Offshore wind energy is entering a period of deep systemic crisis. The failure of the tender for the construction of two large wind farms off the coast of Germany in 2025 shows that the market has essentially lost its ability to attract investors. Industry organizations attribute this to the flawed design of the auctions, which in recent years have begun to impose negative bidding schemes on developers. This model assumes that companies not only do not receive a guaranteed price for electricity but are also required to pay for the right to build a wind farm itself. With rising costs, this makes the projects inherently unprofitable. Economic conditions are exacerbating the situation. The cost of materials, equipment, and logistics has increased, while rising interest rates have sharply raised the cost of capital. Offshore wind farms require significant initial investment, and any price increase directly reduces potential profits. Developers no longer see the financial sense in participating in tenders that lack income stabilization mechanisms.
Plans frozen
This has already forced large companies to freeze or reconsider their projects, even outside Europe. Some equipment manufacturers have canceled expansion plans and cut thousands of jobs. Industry associations and grid operators are pushing for reform of the current system, proposing a return to contracts with guaranteed returns or long-term power purchase agreements. However, such proposals essentially equate to admitting that without subsidies and state involvement, the offshore wind energy market is not viable. It can only thrive in an environment of cheap capital, low interest rates, and government willingness to bear some of the risks. The critical situation shows that recent years have created an illusion of stability for the sector. The increase in production capacity was presented as an indicator of technological maturity, but it was actually achieved through extremely loose monetary policy and subsidized borrowing costs.
Failure of the model
As soon as the economic environment changed, the model immediately failed. The economics of wind farms are highly sensitive to macroeconomic fluctuations, making them, in their current form, ineffective for long-term planning. The technological race for ever-larger wind turbines further exacerbates the problems. While increased capacity should technically reduce energy costs, in reality, these gigantic installations require complex maintenance, rare materials, and intricate logistics. The installation of such turbines becomes a risky gamble on technologies that have not yet proven their reliability. Developers are essentially forced to develop equipment that is expensive not only to manufacture but also to operate, resulting in a total energy cost that is higher than expected. Discrepancies between forecasts and actual performance have become the norm, undermining investor confidence.
Lack of consumers
Finally, the industry has become dependent on large corporate consumers willing to buy energy in advance for the future. However, the number of these customers is limited, and their participation does not address the market's systemic problems. Even projects that have found buyers cannot serve as proof of the viability of the entire sector: they exist only due to unique conditions and the increased risk assumed by the companies entering into such agreements. Overall, these factors make the prospects for offshore wind energy extremely uncertain. It has failed to prove its ability to operate in a market environment without special incentives. The lack of income stability, high capital intensity, technological risks, and dependence on the political situation call into question its role as a reliable pillar for the energy transition. In its current form, the industry looks more like an experimental technology than a mature energy sector capable of withstanding global market pressure.
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