Material Insights · Understanding the Material World

Offshore wind and Steel

Offshore wind is built largely of heavy steel plate: monopile foundations alone take around 200 t per MW, and foundations and towers were put at about a quarter of capital cost in 2021. That makes the industry a major plate customer and exposed to steel and supply chain inflation, as the 2023 cancellations showed.

Offshore wind (energy) and Steel (commodity): 5 relationships.

How they are linked

1. Heavy plate for foundations

Physical flow · Strong · Steel to offshore wind

Fixed-bottom turbines stand on steel monopiles or jackets and carry steel towers, all rolled from very thick plate, so each megawatt installed embeds a large tonnage of steel.

  • 2.2 Mt steel in UK monopiles supporting 10.9 GW, 2023
  • about 200 t monopile steel per MW implied by those figures
  • 3 to 5 inches monopile plate thickness, possibly rising to 7

The 200 t per MW covers monopiles only, before towers, transition pieces and turbines, so total steel per MW is higher. Larger turbines need wider, thicker piles that fewer mills can roll, so heavy plate supply rather than steel in general is the constraint.

Sources: Offshore Magazine; NREL

2. Big plate customer

Shared risk · Medium · Offshore wind demand to plate mills

Because offshore wind uses so much heavy plate, its build-out is a material share of demand for the reversing mills that make it in Europe.

  • 15 to 20% of European reversing mill plate demand from wind, 2021
  • over 25% expected wind share within five years, driven by offshore (2021 view)

Plate mills and offshore developers depend on each other: delays to wind auctions leave mills idle, while a rush of projects can tighten plate supply and lengthen lead times. In the United States, NREL's road map counts steel plate among critical items and assumes two new plate facilities come online by 2030.

Sources: CRU; NREL

3. Steel in project cost

Cost and price · Medium · Steel and supply chain costs to offshore wind

Foundations and towers make up about a quarter of offshore wind capital cost, so steel prices, along with fabrication and vessel costs, feed directly into project economics.

  • about 25% of offshore wind capex from foundation and tower (CRU, 2021)
  • $4 billion Ørsted impairment for the first nine months of 2023, as it stopped Ocean Wind 1 and 2

Projects bid at fixed tariffs before 2022 met higher steel, supply chain and interest costs during construction. Ørsted cited supply chain delays and rising interest rates when it stopped its New Jersey projects in 2023; steel was one strand of a wider cost squeeze rather than the sole cause.

Sources: CRU; CNBC

4. Price link: main input

Cost and price · Weak · Both ways

Despite the heavy steel use, the US turbine price index used as a proxy does not track steel month to month, because offshore contracts fix prices years ahead and the index covers several power technologies.

  • 0.05 monthly change correlation
  • -0.01 12-month change correlation
  • 0.26 fitted elasticity

Steel cost shocks show up in offshore wind as repricing at later auctions or as losses on fixed-price projects, not as smooth price moves. That is why the 2022 to 2023 squeeze appeared in impairments and cancellations rather than in this index.

Sources: Material Insights (World Bank, FRED, IMF data); CNBC

5. Green steel and carbon

Policy · Rising · Steel emissions to offshore wind footprint

Steel-dominant foundations carry most of a fixed-bottom wind farm's structural carbon, so low-carbon steel rules and buyer standards bear on offshore wind.

  • 2.2 to 2.5 g CO2/kWh foundation carbon intensity, fixed-bottom, 25-year life
  • 66 to 76% possible cut in foundation emissions with low-carbon steel and green cement

Offshore wind is already low-carbon, but as auctions add non-price criteria, the steel source becomes a scoring factor. Floating foundations have higher intensities, 4.7 to 6.4 g CO2/kWh, so the issue grows as projects move to deeper water.

Sources: Journal of Cleaner Production (University of Birmingham)

For investors

Key learnings

  1. Monopiles alone use around 200 t of steel per MW, so heavy plate capacity and price matter more to offshore wind than general steel indices.
  2. Fixed-price contracts mean steel shocks hit developers as impairments, such as Ørsted's $4 billion in 2023, rather than as gradual price changes.
  3. CRU estimated in 2021 that wind takes 15 to 20% of European reversing mill plate demand, so auction pipelines move the fortunes of plate mills.

What to track

  • Heavy plate prices, Europe and US: Rising plate prices squeeze projects with fixed tariffs and raise future bid prices (Monthly · steel price reporters)
  • Offshore wind auction results and strike prices: Higher strike prices show cost inflation being passed on; failed auctions signal stress (As held · national auction bodies)
  • Developer impairments and project cancellations: Shows where steel and supply chain costs exceed contracted revenue (Quarterly · company results)

For policymakers

Key learnings

  1. Foundations and towers are about a quarter of offshore wind cost, so local heavy plate and fabrication capacity can lower costs and keep value at home.
  2. Indexing tariffs to steel and interest costs, or awarding contracts closer to construction, can reduce cancellations like those of 2023.
  3. India's first 1 GW of offshore wind, backed by a viability gap funding scheme with a total outlay of Rs 7,453 crore approved in 2024, would draw on heavy plate and port fabrication that local suppliers could provide.

What to track

  • Offshore wind tenders and awards in India: Shows when demand for heavy plate and fabrication yards will appear (As announced · MNRE, SECI)
  • Domestic heavy plate capacity and imports: Rising imports suggest wind demand is outpacing local supply (Monthly · Joint Plant Committee, Ministry of Steel)

India

India's first offshore wind projects are still to be built: in June 2024 the Cabinet approved a viability gap funding scheme with a total outlay of Rs 7,453 crore, including Rs 6,853 crore for 1 GW, 500 MW each off Gujarat and Tamil Nadu, which would draw on heavy plate and port fabrication.

Sources

  1. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)
  2. Spinergie assesses how much steel a country requires to reach its offshore wind target, Offshore Magazine (2023)
  3. Offshore wind and steel: a huge mutual dependency, CRU (2021)
  4. A Supply Chain Road Map for Offshore Wind Energy in the United States, NREL (2023)
  5. Orsted axes two New Jersey wind projects, takes $4 billion writedown, CNBC (2023)
  6. Material and carbon intensity of offshore wind foundations for sustainable infrastructure, Journal of Cleaner Production (University of Birmingham) (2026)
  7. Cabinet approves Viability Gap Funding (VGF) scheme for implementation of Offshore Wind Energy Projects, Prime Minister's Office, Government of India (2024)