The UK has long prided itself on being a leader in offshore wind, with an ambitious goal of generating 50GW of electricity from offshore wind by 2030.
However, last month, news that global fossil fuel giant BP is halving its investment in renewable energy over the next two years due to profitability concerns signals uncertainty for the wider market. Its news comes after Equinor and Shell made similar announcements. If the recent withdrawals of key investors from the offshore wind market continue, the UK’s transition to a sustainable energy future could be jeopardised.
Economic uncertainty puts pressure on companies’ renewable targets
Currently, the offshore wind industry faces several challenges. Rising capital costs, market volatility and broader economic uncertainties have created significant obstacles to investment in large-scale projects.
A shift in global priorities towards economic growth rather than green energy has raised perceived risks, making it harder to attract investment. As a result, fewer companies are willing to commit resources to these high-cost, long-term projects. Notably, BP’s recent scrapping of its current green ambitions to focus on growing fossil fuel production raises alarm bells.
Additionally, some oil and gas companies are relaxing targets for renewable energy investment due to reduced pressure from governments, further exacerbating the situation.
With companies changing gears in their renewable investments, we are seeing a concerning trend brewing. Should this continue and urgent investment does not step in, the UK will be moving in the opposite direction from achieving net-zero ambitions.
Strategic vs Market Signals
This year is a pivotal one for Government policy, since progress this year will lay the foundation for meeting the 2030 goals, or at least getting anywhere near them.
While it is clear the Government and NESO understand the scale of the challenge, and are sending the right strategic signals, we are nonetheless seeing contradictory signals in the market. Zonal pricing is looming over investment decisions this year, and some investors are hoping that the Government chooses to act against what is expected to be the advice from their own regulator, Ofgem, on the issue.
Until that question is resolved, developers will have to price a great deal of uncertainty into their projects. The Government has said that AR7 CFD winners will be “insulated” from zonal pricing changes but have not made clear how. Developers still do not have a definite Gate 2 date for connection queue reform. Rising costs and substantial grid delays, due to the sheer scale of enabling works needed across the transmission network, are seeing many FIDs delayed. Strategic planning decisions need to be bold, and so far, they have been under Labour, but they need to be aligned with market signals or investors will balk. The upcoming cap and floor decisions, design of future CfD allocation rounds, ongoing balancing mechanism reforms, and REMA (Review of Electricity Market Arrangements) are opportunities to provide clarity.
However, Government have said they are looking at the offshore sector to the extent of focusing on individual projects, and “know which ones they need to unblock” (Ben Golding, Mission Control, SR Grid and Networks Conference 2025). There are a lot of schemes in the offshore pipeline, so developers will be hoping that if the Government is indeed picking winners, they will be the ones getting picked.
The urgent importance of championing domestic energy
More immediately, energy prices are set to rise again in April, and there’s little sign they’ll return to the lower levels seen before the energy crisis. The last price shock cost the country £44 billion. Should the security of the UK’s energy supply, which is now a national security issue, continue to be a cost laid solely at the door of consumers? Had the UK been further into the energy transition and less dependent on gas pricing, the impact of the crisis could have been less severe, with energy costs being less vulnerable to fluctuations in the global market. With geopolitics providing instability within the market, it is more important than ever to be investing in home grown energy.
To ensure the UK remains competitive in the offshore wind sector, urgent action is required. Countries such as Germany and the Netherlands are continuing to make strides in this area – with Germany installing 1,639 turbines with a capacity of 9.2GW alone during 2024[1]. Securing investment and adapting the regulatory environment to support a dynamic, competitive industry are essential steps for maintaining the UK’s leadership and long-term energy resilience.
If these announcements by oil and gas producers signal a wider decline in offshore wind investment, the gap between the UK’s capacity and its ambitious renewable energy targets will continue to widen. We need vital players to step into the market because a well-supported, and funded, offshore wind industry will provide affordable and sustainable energy, reducing the UK’s reliance on fossil fuels.
Written by David McGuire, Partner in the Energy and Renewables team at Morton Fraser MacRoberts
[1] https://www.renews.biz/98584/act-fast-to-support-german-offshore-wind-expansion/
