Clean Power cost of offshore wind energy could drop 40%

Published on July 6th, 2016 | by Joshua S Hill

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DONG Energy To Build 700 MW Offshore Wind Farms At €72.70/MWh

July 6th, 2016 by  

DONG Energy has been awarded the concession to build the 350 MW Borssele 1 and 2 Offshore Wind Farms off the coast of the Netherlands.

DONG Energy announced on Monday that the Netherlands’ Minister of Economic Affairs had awarded the company the concession to build the Borssele 1 and 2 Offshore Wind Farms, which will each have a capacity of 350 MW. The wind farms will be located 22 kilometers off the west coast of the Netherlands, in a water depth of 14 to 38 meters, using monopile foundations.

DONG Energy won the concessions with an average bid strike price, excluding transmission costs, of €72.70 per MWh over the first 15 years of the contract — after which, the two wind farms will receive the market price.

“Winning this tender in a highly competitive field of bidders is another proof of our market-leading position and our business model which builds on continued innovation, industrialization and scale,” said Samuel Leupold, Executive Vice President and Head of Wind Power in DONG Energy. “With Borssele 1 and 2, we’re crossing the levelized cost of electricity mark of EUR 100 per MWh for the first time and are reaching a critical industry milestone more than three years ahead of time. This demonstrates the great potential of offshore wind.”

The Dutch tender regulation requires that DONG Energy complete Borssele 1 and 2 within four years.

“The Dutch government has introduced an ambitious, long-term development plan for offshore wind,” explained Country Manager for DONG Energy Netherlands, Jasper Vis. “The Borssele concessions mark a milestone in the Netherlands’ shift towards green energy, and we look forward to bringing our more than 20 years’ experience with offshore wind into these projects.”


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I'm a Christian, a nerd, a geek, and I believe that we're pretty quickly directing planet-Earth into hell in a handbasket! I also write for Fantasy Book Review (.co.uk), and can be found writing articles for a variety of other sites. Check me out at about.me for more.



  • Ronald Brakels

    China has gifted the world with some slightly below production cost steel on account of not wanting the unemployment that would come from closing down some production capacity. But there is not likely to be much increase in the cost of steel as the world has much more steel production capacity than demand. So that’s good news for steel users. And bad news for steel makers.

    • Jens Stubbe

      Steel is not really critical for the price of windpower. The bill of materials is only 40% of the sales price of wind turbines in general and considerably less for offshore. Also should the world decide to use only wind to power the grid everywhere it would only require little more than one years steel production and just recycling steel from obsolete fossil fuel installations would give a net surplus of steel. Besides Swedish companies are developing technologies to produce steel without coal.

      • eveee
        • Ulenspiegel

          Where do you see lot of BOS in case of onshore wind turbines? It is only 1/4.

          It is much higher for offshore turbines and allow there to use larger turbines that are not economical onshore.

          • eveee

            My bad. That graph is too old, from 2011. The picture is changed. In that graph, they are showing rotor, nacelle, generator, and tower at about half the total. I need to find some recent analysis that shows the breakdown. There is a Henrik Stiesdahl YouTube video where he talks about offshore and mentions how the turbine is not the dominant cost factor for offshore (when he gave the talk) and discussing all the cost factors and goals for cost reduction. He says a lot of it is logistics, – that is, how they do the job. Supply chain planning, all the things having to do with the dock, the special installation ships, and even weather prediction, because there are only certain times when it’s calm enough and good enough sea states to install offshore.
            Offshore turbines are a thrill, because they are so gargantuan.

        • Jens Stubbe

          Part of the cost premium for offshore is down to the fast generation shifts caused by the rapid technology development. If you are to build a several $100 mill. ship and you know it has a maximum service life about 10 years and also know that ost is under pressure all the way then you have to get your ROI fast.

          Vattenfall, DONG, EON etc. all have a costly fossil generation branch that they have to close down and except for DONG also a costly nuclear branch they have to close down so they are using the proceeds from wind power to sustain their doomed fossil and nuclear activities.

          In the recent DONG IPO approximately 80% of the value was attributed to their offshore business by independent analysts.

          • eveee

            Wow. That’s incredible. I think they should just see the writing on the wall and exit the failed nuclear and coal business and expand big in renewables. No sense in putting good money after bad.

