Offshore wind farms have higher upfront capital costs for development and construction compared to many other renewable technologies due to the associated marine infrastructure requirements such as specialist installation vessels, foundations, underwater cables, and high voltage transmission connections to shore. The specialized heavy-duty turbines also have higher price tags than solar panels or simpler onshore wind turbines. Offshore locations allow the use of larger and more efficient wind turbines that can fully take advantage of the stronger and more consistent winds available out at sea.

A recent report from the International Renewable Energy Agency estimated the levelized cost of energy from offshore wind farms constructed in 2020 to range between $53-84 per MWh compared to just $32-42 per MWh for onshore wind, $36-46 per MWh for solar photovoltaic, $15-30 per MWh for hydropower, and $12-15 per MWh for geothermal energy. The costs of offshore wind have been steadily declining as the technology scales up and larger more efficient turbines are deployed in deeper waters further from shore where wind resources are better. Some recent auctions and power purchase agreements have come in well below $50 per MWh even for projects to be installed in the early 2020s.

As the technology matures and supply chains develop the costs are expected to continue falling significantly. Blooomberg New Energy Finance predicts that by 2030 the costs of electricity from offshore wind could drop below $40 per MWh on average globally and potentially below $30 per MWh in the most competitive markets like parts of Northern Europe and Asia. This would make offshore wind cost competitive even without subsidies in many locations compared to new gas-fired generation. Offshore wind is also projected to decline faster in price than any other major renewable energy source over the next decade according to most analysts.

In addition to lower operating costs over time, offshore wind farms have a major advantage over many other renewables in their more consistent year-round generation profiles with output peaking during winter months when electricity demand is highest. Output is also more predictable than solar due to capacity factors averaging over 40-50% compared to just 15-25% for photovoltaics. The steady offshore winds mean generation matches energy demand profiles better than intermittent solar or seasonal hydropower resources without costly grid-scale battery storage.

Reliable round-the-clock energy from offshore wind coupled with growing abilities to forecast weather patterns days in advance allows power grid operators to effectively integrate significantly larger shares of this clean generation into electricity systems than highly variable solar and maintain higher standards of grid stability and reliability. Offshore sites have fewer space constraints than land-based projects and can potentially be located near heavily populated coastal load centers in markets like Europe and East Asia to minimize transmission expenses.

Offshore wind projects require an extensive multi-year development and construction process unlike the quicker installation timelines for solar farms. This means higher upfront financing costs and risks that get priced into the initial levelized costs per kilowatt-hour calculations compared to less capital-intensive onshore renewables with simpler development procedures. Challenging offshore conditions and geotechnical uncertainties also introduce construction difficulties and greater risks of delays and cost overruns versus land-based facilities. Accessing deepwater locations further from shore for the best wind resources also increases complexities and costs.

Overall while upfront investment costs are higher, offshore wind power is projected to become significantly more cost competitive by the end of this decade as technology improves, supply chains scale, and multi-gigawatt projects are deployed. Key advantages in capacity factors, grid integration, and location attributes position it favorably versus alternatives like utility-scale solar photovoltaic and seasonal hydropower resources especially in coastal markets with strong energy demand like in Europe and parts of East Asia. With power purchase costs likely falling below $50 per MWh at many auctioned projects by 2025, offshore wind will establish itself as one of the lowest-cost renewable energy sources for leveraging oceans to help transition electricity grids to carbon-free systems in the decades ahead.