What if offshore wind farms became cheaper than coal plants? [03]

If offshore wind’s levelized cost of electricity (LCOE) were to fall below that of new coal plants—consistently and across major markets—the power sector’s economics would reset. The tipping point is not far-fetched: recent analyses show offshore wind costs stabilizing and expected to decline, while coal’s LCOE remains elevated and sensitive to financing, fuel, and compliance costs. In 2024–25, global evidence already indicates renewables are the cheapest source of new electricity in most markets, with offshore wind approaching parity even after a period of macro headwinds. [irena.org], [lazard.com]

Bottom line: Cheaper offshore wind would catalyze five shifts: (1) accelerated coal retirements and moratoria on new coal builds; (2) rapid reconfiguration of transmission planning for coastal grids; (3) reallocation of capital toward offshore supply chains and ports; (4) policy rewiring—auctions, permitting, and market design—to unlock scale; and (5) workforce and community transition plans around coal sites. Leaders who treat this as a system change (not a marginal technology swap) will capture cost, resilience, and decarbonization gains.

Evidence base: are we already close?

Renewable cost leadership is broad-based. IRENA’s latest cost report finds that 91% of newly commissioned utility-scale renewables in 2024 were cheaper than the lowest-cost fossil alternative. Offshore wind’s LCOE ticked up slightly amid higher rates and supply-chain pressure but remains competitive; cost declines are expected to resume as constraints ease. [irena.org]
Coal remains costly on an LCOE basis. Lazard’s 2024 LCOE+ (U.S.-focused) places new coal well above most renewables; offshore wind sits within a band that, with lower cost of capital and maturing supply chains, can undercut coal in numerous contexts. [lazard.com]
Near-term trajectory for offshore wind: NREL and DOE tracking show strong global pipeline growth and improving capacity factors; market reports confirm expanding installations and auctions despite recent volatility. [osti.gov], [docs.nrel.gov]
Medium-term forecasts: Modeling suggests fixed-bottom offshore wind could reach ~$53/MWh by 2035, with floating offshore wind falling from ~$207/MWh to ~$64/MWh as industry scales—well within the range to beat new coal. [energy.gov]

Collectively, the data signal that a world in which offshore wind is structurally cheaper than coal for new-build is plausible and, in several regions, imminent. [irena.org], [lazard.com], [docs.nrel.gov], [energy.gov]

Strategic implications across the value chain

1) Generation portfolio strategy—no-regrets moves

Freeze new coal FIDs (final investment decisions) where offshore wind pipelines can deliver equivalent firm energy when paired with proactive transmission, storage, and market reforms. The avoided “lock-in” risk on future carbon, ash disposal, and compliance costs is material. [lazard.com], [ourenergypolicy.org]
Accelerate coal retirements with structured decommissioning programs. Best-practice playbooks emphasize community engagement, remediation budgeting, and asset repurposing—industrial reuse, grid support, or clean energy hubs. [pnnl.gov], [epa.gov]

2) Grid & market design—make cheap offshore wind deliver cheap system costs

Plan transmission holistically. Meshed offshore grids, high-capacity corridors, and optimized points of interconnection can cut lifecycle costs versus ad hoc radial tie-lines. Studies show proactive planning reduces total cost, marine cable miles, and shore impacts. [brattle.com]
Update grid codes for inverter-based resources. Grid-forming control, HVDC integration, and harmonized interconnection standards improve stability and reduce curtailment risk as offshore penetrations rise. [docs.nrel.gov]

3) Supply chain & industrial policy—unlock learning rates

Scale manufacturing and installation capacity. Global reports track rising turbine sizes, nacelle/blade capacity, and port investments; larger orders and predictable auction pipelines stabilize OEM economics and drive down LCOE. [iea.org], [energy.gov]
Invest in ports and vessels. Dedicated WTIVs (wind turbine installation vessels), heavy-lift cranes, and marshalling yards are rate-limiting resources today; public–private co-investment is essential to avoid bottlenecks that keep offshore costs elevated. [osti.gov]

