With the growth of renewable energy and the global energy transition, wind farm investments have become increasingly attractive in recent years. Many reports predict promising returns for wind farm projects in 2023 as technology costs continue to fall. According to the International Renewable Energy Agency (IRENA), onshore wind power could be one of the cheapest sources of new power generation in 2023. There are also optimistic projections for offshore wind farms as their levelized cost of energy drops. This article analyzes the investment returns outlook for wind farms in 2023 based on latest industry reports and research papers.
Onshore wind investment returns remain strong
Many industry analysis predict continued good investment returns for onshore wind farms in 2023. According to projections by BloombergNEF, levelized costs for new onshore wind power generation could fall 5% year-over-year to $26–$44 per MWh in 2023. This makes investments in new onshore wind projects very economically attractive. Research by IRENA also suggests strong investment returns for onshore wind based on the global weighted average cost of capital. Their analysis shows an internal rate of return between 7-15% for new investments under most scenarios. Key factors enabling continued good returns include technology improvements, lower operation and maintenance costs, and the availability of preferential policies in many markets.
Offshore wind investment outlook brightens
The investment case for new offshore wind projects also looks increasingly positive in 2023. Industry reports predict offshore wind levelized costs dropping 13% year-over-year globally to $37–$81 per MWh. This brings many new offshore wind farms into a profitable investment range. Wood Mackenzie power and renewables research predicts over 275 GW of new global offshore wind additions through 2030, implying strong continued growth. Key offshore wind markets like China, the UK and Germany have ambitious build-out targets supporting new investments. Advanced turbines like GE’s 14 MW Haliade-X also enable greater efficiencies and capacity factors for new projects.
Supportive policy environments attract investment
Favorable policy incentives in major markets continue to improve the investment case for new wind power projects. Countries like China, India, Germany, the UK and others have implemented preferential feed-in tariffs, tax incentives and other measures to encourage renewables growth. The Inflation Reduction Act in the U.S. also provides long-term tax credits for wind power generation along with bonuses for domestic content and prevailing wage requirements. Such incentives can provide investors 5-10 year revenue clarity and improve equity returns on new wind developments. However specific policy adjustments remain a key variable investors must track closely when evaluating individual markets.
Industry projections point towards a promising investment outlook for both onshore and offshore wind farm projects in 2023. Continued technology cost reductions combined with supportive policy incentives in major markets provide tailwinds for attractive returns.