Demand for renewables will increase, squeezing supply chains further

  • Market Insight 11 December 2023 11 December 2023
  • Global

  • Predictions 2024 - Economic Risk

Pressure on supply chains could lead to disputes over past losses and exploration of alternative pricing models

The increased global demand for renewable energy sources will continue in 2024 as we move ever closer to 2050’s net zero target. And this will mean even greater pressure on already squeezed supply chains.

It’s becoming increasingly difficult for contractors to secure resources, particularly at fixed prices, so we expect to see a greater use of alternative financing models in 2024 and beyond.

Strike prices for auctions may well increase too.

This autumn, for example, the UK Government announced that the maximum strike price for offshore wind projects would increase by 66%, and the maximum strike price for floating wind projects by 52%, for the next Contracts for Difference round in 2024. Other countries may follow suit as they seek to ensure that projects are sustainably priced and economically viable.

As we head into 2024, many contractors will continue to bear the burden of contracts negotiated during the volatile economic and geopolitical conditions of the past few months. Payment security remains a risk for many renewable energy contractors. And the risk of supply chain insolvencies also looms large for 2024.

Contractors that have projects slated for completion during next year will face the twin challenges of the need to deliver those projects on budget and a potentially unstable supply chain looking to recoup its own losses on past contracts.

Against that backdrop, the prospect of continued disputes going into 2024 is a very real one, worldwide.


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