4) Finance—cost of capital becomes the biggest lever

Rising rates were a key reason for the 2023–24 cost plateau. Structuring auctions for bankability (indexed pricing, inflation protection, realistic delivery milestones) and blending concessional capital in emerging markets can reset WACC and tip economics decisively below coal. [lazard.com], [irena.org]

5) Communities & workforce—decommissioning done right

Coal retirements entail large remediation and redevelopment costs; federal, state, and municipal programs plus Brownfields mechanisms help fund cleanup and reuse. The social license to transition hinges on credible job pathways (ports, fabrication yards, operations & maintenance). [epa.gov]

Scenario analysis: when offshore wind beats coal

Assumptions (representative, not exhaustive):

Offshore wind LCOE (fixed-bottom) declines to $50–65/MWh; floating reaches $60–80/MWh in good-resource basins by early–mid 2030s. [energy.gov]
Coal LCOE remains >$90/MWh for new builds under contemporary U.S.-style financing and compliance; higher under carbon pricing or stricter pollution controls. [lazard.com]

Impacts in three archetypes:

OECD coastal systems (e.g., North Sea, Northeast U.S., Japan):
Offshore wind displaces planned coal capacity additions; gas peakers and storage firm residual variability. Transmission upgrades (onshore reinforcements + offshore meshed grids) become the main capex focus. Auctions pivot from price-only to multi-criteria (delivery certainty, domestic content, system value). [energy.gov], [brattle.com]
Emerging markets with deep-water coasts (e.g., India’s western/eastern seaboard, Brazil):
Floating offshore wind gains relevance where bathymetry limits fixed-bottom; blended finance and PPPs lower WACC; green hydrogen offtake supports bankability for early projects. Coal additions slow, and “coal-to-clean” industrial corridors arise near legacy plants. [irena.org], [globenewswire.com]
Coal-dependent grids with limited coastal load centers (e.g., inland-heavy systems):
Offshore wind competes as a system—requiring long-distance HVDC, demand-side electrification, and siting flexibility. Economic case still improves vs. building new coal, especially when factoring fuel risk and environmental liabilities. [docs.nrel.gov], [ourenergypolicy.org]

Why this time is different: overcoming the “renewables paradox”

Even when a technology is cheaper on LCOE, system frictions (permitting, queues, grid congestion, supply chain) delay adoption. Recent reviews highlight that offshore wind’s competitiveness depends on learning-by-doing, economies of scale, and stable policy frameworks—areas where momentum is building despite macro headwinds. [research.rug.nl], [phenomenalworld.org]

Global installations and auction volumes have surged—2024 was a record year for construction and awards, lifting capacity toward ~83 GW installed and setting up multi-year delivery visibility. This scale is a prerequisite for sustained cost declines below coal. [gwec.net]

The CEO/CFO playbook: six moves to operationalize the advantage

Portfolio “clean sheet” planning (12–18 months).
Replace coal new-builds in the pipeline with offshore wind, storage, and flexible resources; run system-level total cost of service models incorporating transmission plans. Use shadow carbon pricing and compliance scenarios to stress-test coal economics. [lazard.com]
Auction strategy reboot (next procurement cycle).
Advocate and bid into auctions that feature indexation, milestone-based penalties, and delivery-weighted scoring to de-risk projects. Coordinate offtake contracts (corporate PPAs, hydrogen) to support bankability in early floating projects. [osti.gov], [energy.gov]
Supply chain localization (24–36 months).
Co-invest in blade/nacelle plants, tower factories, and port upgrades. Secure installation vessel slots; develop a rolling multi-year pipeline to anchor OEM commitments and dampen price volatility. [energy.gov]
Transmission & grid code engagement (ongoing).
Partner with TSOs/ISOs to design meshed offshore grids and adopt grid-forming standards; prioritize POIs that minimize onshore reinforcement costs and curtailment. [brattle.com], [docs.nrel.gov]
Coal decommissioning program (next 12 months).
Launch an integrated plan: stakeholder mapping, remediation budgeting, alternative site uses, workforce reskilling, and financing options (EPA Brownfields, state funds). Tie milestones to retirement schedules to avoid stranded O&M and compliance expenses. [epa.gov], [pnnl.gov]
Capital structure optimization (deal-by-deal).
Blend green bonds, export credit agency support, and development bank tranches to cut WACC 100–300 bps; this can swing offshore LCOE below coal even before full learning-rate benefits materialize. [irena.org]

