The Offshore Wind Challenge
Offshore wind construction is one of the most complex and capital-intensive infrastructure undertakings of the 21st century. With projects often spanning multiple years, involving international supply chains, marine operations, and weather-sensitive schedules, keeping budgets and timelines on track is no easy feat. Yet, as governments and developers race to meet net-zero targets, the pressure to deliver projects faster and more cost-effectively has never been greater. This article explores the strategies and pitfalls in managing budgets and timelines in offshore wind construction, drawing on OCA’s industry experience, recent project data, and the hard lessons learned we’ve witnessed developers face along the way.
The High Stakes of Offshore Wind Projects
The total cost to complete a single offshore wind farm can end up anywhere between £1 billion and £3 billion. These costs fall into three categories: CAPEX, DEVEX, and OPEX.
- Capital expenditure (CAPEX) includes turbine procurement, foundations, subsea cabling, substations, and installation vessels.
- Development expenditure (DEVEX) is the total cost of all the processes up to the financial close or placing firm orders to proceed with wind farm construction.
- Operating expenditure (OPEX) covers maintenance and servicing over the project’s 25–30-year lifespan.
Even small delays or budget overruns can dramatically impact the project’s internal rate of return (IRR) and overall financial viability.
Common Budget Risks
Supply Chain Bottlenecks: Delays in critical components or equipment can lead to unexpected schedule impacts, idle resources, and higher costs.
Inflation: Fluctuations in global markets can inflate material costs, especially for long-lead items such as turbine towers and foundations.
Unanticipated Geotechnical Conditions: Discovering soft sediments, boulders, or unexpected seabed conditions can require design changes and additional engineering work.
Permitting Delays: Regulatory approvals can be delayed by public objections or litigation processes, halting construction or increasing holding costs.
Common Timeline Risks
Weather Windows: Offshore construction is highly sensitive to sea conditions, and periods of poor weather can cause unexpected delays or even push critical activities into less favourable seasons.
Commissioning Delays: A project can end up being physically complete but still unable to generate revenue if the grid connection is not ready. This delay in generating returns can cause financial strain.
Subcontractor Underperformance: Poor performance or insolvency from subcontractors or suppliers in the supply chain can disrupt the schedule and require rapid contract renegotiation or replacement.
Regulatory Changes: Shifts in environmental, labour, or energy policies or regulations can alter the established project assumptions, requiring costly rework or reapproval.
A 2022 report by the Global Wind Energy Council (GWEC) found that 36% of global offshore wind projects experience cost overruns, and 45% face timeline extensions.
Best Practices in Budget Management
Early-Stage Cost Certainty
Accurate front-end engineering design (FEED) and seabed surveys can reduce risk exposure later. Investing more up front can save millions down the line.
- Use contingency allowances based on detailed risk assessments: Projects should budget a specific percentage for unexpected issues, adjusting based on known complexity and site conditions.
- Apply scenario-based cost modelling to test against price changes: Running multiple budget models helps developers to prepare for high and low inflation environments, allowing for better informed contingency planning.
Procurement Strategy
Supply chain tightness is a reality. Strategic sourcing and locking in key contracts early can help to manage price escalation and availability.
- Secure long-lead items in advance: Placing early orders mitigates delays from limited global manufacturing capacity and allows for greater predictability in delivery schedules.
- Negotiate framework agreements or indexed pricing with suppliers: Framework deals secure capacity and provide flexibility across phases, while indexed pricing ties costs to pre-agreed inflation indices.
Integrated Cost Control
Having dedicated commercial and finance teams within the project office improves response times to potential budget shifts.
- Track earned value management (EVM) metrics: EVM provides a real-time view of cost vs. performance, highlighting unexpected budget deviations early.
- Build in real-time cost dashboards using project management tools: These dashboards allow project managers to visualise trends and act proactively should costs begin to drift.
Insurance and Risk Transfer
Share or shift risk through contracts (e.g., EPC, EPCI models) where possible. Insurance can help to mitigate unforeseen liabilities such as weather downtime.
- Ensure coverage includes delay-in-startup (DSU) and marine liabilities: Choosing specialised offshore policies can protect against lost revenue and equipment damage, reducing potential financial exposure.
Best Practices in Timeline Management
Realistic Scheduling
The temptation to overpromise is ever present; however, it can backfire. Developers should look to build schedules based on empirical weather data and contractor performance.
- Allow for seasonal weather constraints in marine operations: Schedule critical activities like pile driving and cable laying during optimal seasons to avoid downtime.
- Include buffer time in critical path activities: Incorporating a buffer into the schedule helps to absorb unforeseen delays without impacting the final completion date.
Agile Project Governance
Having weekly cross-functional meetings, clear decision hierarchies, and involved site managers can help tackle problems before they escalate.
- Maintain clear lines of accountability: Each contractor and team member should know their scope, expected deliverables, and escalation paths.
- Enable project managers to flag and escalate issues early: Dedicated schedule analytics and planners ensure that risks can be addressed before they cause delays.
Preassembly and Modular Construction
Where feasible, move complex or time-consuming operations onshore, e.g., preassembled turbine components and substations reduce time offshore.
- Preassembly reduces weather exposure risk: Less time offshore means fewer days lost to bad weather and reduced cost uncertainty.
- Improves quality control and reduces offshore person-hours: Controlled factory environments produce higher quality components and reduce the need for risky, time-consuming offshore tasks.
Case Study: Dogger Bank Wind Farm
The Dogger Bank project, the world’s largest offshore wind farm, demonstrates both the scale of the challenge and the power of good project management. Despite COVID-19 disruptions and volatile global markets, the project is on track to deliver 3.6 GW over three phases, with current key lessons learned including:
Early turbine orders secured cost certainty:
By ordering from GE early, the developers locked in prices and ensured supply availability.
Floating substations helped reduce seabed risk:
Floating substations could be adapted to varied seabed conditions to avoid costly foundation works.
Dedicated logistics hubs shortened supply lines:
Strategically located ports allowed for efficient component transport and crew transfer.
A Culture of Realism and Resilience
In offshore wind construction, perfection is rarely possible, but smart planning, early engagement with risk, and a culture of realism can go a long way. Managing budgets and timelines is less about avoiding surprises and more about being ready to face them.
As the UK, EU, and global markets look to increase offshore capacity, the lessons from past projects will be invaluable, and transparency, agility, and foresight will define the next generation of successful wind farms.
At OCA, we’ve supported the delivery of offshore wind projects from early-stage development through to commissioning. Our comprehensive lessons learned database, built from real-world experience, continues to inform best practice, helping our clients avoid pitfalls and deliver more predictable outcomes. With every project, we refine our methods and share insights that strengthen the offshore wind industry.
