate things like supply chains because there's not really a domestic supply chain. So, everything was having to come to Europe.

And when it was coming to Europe, we were having, they were having to deal with the Jones Act compliant vessels that were having to install parts. So, there were all these workarounds. So just that uncertainty and the additional work and effort needed by developers really reflects on how these leases have gone. And it has been, I guess, a complete unraveling of what happened during the Biden-Harris administration.

Big plans for offshore wind. We had multiple lease areas, popping up left, right and center, whether they were going to go ahead or whether they were going to be successful or not, they just kept coming up and that showed how much they wanted it, how much they wanted to kind of go for the net zero target to hit their renewable energy targets.

But yeah, leasing has been kind of on a bit of a downward slope and will continue to do so, of course. The sheer amount of leases that the Bureau of Ocean Energy Management or BOEM have had plans for the next five years at this point won't really exist, but leases have been a bit hit or miss for the US. Lots of East Coast support, not a lot of West Coast support, no real Gulf of Mexico support, which wasn't surprising, I mean, it's the Gulf of Mexico, not a lot of developers had a great interest in it because it's just...a difficult part of the US to try to develop a wind farm in.

Jamie Bernthal-Hooker (24:41)

Yeah, there was a definite rush of a lot of these lease areas to get them out to auction before the election, I think.

 

Dan Wiseman (24:51)

I think what's the American football term, a “Hail Mary”. I think that was pretty much the approach and that had been the approach for the final year of Biden's presidency because I think although people didn't want it, I think there was always in the back of their minds that the Trump presidency was going to come through. So, they needed to do something.

 

Jamie Bernthal-Hooker (25:12)

If this Trump presidency had been like the last one, maybe this would have worked because what we saw last time was that BOEM was understaffed and didn't have maybe so many of the resources it had, but it was still able to progress some things and states were able to lead on the offtake and the port readiness and everything. The states still do have quite a lot of autonomy in offshore wind. What we have this time that we didn't work are kind of active efforts to disincentivize the development of the industry.

 

Dan Wiseman (25:48)

Yeah, everybody that Trump has on his side are very oil and gas hardliners. You know, they're all singing from the same hymn sheet. They all want it gone. But like you said, interestingly, this is a federal thing. So, the federal actions is what is being slowed down on what's being looked at. State level stuff can still go ahead. So, if they're looking at developing policy, for example, in Oregon, the only reason that auction didn't go ahead was purely for the fact that, well, A, there was no real interest in the Northwest.

But Oregon simply wasn't ready for offshore winds. They had no plans for offshore winds, how it was going to be developed offshore, how it was going to be brought in and worked into their transmission systems. And what this can do is it might give them a hiatus to be able to develop. And I think that's mainly kind of a West Coast thing.

The East Coast, think, have a lot more things in place, but it gives them the chance to prepare for the bounce back. If and when it happens, we can't really predict what's going to be in the next four years. We may have somebody who is harder on offshore wind than Trump is, but hopefully that's not going to be the case.

 

Jamie Bernthal-Hooker (27:04)

I the state governor has to support offshore wind and there has to be enough appetite in the state level, especially now that that's going to require more involvement from the state than it did before.

 

Dan Wiseman (27:15)

Yeah, and I think luckily the states that have offshore wind in their plans are still states that have good support from their governors. I know it's been a bit odd with New Jersey recently pulling out of their fourth offshore solicitation, but the pro-wind states are the states that have wind in their plans and the ones that aren't don't really.

 

Jamie Bernthal-Hooker (27:45)

Thank you both, this has been a really insightful dive into the way auctions feed into those broader conversations around offshore wind and we're almost out of time but there is just time for final thoughts. So, I'm going to come to Dan first then Benedict, what are you looking out for in your markets in coming months?

 

Dan Wiseman (28:03)

It's a tough one for the US; there's not really a lot to look forward to. I think it's going to be mainly how these projects under construction, the Coastal Virginia, Offshore Winds and Windyard, how they're going to progress. They're doing quite well. Windyard had their hiccups, but there's positivity still. And I think mostly it's going to be looking out on the bigger picture of these policy changes. And if offshore wind in the US has the resilience it needs to hold out.

 

Benedict Cooper (28:33)

Yeah, think from my side, particularly with the main thing really is going to be following the auctions and seeing whether some of these changes can have the desired impact on offshore wind build out moving forwards. And then obviously some of these political changes in Germany as well, just kind of seeing how they develop. So, I think I think overall this this year and particularly the next few months are going to be vital to getting an idea of as to how the next few years are going to go.

And then another really exciting thing I think at the moment is Poland's offshore wind industry getting off the ground and into the water. So, we've seen Baltic Power start construction early this year with another project, Baltica 2, reaching financial close as well. So, I just think the development of that is just going to be a really exciting thing to follow over the next few months and couple of years.

 

Jamie Bernthal-Hooker (29:27)

Nice, it is nothing if not exciting, this industry. Thank you both.

 

Dan Wiseman (29:32)

Thank you.

 

Benedict Cooper (29:34)

Thank you.

 

Jamie Bernthal-Hooker (29:35)

And thank you for joining us today at PowerPod by TGS. Make sure to subscribe to our podcast and join us next time as we continue this conversation around new energy solutions. See you on the next episode. Bye.