In September 2024, McKinsey held its annual Offshore Operations and Maintenance Roundtable in Hamburg, bringing together over 35 executives from approximately 20 offshore wind companies, where we explored the key challenges and opportunities facing the industry.
After a period of steady performance improvement, the industry hit a snag in 2023 and showed a significant increase in costs and lost revenue. Despite this setback, there is still untapped value for stakeholders willing to adjust their operations and maintenance (O&M) strategies to address emerging challenges.
The industry trend break
After years of performance improvements, 2023 saw a clear trend break, leading to a 7 percent increase in cost and lost revenue when adjusted for inflation (exhibit). This trend break is a result of several underlying challenges. While offshore wind day-to-day performance is relatively stable, the costs and lost revenues associated with maintaining and replacing major components have increased by approximately 50 percent, contributing to this spike.
Although strategies such as transitioning assets to in-house operations and maintenance (as opposed to using external companies) and enhancing productivity can improve performance, they are being overshadowed by increased failures due to the aging of assets, an unexpected increase in major component events, a constrained jack-up vessel market which is not meeting the spike in demand, and supply chain issues for some essential spare parts.
Unlocking potential value
Despite these challenges, we estimate that operators and owners can capture approximately €2 billion in potential upside across operational assets in Europe alone by lifting the industry’s performance to match the current top quartile average. Half of this potential lies in cost reductions, while the other half comes from improvements in asset availability. A key component is the ability to gain transparency into cost performance against industry benchmarks and availability performance to know where to take action (see sidebar, “McKinsey’s Offshore Wind Operations and Maintenance Benchmarking tool”).
Two paths to value
Operators could focus on two key themes.
First, they could enhance their operational excellence through end-to-end digital solutions and hub integrations, which are practices that drive top-quartile performance. They could also adjust their O&M strategies to address challenges such as aging assets, technology-specific issues—such as generator exchanges on traditional platforms and main bearing exchanges on new platforms—and market tightness. For this, operators need to review their optimal setup and determine the best O&M practice, such as transitioning to self-operation, finding the right balance of operational expenses and overall asset performance, and using learnings from existing assets to inform new contracts.
Second, operators could consider capitalizing on large structural opportunities in this moment of industry shake-up, such as consolidating with other operators to gain synergies and leverage best practices, introducing selective independent service providers to tackle labor and skill shortages, and redefining OEM interfaces by examining optimal contract length and the covered scope.
While the offshore wind industry faces significant challenges, there are clear pathways to recovery and performance improvements. By embracing innovative strategies and optimizing operations, stakeholders can not only mitigate current cost increases and revenue loss but also unlock substantial value.