          • Bob_Wallace

            I continue to wonder if floaters won’t dominate everywhere except the shallowest waters.

            The Statoil design seems to use less material than a fixed base tower.

            http://www.scottishenergynews.com/wp-content/uploads/2015/11/Hywind-offshore-floating-wind-turbine-parc-Photograph-Statoil.jpg

            .
            http://www.renewablegreenenergypower.com/wp-content/uploads/2012/05/Space-Frame-Structures.png

            All construction can be done at the dock. Major labor savings just in travel time to and back from the installation site.

            And no expensive ships are needed. Just a fairly simple barge that can carry the completed rig to the site and drop it off. If major repairs are needed then tow out the barge and bring the rig back to the shore.

            http://c.fastcompany.net/multisite_files/coexist/imagecache/1280/article_feature/1280-windflip_0.jpg

          • Bob_Wallace

            I’ve seen another delivery system in which the bottom end of the turbine tower floats in the water and a barge holds the turbine and rotor above the water.

            A slit in the barge allows the the turbine to erect itself as more water ballast is pumped into the float. The bottom sinks, the nacelle and rotor rise off the barge rack.

          • Jens Stubbe

            You are on the same page as Henrik Stiesdal the former Siemens Windpower CTO who as started this project. http://www.windpowerengineering.com/featured/business-news-projects/denmarks-henrik-stiesdal-unveils-open-sourced-floating-offshore-platform-can-you-improve-on-it/

            And my friends at FloatingPowerPlant that are quite close to their first full-scale deployment of a combine wave power and wind power plant.

            However offshore is despite what seems to be the general glut about the technology moving closer to commercial viability so even with the mainstay technologies it is now about scale and scope – not to say that innovation is not wellcome.

          • Bob_Wallace

            That’s a lot more complicated system than Statoil’s system which simply makes the bottom end of the tower “fatter”, caps off the bottom, and adds a pump so that water ballast can be adjusted.

            http://3.bp.blogspot.com/_pG6TFBuJW38/TDwXxycZKWI/AAAAAAAAAlQ/bRw5LRsYEYc/s1600/pof108_energie_wind2.jpg

            It would also be more complicated to build dockside and tow to the farm. You’d need a greater than 84 meter opening in the seawall. With the Statoil system the barge is the widest thing out the opening. (Blades would have to be held high enough to clear light towers/whatever.)

          • Jens Stubbe

            Both are complicated for a reason. The Henrik Stiesdal concept to lower weight and cost plus towing cost and mooring.

            The FPP design to increase power production and to lower weight and to give access to service crews at sea.

            Statoil and other similar designs are very heavy and costly to tow and moor.

      • Ulenspiegel

        “Besides Swedish companies are developing technologies to produce steel without coal.”

        That is an chemical oxymoron. 🙂

        The differenece between iron and stell is that the latter contains carbon. It is not essential to get the carbon from coal, but you need carbon to produce steel.

        However, I assume that your actual point is, that most of the coal in steel production is used to provide thermal energy and reduction equivalents (CO), both functions can of course be provided by other sources, e.g. electric heating for the furnace and hydrogen or methane for the reduction steps.

  • Ronald Brakels

    This about one third more than what it costs to build land based wind power in Australia.

  • Bristolboy

    Interesting to note the tender for Borselle 3&4 is due to open next month, with the expectation that this will lead to even lower rates so hopefully we will see a follow-up article of another world record low offshore wind price before too long :).

  • JamesWimberley

    The UK still pays considerably more, over £10/MWh. My hypothesis is that this must be down to financial parameters. The most important of these is the expected rate of inflation, about 2% in the UK and under 1% in the eurozone. In turn, this leads to systematically higher interest rates. The markets are competitive and it’s the same developers like Dong bidding, with the same portfolio of equipment. The alternative would be that a cartel of developers is ripping off the British government but not the Dutch and German. I find it hard to believe this.

    • John Norris

      I’m guessing you mean £100/MWh which is 12.9c/kWh at today’s rates.

    • I imagine the scale of the deal helps as well. 700 MW is a huge deal.

      • Bristolboy

        In the UK:

        East Anglia 1 is 714MW at a guaranteed rate of £126.85/MWh.

        Hornsea is 1200MW at a rate of £148.06/MWh.

        Walney is 660MW at a rate of £158.61/MWh.

