The only non-European nation set to make a significant contribution during this time frame is China, which is anticipated to install 5.2GW to reach a total offshore capacity of 5.41GW by the end of 2016. This would put China third behind the UK - currently the world's largest offshore nation with 2.1GW of installed capacity and anticipated to have 6.5GW by 2016 - and Germany, which BTM predicts will have installed 7.1GW of offshore capacity by the end of 2016.
In total, Europe is expected to install 16.2GW of offshore wind capacity over the next four years - the vast majority of it in the North Sea. Looking beyond 2016 the figures become even more extraordinary: the UK alone is expected to have close to 32GW installed offshore wind capacity by 2022, according to figures published by the country's marine landlord, the Crown Estate. Europe is expected to have around 60GW installed capacity by 2022.
With such a large level of new capacity expected over the next ten years, it is no surprise that Europe's governments, financiers, developers and turbine makers have turned their attentions to improving the efficiency and cutting the cost of offshore wind. As the box below shows, offshore wind energy costs substantially more than onshore, and research commissioned in 2010 by the newly elected UK government put the cost at £150 (EUR183) per megawatt hour, more than double that of onshore wind at £74/MWh. As a result of this research, the UK coalition government said it would stand by the previous Labour administration's offshore wind plans, but only if the industry committed to bringing the cost offshore wind down to £100/MWh.
"It's quite ambitious, as this means cutting costs by 30-40%," says Frank Beiboer, managing director of marine consultancy Intertek Metoc. "Offshore wind is never going to be as cheap as onshore wind, but there are still very good reasons for building offshore, particularly in Europe. It is far easier to get consent for a large wind project offshore, you are accessing a far better wind resource and there are more economies of scale, so it's a big prize. It should be possible to bring the cost down to £100/MWh, but only if certain steps are taken now."
In a report last year, Intertek Metoc, which has been working in offshore energy since 1983, said cost reductions should be sought in areas such as standardisation, installation and operations and maintenance (O&M).
Late last year the UK's Department of Energy and Climate Change convened an offshore wind cost reduction task force, which will examine evidence gathered by the Crown Estate and industry bodies on the various factors affecting construction and operational costs.UK wind consultancy BVG Associates has been working with the industry and the Crown Estate on its evidence-gathering exercise, and the firm's director, Bruce Valpy, says success will depend on the convergence of several key factors.
"The industry is heading down towards a lifetime cost of energy of £100/MWh for projects that will be constructed ten years from now," says Valpy. "Through a mixture of supply-chain and technology improvements, it's a figure that becomes eminently possible - as long as the industry is given confidence to invest in a long-term future."
Costs have been rising sharply in recent years: according to research carried out by BVG Associates for trade body RenewableUK, the average offshore wind capital expenditure reported by developers more than doubled between 2005 and 2010, hitting around £3 million per installed megawatt. As wind farms are built further offshore in deeper waters, they will require larger foundations, longer grid-link cables and longer usage of installation vessels. Both the BVG Associates report and similar research by Intertek Metoc concluded that all of these factors would mean that capital expenditure costs would continue to rise.
However, Valpy believes they would be unlikely to continue to rise at the rate they have done over the past few years. "Capital costs have stabilised in offshore wind," he says. "One of the main reasons they rose so sharply was that people were getting their heads around the conditions and working in deeper waters and in harsher conditions. The industry now has a more realistic understanding of costs based on hands-on experience, and we are starting to see an increase in competition within the supply chain."
However, capital costs are likely to continue rising as wind farms move to still deeper waters further from shore. Improving areas such as foundation design will be one way of cutting costs, but the BVG RenewableUK report concludes that the key areas in the battle to bring offshore wind down to £100/MWh will be reducing O&M costs and improving turbine energy production.
"The biggest impact on the cost of energy is the move to the next-generation 6-7MW class of turbine," says Valpy. As explained in the BVG-RenewableUK report, by increasing the generating capacity of turbines, fewer expensive deep-water foundations need to be installed and less vessel time is required in order to complete a project: "Turbines with higher rated capacity and much larger rotors may have higher costs per megawatt but offer significant benefits in terms of the capital costs of many other elements of the wind farm, as well as the increased capacity factors and the expectation of lower operating costs."
Beiboer says that speeding up a project's construction period is key to cutting capital costs - if a project can be built in just one or two seasons, the worst of the North Sea weather can be avoided. On the operational expenditure front, meanwhile, fewer turbines means fewer risks of problems that may need fixing, he adds. Ongoing work to improve turbines' resilience to harsh marine conditions will also help bring down maintenance costs, as will the improvement of maintenance vessels to cut the time at sea.
Ray Thompson, business development manager at Siemens Wind Power UK, says that the industry's aim is to reduce the "levelised cost" of wind-generated electricity - meaning for the whole-life cycle rather than just upfront capital costs. He says the two key considerations for bringing down levelised costs will be innovation and industrialisation.
