On 10 March 2026, the UK Government announced it would remove some import taxes (tariffs) on components used in offshore wind energy manufacturing. The measure is intended to support offshore wind industrialisation in the UK by making it more attractive to manufacture domestically.
Import tariffs are generally used to support domestic manufacturing by making imported goods more expensive, helping local producers compete on price. However, where companies rely on overseas suppliers, which is particularly relevant for offshore wind, tariffs can increase costs and have a negative effect.
Until now, tariffs applied to key imported wind energy components including turbine blades, rotors, electrical cables and offshore substation systems. From 1 April, the government is removing tariffs on 33 specific components, provided they are used for wind energy production. In practical terms, this means UK manufacturers will pay less for raw materials and components, potentially saving millions of pounds each year.
There has already been plenty of discussion on the industrial and economic benefits stemming from industrialisation of offshore wind in the UK, from job creation to supply‑chain resilience. However, beyond these broader ambitions lies a more immediate question: what direct impact will the removal of tariffs have on the cost of offshore wind? In particular, how much of an impact do these new rules have on kick starting the cost reduction of the currently expensive floating wind industry? We thought we’d take a look.
Cost Reduction for FOW
Floating Offshore Wind (FOW) presents a major opportunity in the UK; however, it also faces a number of key challenges. Chief among these is cost competitiveness, driven by the need for complex substructures, mooring systems, and dynamic cables. These technical requirements are compounded by constrained fabrication capacity, limited availability of specialist ports, and more demanding installation and maintenance logistics, all of which contribute to higher overall project costs.
To unlock widespread deployment of FOW, costs must come down. As offshore wind has shown before, sustained deployment, innovation, and supply chain maturity can drive rapid cost reduction, but these new tariff rules introduced by the government highlight another, often under-discussed mechanism through which costs can be reduced. Changes to the fiscal and regulatory regime are themselves a cost-reduction lever: they directly affect project economics without requiring technological breakthroughs or supply-chain learning. With the current FOW supply chain heavily weighted towards imported goods, removing tariffs has the potential to materially improve cost competitiveness for UK-based manufacturing in FOW.
How Tariff Changes Could Impact FOW Costs
In order to get an idea of the impact removing tariffs could have on the cost of FOW projects, we decided to take a look at a hypothetical 900 MW floating wind farm in the North Sea. By removing tariffs on imported componentry, it has been assumed that the cost of the elements such as cables, rotors, blades, auxiliary electrical systems in the turbine and the offshore substation could reduce by around 6%. Applying this reduction in capital expenditure (CAPEX) results in a 3.8% reduction in levelised cost of energy (LCOE), a meaningful outcome for floating offshore wind, where multiple parallel cost‑reduction pathways are still being pursued and incremental savings can materially improve competitiveness with overseas manufacturing.
In addition to CAPEX reduction, it is also possible that the removal of tariffs will affect the operational expenditure (OPEX) for FOW developments, by reducing the cost of replacement materials. Because these costs are modelled as an aggregate category, two scenarios were tested: a 6% reduction and a more conservative 3% reduction, with the latter used to reflect potential uncertainty around achievable savings. As expected, reductions in replacement material costs deliver a smaller overall impact on LCOE resulting in a reduction of around 0.06–0.11% but still contribute positively to total project cost reduction.
If looking at CAPEX and OPEX together, the impact of removing tariffs could therefore amount to an almost 4% reduction in LCOE, which if applied to the most recent Contracts for Difference Allocation Round (AR7) FOW strike price of £216/MWh, is a reduction of over £8.50/MWh.
Additional benefits to removing tariffs for FOW
The analysis suggests that the removal of tariffs on 33 industrial goods used in manufacturing offshore wind components could provide a reduction in FOW LCOE, if it results in lower CAPEX. However, it remains uncertain whether this change will fully level the playing field between the UK and lower cost manufacturing regions. What is more likely is that it will narrow the cost gap, making UK manufacturing a more comparable and competitive option. While this will not eliminate higher UK labour, energy, and overhead costs, it will reduce the differential and make UK–made components more cost comparable overall. What must be remembered, however, is that there are several additional benefits to UK supply chain, that cannot be captured purely through cost analysis.
