Offshore Wind Costs Continue To Fall, Will Reach £100/MWh By 2020

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A new report published this week has shown that offshore wind costs continued to fall through 2015, and are on track to reach £100/MWh by 2020.

The report was delivered by the UK’s Offshore Wind Programme Board, which exists to drive offshore wind cost reduction, and assess risks and barriers to the industry. The second annual Cost Reduction Monitoring Framework (CRMF) report, published Monday by the country’s Offshore Renewable Energy Catapult on behalf of the Board, outlined how investment in turbine technology has delivered significant cost benefits to the offshore wind industry, with costs continuing to fall through 2015 with 12 of 13 cost indicators on or ahead of target, and remains on track to fall to its target of £100/MWh by 2020.

uk offshore wind power“Offshore wind is delivering jobs and economic benefit to the UK right now,” said Jonathan Cole, Chair of the Offshore Wind Programme Board. “This report shows that consumers and Government can be confident that the cost of offshore wind will continue to reduce and that offshore wind is the ideal way to produce the large quantities of clean, reliable energy that the UK needs.”

However, the report also concluded that further reduction will need to come from innovations in the “balance of plant” sector, such as foundations, cables, and offshore wind substations.

The report’s authors further noted that the only way to acquire the investment necessary for research and development & manufacturing industrialization to deliver the necessary improvements is to increase the visibility of future rates of deployment and market size.

The good news, however, is that the industry has already adopted innovations that had not been expected to be implemented until 2017, particularly in the areas of turbine design and project maintenance. The only scale by which the offshore wind industry is not ahead of the game is in growth & scale.

“We have continued to see excellent progress in reducing the cost of clean energy from offshore wind,” said Benj Sykes, industry co-chair of the Offshore Wind Industry Council, who was quoted by RenewableUK, which published news of the report this week. “The industry is fast-tracking adoption of new innovation in turbine design and in project operations, putting us ahead of the curve in efforts to bring down the cost of offshore wind. We are very confident that we can not only reach our £100/MWh milestone, but go beyond this to become fully cost competitive with other generation technologies.

“We welcome the UK Government’s continued strong support for the offshore wind sector, recognising it as a major contributor to the nation’s future energy mix. The report shows that further clarity on the timing and volume of future Contract for Difference auctions, and the longer term capacity requirements out to 2030 and beyond, is essential for the industry to galvanise the activity that will deliver further innovation and cost reductions.”

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25 thoughts on “Offshore Wind Costs Continue To Fall, Will Reach £100/MWh By 2020

  • More reason as if any were need to cancel plans for Hinkley Point C.

    • Hinckley point could be dropped and changed to a HVDC connection to Nordpool where electricity including transmission cost is a factor 8 cheaper than Hinckley Point and on demand rather than just senseless base loading.

      If the British was hell bent on the electrons being Nuclear electrons they could save any number of Swedish reactors soon to be retired on account of impossible economic prospects.

  • Positive progress for sure, isn’t that still about $140/mwh? In 4 years?
    That would be at least twice as much as onshore wind in most places right now, and probably more considering that British Isles have excellent wind resources to begin with.

    I realize that there is other value from offshore wind (somewhat less variable, higher capacity factor, possible easier to predict; less NIMBY opposition). But still… for all the complaining about high cost of CSP (compared to solar PV), isn’t the cost difference actually bigger between on- and offshore wind?

      • That makes sense, and I do recall wondering why Denmark seemed to have lower contract prices (from Wikipedia’s listing). Is that due to more shallow waters, or what could explain the discrepancy?

        • Shallow waters must help. But Denmark has been installing offshore wind for a number of years and they have experience.

          IIRC Germany has talked about getting the price of offshore wind under $0.10/kWh in the near future.

          • Yes, there is something funny about the price gap. Wikipedia quotes a Fraunhofer study from 2013 giving the LCOE of German offshore wind as a range from 12€c/kWh to 19c. That is, two years ago the Germans were already where Whitehall hopes to be in 2020.

          • I just emailed someone who is involved with financing offshore wind projects in Europe. Perhaps we can get some inside information.

          • There are also reason linked to specific policies and financing in different markets – there is much less risk in developing projects in Denmark and Germany than in the UK for example.

          • That is absolutely not true – actually to the contrary because Nordpool is so much cheaper and the FIT is so much smaller and covers much fewer years.

            As mentioned the cost of offshore would soon go lower than onshore in Denmark if it was not for the unfortunate new minority government – the same party that propelled Bjorn Lomborg into fame and now with a long time CEO of a fossil lobbyist group as Energy minister.

          • Jens – Can you give some detail? This is interesting.

          • The parliament with 96% of the votes decided in 2012 to find coastal areas within 8 km from the shore and simplify procedures so the projects was basically pre approved say for compensation to owners of houses that could prove diminished value.

            I attended a presentation of the then new 6MW offshore turbine from Siemens wind power who stated that this turbine singlehandedly would slice 40% of the offshore cost.