"Offshore wind is a relatively new industry, so we are on a steeper part of the learning curve with greater opportunities for cost reduction," he says. "The move to direct-drive wind-turbine designs will be a significant factor in simplifying complexity and reducing through-life cost, as well as enhancing potential wind-farm yield. Meanwhile, the industrialisation of manufacturing processes will provide significant cost reduction potential; we have to move to an industrial model that is more oriented towards products rather than project mentalities, and we will be looking to learn from industries such as automotive as part of this change. This requires a predictable and sustainable market to facilitate the necessary investment."
One important area neglected by industry analysis so far is the cost of borrowing to finance offshore wind, says Jerome Guillet, managing director of renewable-energy financial advisers Green Giraffe Energy Bankers, who has advised on financing offshore wind projects across Europe, as well as Cape Wind in the US. "Financing costs are actually the single largest driver of cost and I am amazed that they are discussed so little," he says.
Guillet adds that the 1% funding cost difference offered by German state bank KfW under its programme for offshore projects is probably worth EUR5-10/MWh to projects. "So just reducing commercial banks' cost of funding today can be worth 5% of the price of offshore wind," he explains. "And you can add other factors that lower costs, things like higher leverage, longer maturities and lower margins, all of which will happen with a longer track record. So things will improve over time, but are also heavily dependent on the perceived stability of regulatory regimes."
However, even if construction, financing and operating costs could all be brought down, offshore wind would still be more expensive than onshore wind - so why bother?
The US and China are faced with these costs, or similary costly grid connections to onshore sites far from populations, says Valpy. "If northern Europe had a lot more space and there was strong public will for onshore," he says, "then for some time it would remain the economically more attractive solution. But it doesn't. When getting (construction) consent for even relatively small projects onshore can be so time consuming and uncertain, people recognise the only way to get the scale for renewable electricity generation is to go offshore."
ON-OFF RELATIONSHIP IS OFFSHORE WIND ENERGY WORTH THE EXTRA COST? ASKS DAVID MILBORROW
Offshore wind has a number of attractions, including large wind resources, higher wind speeds than on land and fewer environmental constraints. The wind characteristics at sea are also more favourable, with lower turbulence and less wind shear, which means less severe dynamic loads on blades.
There are opportunities offshore to build very big arrays, so that some overheads can be spread between large numbers of machines. These include site meterological measurements, and legal and financial fees.
However, construction costs are significantly higher due to the need for more expensive foundations to cope with wave and wind loadings, plus measures to protect machinery and external surfaces from the harmful salt spray (see below). The electrical cabling and grid connection to shore will also be more expensive, while the higher wind speeds necessitate the use of more robust wind turbines.
The need for appropriate vessels means operation-and-maintenance costs are also higher offshore. As the vessels may not always be able to gain access to repair faults due to adverse weather conditions, machine availability may be lower.
Dissecting the costs
Everything costs more offshore compared with onshore. The graph, left, shows typical data. Onshore wind turbines can now be procured for less than EUR1,000/kW, while offshore turbines cost roughly 15-20% more. Onshore foundations cost around EUR200/kW, compared with EUR500/kW or more offshore. Electrical cabling between machines, plus a grid connection, typically costs around EUR100/kW onshore, but up to six times as much offshore. Onshore installation costs are generally around EUR100/kW, but typically around EUR450/kW offshore.
Overall, total onshore installed costs average around EUR1,500/kW of energy produced - offshore that figure is roughly doubled. It should be noted, however, that there are wide variations in the constituent costs, and in the totals, with onshore costs ranging from around EUR1,300/kW to EUR1,700/kW, and offshore costs ranging up to around EUR3,300/kW.
Operation and maintenance costs
Operation and maintenance (O&M) costs are inevitably higher offshore but there is a shortage of data to allow definitive comparisons. Onshore O&M costs are around EUR15-20/MWh, and offshore levels are roughly two to three times as much. However, the precise scope of any particular estimate needs to be scrutinised, as not all the figures include rent, rates and insurance. This data is crucial to deriving a reliable figure for O&M costs.
In submitting projections as part of their National Renewable Energy Action Plans, EU member states suggested the capacity factor of offshore wind would 24-45%, as shown below. On average, the offshore capacity factor, at 33%, was nearly 50% higher than the corresponding onshore figure of 24%. However, a 50% increase in productivity does not cancel out the 100% increase in capital cost, and so offshore wind is significantly more expensive than onshore wind.
Cost of energy comparisons
With installed costs offshore 70-100% higher than onshore and O&M costs also higher, generating costs are generally 30-80% higher offshore, despite greater productivity. Windpower Monthly's annual review of generating costs (Windpower Monthly, January 2012) suggested that EUR90/MWh was a typical onshore figure at a site with a mean wind speed of 7 metres per second (m/s). With offshore wind at EUR3000/kW, the generating cost at a site with a mean wind speed of 9 m/s will be around EUR120/MWh.
Sites with higher wind speeds are being developed - particularly for the German and UK offshore programmes - but these are a considerable distance from shore and therefore construction costs are likely to be higher.
There are expectations that installed costs may come down in future, but the differential between onand offshore is likely to remain significant.