The removal of tariffs supports the UK’s clean energy manufacturing ambitions by reducing operational barriers for domestic firms and strengthening the business case for local sourcing. For developers, UK based supply chains reduce exposure to long‑distance shipping delays, customs friction, and global logistics disruptions. Improved local logistics, faster access to spare parts, and more predictable delivery schedules can lower both CAPEX, through reduced contingency allowances, and OPEX, by improving operational availability. Together, these benefits can make UK manufactured components attractive even where base production costs remain marginally higher than imports.
Reducing reliance on imports also helps prevent UK manufacturers from being undercut by cheaper overseas suppliers. This is a concern the Government directly addresses through the conditional Authorised Use mechanism, which ensures that tariff free imports are used only for offshore wind projects and are not diverted into other sectors where they could undercut domestic producers. In addition, the UK’s strategic position in offshore wind means that a stronger domestic manufacturing base could unlock future export opportunities, a point reinforced by the scale of new UK offshore wind investments, such as the 8.4 GW secured in AR7 in January 2026.
There are additional risk‑reduction benefits associated with domestic sourcing. Relying on UK based supply chains reduces exposure to exchange rate volatility and limits vulnerability to geopolitical or trade related disruptions. To illustrate this point, we assessed exchange‑rate exposure for tariff affected components, which are typically priced in euros and therefore subject to pound–euro fluctuations. Industry evidence suggests these movements can increase costs by up to 15%. Removing this exposure results in a 3.99% reduction in LCOE, if the pound were to weaken against the euro. As this impact is of the same scale as that shown from the removal of tariffs on CAPEX components, it should not be dismissed, and represents a meaningful fluctuation in cost that domestic supply would negate.
Reducing reliance on long haul imports also lowers exposure to supply cost shocks caused by international events beyond the UK’s control. Transport delays for imported wind farm assets such as floating substructures, are an increasingly material issue given global congestion and customs bottlenecks reported across the industry. Domestic production therefore supports not only cost reduction but also improved schedule certainty and lower overall project risk.
To illustrate the impact of reduced risk on LCOE, we modified the contingency percentages applied to FOW CAPEX line items, reducing the tariff-affected items (cables, rotors, blades, auxiliary electrical systems in the turbine and offshore substation) contingency by between 2.5-30% depending on the item, and the uncertainty margins originally applied. This adjustment delivers an additional 0.71% reduction in LCOE. While modest in isolation, the impact would be considerably larger for high value components such as turbines and substructures, and therefore the LCOE benefits of reducing supply risk are not immaterial.
Tariff changes: A positive industry boost
In general, the reduction of delay, risk, and exposure to external shocks is strongly welcomed by the industry, particularly by insurers and investors who place significant emphasis on predictability and downside protection. Measures that improve supply chain reliability, clarify regulatory pathways, reduce cost uncertainty, or shorten delivery timelines directly strengthen project bankability by lowering contingency requirements and risk premiums. Greater certainty around schedules, costs, and performance enables capital to be deployed more efficiently, improves access to competitive financing, and supports faster investment decisions. Collectively, these risk mitigation effects are often as valuable to decision makers as direct cost reductions, as they help shift projects from higher risk, first‑of‑a‑kind profiles toward more repeatable, financeable infrastructure asset.
Finally, this policy aligns closely with the UK’s broader local content, industrial strategy and supply chain growth agenda. By lowering the cost base for UK manufacturing, the tariff removal supports industry plans such as the development of new cable and blade factories, as well as other component facilities, which the announcement suggests will be increasingly viable as domestic production costs fall. This creates added value within the UK economy and strengthens the long-term competitiveness of British offshore wind manufacturing.