        Basically the low price relative to the UK must be down to something more than just the scale!

        • Point taken.

        • CU

          Bristolboy, see the second point in your own comment above! Denmark has low price as well due to much lower risk to build at the site.,

          • Bristolboy

            CU, I agree. I was just responding directly to Zachary’s comment that the sites in Netherlands were potentially cheaper than UK sites due to its physical scale.

        • eveee

          Those numbers are improved from only a little while ago. There are still plenty of older LCOE papers with offshore over 20c/kWhr. We are used to looking at solar prices every six months to keep up with price drops, but wind costs are dropping rapidly, too.

    • Ulenspiegel

      “The alternative would be that a cartel of developers is ripping off the
      British government but not the Dutch and German. I find it hard to
      believe this.”

      OTOH, despite much better wind resources in UK, onhore wind power is more expensive. How do you explain this contradiction?

      • Bristolboy

        The UK planning is much more challenging than that on the continent – less than 50% of proposed onshore wind schemes are approved and these have smaller turbines and more onerous conditions than projects elsewhere.

        There are other reasons for costs in the UK being higher:
        – UK generally more expensive labour etc
        – Less government support resulting in higher political risk
        – Currency exchange risks turbines since turbines and much other BOP from overseas
        – Higher land costs
        – Higher grid costs

        There are many other reasons but these are some of the key ones!

        • Ulenspiegel

          Here I have some issues:

          Is labour in UK really mmore expensive than in Germany?

          The Vestas turbines are the same in UK and Germany.

          Projects are usually smaller in Germany than in other countries.

          • Bristolboy

            Relatively so labour is more expensive in the UK, especially when accounting for productivity.

            The turbines are nominally the same, but due to planning restrictions they are much smaller in the UK in terms of generator size, rotor size and tip height. In the UK tip height are often limited to 125m and there is nothing over 150m. Just yesterday I read on Renews about a single turbine project in Germany with a 101m rotor diameter and 135m hub height. There is absolutely no way such a project would ever get planning in the UK.

          • Larmion

            On the other hand, the UK has steadier and much stronger winds than Germany. That means there’s very little point in ultra-tall turbines with oversized rotor blades relative to the generator.

            If you travel through Germany from north to south, and thus from a windy to a much less windy area, you will notice wind turbines becoming progressively larger. That’s not because the southern states have laxer planning laws (quite the contrary!), but simply because you need these XL models to get a decent capacity factor in weak winds.

            That said, the UK does have some draconic planning rules (although even those seem mild compared to what you find in Bavaria these days…).

          • Bristolboy

            I accept the smaller turbines are partly due to better wind speeds, but it is also a large part linked to planning.

            As an example the typical Vestas new machines in the UK are V80 or V90 (2MW), despite V105 and V112 (3.45MW) being Class 1A rated and therefore suitable from an engineering point of view for the same sites. The main driver for the smaller machines is planning and it still being normal to have tip height restrictions which preclude the latest, financially best, machines.

            Fortunately the Scottish government are coming around to the idea of larger machines to cope with a zero subsidy world, which is in stark contrast to projects in England which now get rejected regardless of size.

          • eveee

            England is so backward on onshore wind. No excuse for that, IMO.

      • heinbloed

        (just posted further above)

        The high prices for REs paid in the UK are political, the RE-industry
        said so years ago. They could have done more with less, it was that the
        atom power was to look cheap so high prices for REs were granted.

    • Bristolboy

      Recent projects in the UK range from £120/MWh up to £160/MWh – these can be found on the Low Carbon Contracts Company website.

      There are numerous reasons for the UK being more expensive:

      – Currency risk since most component come from overseas
      – Perceived political risk
      – Developer responsible for permitting and SI introducing extra risk. Some offshore wind farms in the UK have had planning rejected after tens of millions spent
      – Higher grid costs

    • Bristolboy

      However, one thing which should theoretically make the UK cheaper is the large experience of offshore wind, and other related industries eg North Sea oil and gas. However, it doesn’t appear to work like that!

      • Larmion

        On the other hand, the continental countries that installed a lot of offshore wind (relative to their size) like Denmark, Germany and Belgium are also countries with considerable maritime engineering experience.

        It’s not in the oil and gas business (except in Denmark to some extent), but it were Benelux companies that built all those artificial islands that were fashionable in pre-crash Dubai for example.