            What has been very expensive is the development of knowhow, specialized equipment such as special ships and mishaps such as problems with the concrete and the cable connections. In the 25 years since the first offshore wind farm the size of turbines has grown from 400kW to 8MW and it is still growing with plans up to 25MW, so the learning curve is very steep and it is a challenge for the entire value chain.

            Unfortunately the development has been hit hard a couple of times by right wing parties with their classic anti renewables and anti climate change beliefs.

            Nowadays the spoil sport is Germany that refuse market access simply by not connecting the North of Germany with the south of Germany.

          • Thanks. Nice report. I have been following developments. Saw some nice youtube videos with Henrik Stiesdahl. He presents himself like ably and explains a lot.
            The installation equipment, foundations, and logistics are the largest part of costs anymore, not the turbine. He suggests the whole supply chain needs to be studied for best cooperative result.

          • In an odd way the FIT for renewables are used by companies like EON, RWE, Vattenfall and DONG to keep their loss making fossil generation capacity going.

            EON, RWE and Vattenfall cannot ever handle the cost associated with the decommission of their loss making fossil and nuclear power plants and have all prepared by separating their nuclear power plants into entities that have no money so the decommission build will wind up as a government responsibility.

            Henrik Stiesdal has a concept for storing power in used thermal power plants where he compress air and store the energy as heat in stone and concrete and recycle it as district heating and electricity via the turbines once fired by coal. He has calculated five cents per kWh based on a 20 year lifetime and without factoring in the selling price for the district heating.

            He has also developed a floating fundament for offshore and proposed as a public domain solution. So he is actively trying to harness the crowd creativity and his well renowned reputation in the business to further the concept of offshore wind turbines. Siemens wind power had 80% of the world market in offshore when he decided to resign.

            The big advantage of offshore is that you can build seriously big and you can harness stronger and steadier winds, and do so far from human habitats where noise and visual disturbance pose problems.

          • Yes. The capacity factors are wonderful offshore, too.

          • I am also interested, how did you manage to write Bjørn without an ø? 😉

          • My mac is a US purchase. So no ø.

          • Doesn’t it have a character map?

          • Denmark differs from UK by having able and large pension funds that are committed to create a renewable future. They participate in financing the Danish wind farms but are increasingly also active in Britain. Also unlike many other larger utilities DONG was a first mover and has managed to have only a minor number of financial scandals and to have no nuclear power plant liabilities so they are perhaps slightly less greedy.

          • I saw a video by the head of Siemens wind. He said that wind is forced to use a 15 year finance window while competition was allowed much longer times. Those things make a big bottom line difference. Suspect there are differences between the countries.

        • AFAIK, in Britain the offshore wind farm has to pay for the cable to land and the connection to the main grid at some point inland.

          In Denmark the offshore wind farm does not pay for the cable to land. That cable is part of the grid and paid by EnergiNet the government agency for the grid.

          This makes a difference, but still the offshore contract prices are quite high in Britain. Then again wholesale power prices in Britain are about double as high as in Scandinavia. As Britain adds more wind power and adds more HVDC connections, to Norway, Denmark and other Northsea countries British whole sale prices can be expected to fall within the next decade.

          • The Danish principle is that all grid cost are handled by Energinet, so all other power stations over a certain size have also been connected for free. The FIT is arranged as a PSO (Public Service Obligation), which is paid exclusively by the electricity consumers. If you wanted to build any other type of power generation the needed investment would also be covered by the consumers. The main difference is that it is getting cheaper and cheaper to replace capacity because wind and solar is getting cheaper rapidly.

            Biomass, natural gas and coal power requires far higher subsidies and/or preferential market positions enforced by law.

        • Plus 90% of offshore is developed in Denmark so it is simply the infrastructure component and skill set that makes the difference. The North Sea is pretty shallow and could actually provide enough electricity for all europeans including electrifying all transport. All the countries around the North Sea are developing the required skills and the technology is maturing fast.

          I have absolutely no idea why the UK’s Offshore Wind Programme Board expects such slow learning curves.

          The general belief in the wind power business here in Denmark is that 40% cost reduction by 2020 is the goal to strive after. DONG that lost the bid to Vattenfall is pushing that goal aggressively and they have built more offshore wind farms than any other company.

      • Oh Bob its much lower in Denmark.

        The most recent auction was won by Vattenfall for the Hornsrev 3 wind farm at 0,77DKK FIT for approximately 9 years and then Nordpool spot prices. In the FIT period Vattenfall will sell the generated electricity at $0.1145/kWh but only when the Nordpool price is positive. The average Nordpool price going forward is hard to tell and I also do not know whether the new wind farm will manage less or more than its projected design lifetime and also it is impossible for me to guess how many hours they will choose to curtail because the nordpool price is too low. Never the less it is safe to assume that Hornsrev 3 will be decidedly below £70.6/MWh over lifetime. Before the current right wind government came to power there was planned a large number of areas where the same FIT as applies for onshore was offered, which would have made these offshore turbines cheaper than any onshore turbines in Denmark – which means cheapest in Europe too.

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