Offshore Wind Costs Continue To Fall, UK Study Finds

A new report, delivered by the UK’s Offshore Renewable Energy Catapult in time to coincide with the news that contracts were awarded to two offshore wind farms to be built in the United Kingdom, goes a long way to proving the cost of offshore wind energy is falling.

According to the UK’s Crown Estate, one of the largest property owners in the UK, announced the news that two contracts were awarded under the Department for Energy and Climate Change’s (DECC) Contract for Difference (CfD) regime to a project in England, the East Anglia Phase 1, and one in Scotland, the Neart na Gaoithe project.

The Contract for Difference regime gives renewable power developers Government contracts that provide promised funding levels, known as a “strike price”, which is paid on the total number of MWh a project will produce over fifteen years of operation.

The announcement came at the same time that the Offshore Renewable Energy (ORE) Catapult, in collaboration with the Crown Estate, and commissioned by the Offshore Wind Programme Board, released a report (PDF) revealing that the cost of offshore wind farms has fallen by almost 11% over the past three years — well ahead of the schedule set by the UK Government.

As the Crown Estate declares, “this provides clear evidence that offshore wind can play a growing role in the UK’s sustainable energy mix in the coming decades.”

“The Cost Reduction Monitoring Framework and today’s auction results are welcome evidence of the progress on cost reduction being made by the offshore wind industry,” said Matthew Hancock, the UK’s Minister for Energy. “We’ve created the right conditions for significant levels of investment and are now seeing costs come down towards the target of £100/MWh — and with the potential to go further still.  This strengthens the UK’s position as the world leader in offshore wind, and creates an opportunity for new high quality jobs and growing local economies.”

The report, the “Cost Reduction Monitoring Framework,” concludes that despite the cost of offshore wind declining by 11% between 2010 and 2014, the UK Government’s target of £100/MWh by 2020 is achievable, though “challenges remain.”

Two risks are highlighted by the author’s of the report:

• the supply chain, including turbine manufacturers, does not have sufficient confidence in the size of the market up to and beyond 2020 to justify making the technology investments that will drive cost reduction further.
• solutions expected to be necessary for constructing deeper water further offshore sites, e.g. jacket and/or gravity-based foundations and HVDC connections, are not being developed quickly enough.

Nevertheless, despite these risks, the Offshore Renewable Energy Catapult believes that the target can be met, and offered several recommendations to facilitate good progress:

1. Clarify the Government’s future programme, and level of regulatory support for offshore wind, after the February 2015 Contract for Difference auction and with respect to the Levy Control Framework beyond 2020
2. Encourage the demonstration of balance of plant innovations such as novel foundations and optimised electrical networks
3. Investigate the potential impact of lower than anticipated levels of investment in the jack-up and heavy lift construction vessel fleets, particularly for foundation installation
4. Support the capture and sharing of knowledge and best practice through increased collaboration, with a view to increasing the predictability of project execution
5. Continue to track cost reduction progress in the UK and extend monitoring to include European offshore wind development
6. Consider identifying, and if required, addressing the gaps in skills and expertise required to deliver and operate an offshore wind farm

“Our CRMF report not only demonstrates excellent progress made in just a few years in making offshore wind a more cost-competitive, sustainable secure source of energy, but also illustrates the technology innovations and efficiencies required to deliver the targeted £100/MWh,” said Andrew Jamieson, CEO of the ORE Catapult. “Significant challenges lie ahead for the entire industry, and continued progress will require ever greater collaboration between industry, government and academia.”

To accompany the report, the author’s created a visual representation of their results (shown below). The size of the area assigned to each indicator is proportional to its contribution to the country’s 2020 offshore wind cost reduction target.

(The unnamed pieces of the pie on the outer ring represent specific-segments of the second ring.)

“Offshore wind is a UK success story,” said Benj Sykes, Co-Chairman of the UK’s Offshore Wind Industry Council (OWIC). “It is already providing enough power for 2 million UK households and thousands of UK jobs. But continued success requires ongoing cost reduction, and this report provides good news on the progress being made in delivering more affordable clean energy. It is crucial to understand that future progress will depend upon confidence in Government’s support into the next decade, as well as ongoing innovation and industry cooperation. Thanks go to the Offshore Wind Programme Board and ORE Catapult for this important piece of work”.