    • heinbloed

      The high prices for REs paid in the UK are political, the RE-industry said so years ago. They could have done more with less, it was that the atom power was to look cheap so high prices for REs were granted.

  • Bas

    Just to add the grid connection was excluded from the deal, which is €14/Mwh. Therefore actual total cost is €86.7/Mwh, still competitive in any case

    • John Norris

      Thanks. 9.6c/kWh (US).

    • hmm, that’s weird. that’s paid by the developer?

      • Larmion

        Afaik it’s paid for by TenneT, the grid operator. But it’s not unreasonable to include the cost of grid connection in the final cost of a power plant. It is after all an expense that would not be there without the power plant being built.

  • Wow, this is a huge deal. Offshore wind at 8c/kWh!

    Prices are getting down on offshore wind quickly now!

    This is competitive with (beats) coal and nuclear, and I think nat gas in Europe, but not sure. And offshore wind provides very steady electricity production — higher capacity factor and closer to “baseload power.” I know, we just debunked the need for that, but it is still valuable in this case to have more consistent electricity production from wind. 😀

    • AllenHans

      We could really use some terminology to distinguish between shallow water and deep water offshore wind. They’re following two totally different price curves. The price for shallow water wind is getting very competitive, while deep water is still a decade or more away from hitting these prices. Nonetheless, this is great news for the places that have the right geography for shallow water wind, including spots along the US east coast. If and when deep water wind hits this price then that’s the real game changer.

      • JamesWimberley

        Is there much difference between different parts of the southern half of the North Sea? The Dogger Bank is so shallow as to be a hazard to navigation. It gets deeper off Scotland, but still much is under 100m. The provinces that really need floating platforms are those with hardly any contonental shelf, like the US west coast and the Japanese east coast.

        The best wind resource in the world is the Roaring Forties north of Antarctica, where the ferocious west wind sweeps round the globe with no.land to impede it. The waves go to 50 metres high. It is so remote from centres of population that we are most unlikely to see it tapped.

      • Good call.

    • Larmion

      DONG did warn in Dutch media that this price is not representative for other projects though. It pointed out that there are three exceptional circumstances:

      – A temporary glut in installation vessels
      – Exceptionally low steel prices due to pressure from Chinese dumping
      – Exceptionally low interest rates.

      Of course the third factor is likely to remain, but the first two are temporary.

      • Thanks. Will feature this comment.

      • Bristolboy

        There were other key factors:

        – The cost doesn’t include transmission costs, with these it would be nearer 85 euros
        – The Dutch government were responsible for all permitting, surveys etc which seriously derisked the project and reduced massively Dong’s devex which would have otherwise be included in the price

      • heinbloed

        ” A temporary glut in installation vessels
        – Exceptionally low steel prices due to pressure from Chinese dumping
        – Exceptionally low interest rates.”

        This must it be why atom power gets more expensive year after year ….

        • Larmion

          Nuclear power also benefits from the last two factors (although one has to wonder if interest rates are really that low for nuclear projects, they are rather high-risk these days). However, nuclear is not competitive regardless of steel prices these days.

          I’m not trying to suggest that offshore wind is too expensive. I’m just pointing out that this extremely low project cost is enabled by some temporary tailwinds. Nobody should be surprised or disheartened if the next few projects are somewhat more expensive than this one.

      • Jens Stubbe

        DONG is warming to cheap offshore and have to because they lost Hornsrev 3 that went to Vattenfall at a lower price still.

        Also several consortia including Vattenfall has stated that they will soon present the cheapest ever offshore, which is considerably below the Borssele 1 and 2.

        When Siemens presented their 6MW offshore turbine they expected LCOE to drop 40%. Now this is a 8MW turbine through incremental improvements and those 40% cost decrease have never materialized because the likes of DONG simply have increased profits.

    • globi

      I think the biggest advantage compared to solar is that there’s always more wind power in the winter and wind power can therefore replace all fossil fueled heating furnaces (with heat pumps and some resistance heating).

    • eveee

      Progress in wind and solar is beyond expectations. This is evidence that we are entering the rapid adoption phase of the technology adoption curves. Progress in reducing costs accelerates as demand and volume increase and the new technology replaces older ones. Renewables integration will accelerate, not saturate. Don’t even think about saturation until we are over 50% adoption. It’s been that way with most new tech.

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