Policy recommendations for governments & regulators

Design smarter auctions. Move beyond lowest-price-only toward delivery confidence, system value, and domestic supply chain criteria; introduce inflation indexation and realistic milestone schedules to prevent project cancellations. [osti.gov]
Permitting acceleration. Single-window processes, standardized environmental baselines, and time-bound decisions reduce soft costs that keep offshore wind above coal despite inherent LCOE advantages. [iea.org]
Transmission planning mandates. Require proactive offshore transmission planning (meshed networks, shared corridors) and onshore reinforcements that consider 10–20 year offshore buildouts, avoiding piecemeal radial tie-lines. [brattle.com]
Just transition funds. Targeted support for coal communities—demolition, remediation, retraining—prevents social backlash and accelerates coal-to-clean asset conversion. [epa.gov]

Risk radar—and how to mitigate

Macro-financial volatility (rates, inflation): Indexation in PPAs, hedging strategies, and diversified supply chains dampen impacts on capex and WACC. [lazard.com]
Supply chain constraints (OEM health, vessel scarcity): Forward vessel booking, long-term component contracts, and policy support for domestic manufacturing improve resiliency. [energy.gov]
Permitting & social acceptance: Early, transparent engagement; marine spatial planning; and biodiversity co-benefits (reef creation, monitoring) reduce litigation risk. [iea.org]
Grid integration complexity: Invest early in grid-forming capabilities, HVDC interoperability, and dynamic stability studies to avoid curtailment and reliability questions that erode cost advantages. [docs.nrel.gov]

Metrics that matter

To ensure offshore wind’s cost advantage translates into system savings, track:

Delivered LCOE vs. avoided coal cost (fuel + compliance + externalities) at the node, not just the plant—quarterly. [lazard.com]
Auction-to-COD conversion rate and average delays—portfolio KPI to signal policy and supply-chain health. [osti.gov]
Transmission readiness index—POIs secured, corridor permits issued, offshore grid progress—semiannual. [brattle.com]
Learning-rate realization—capex and O&M per MW vs. cumulative installations, to validate cost-down trajectory. [research.rug.nl]
Just transition outcomes—jobs placed, remediation milestones met, redevelopment investments committed—annual. [epa.gov]

The bigger picture: macro and climate

IEA’s 2025 review underscores surging electricity demand; meeting it with clean capacity is essential to cap emissions growth. Offshore wind’s scaling—alongside solar, onshore wind, and nuclear—met most incremental power demand in 2024; cheaper offshore wind strengthens this decarbonization path. [iea.org]

Globally, renewables are now the default economic choice for new capacity additions. Ensuring their cost advantage translates to system advantage requires policy alignment, transmission planning, and finance innovation—precisely the levers outlined above. [irena.org]

A pragmatic 12–36 month roadmap (for utilities, IPPs, and governments)

0–6 months

Commission a coal-to-offshore portfolio review; halt new coal FIDs where offshore alternatives exist.
Initiate joint working groups with TSOs/ISOs on offshore transmission designs and POI prioritization. [brattle.com]

6–18 months

Restructure upcoming auctions with delivery-weighted scoring and indexation; pre-qualify bidders on supply chain readiness. [osti.gov]
Launch decommissioning masterplans for first-wave coal units; secure Brownfields and remediation financing. [epa.gov]

18–36 months

Finalize port investments, vessel charters, and OEM contracts; lock in multi-year build schedules to extract learning-rate gains. [energy.gov]
Deploy first phase of offshore grid (meshed or network-ready radial), coupled with grid-forming controls and HVDC standards. [docs.nrel.gov]

Closing thought

If offshore wind becomes cheaper than coal, the strategic question is no longer “Should we build offshore wind?” but “How do we re-architect the power system to fully harvest its cost advantage?” Leaders who move beyond project-by-project thinking—toward portfolio, grid, and community-centric execution—will not just beat coal on paper; they’ll deliver cheaper, cleaner, and more resilient electricity in practice.

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