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Although no single figure can quantify the generation cost of either technology, they do now appear to be within a similar range. The generation cost from PV obviously depends on where it is located, but the cheaper systems in the sunniest climes are now able to deliver electricity at similar prices to offshore wind. Beating onshore wind is more difficult, but the differences between PV and onshore wind are likely to come down in the future. By 2020, generation costs from PV systems in sunnier climes are likely to be lower than those from offshore wind, but onshore wind will still be cheaper.
Although the installed costs of utility-scale PV systems are lower than those of offshore wind — $4,700/kW for PV and a little over $6,000/kW for offshore wind, according to the United States Department of Energy (DoE) — the latter delivers electricity at a cheaper price due to higher productivity. Wind’s installed cost comprises the cost of turbines plus costs from internal electrical components and from all related construction, such as foundations.
The capacity factor of offshore wind is typically in the 40-45% range, whereas PV systems in northern Europe have capacity factors around 10%, and it is only in the sunniest climes that capacity factors reach 20%. This means that, roughly speaking, the installed costs of PV in the best locations need to be roughly half those of offshore wind to offset lower productivity. The DoE puts the current cost of onshore wind at around $2,400/kW, which means generation costs are significantly cheaper than those of PV.
Figure 1, shows estimates of present-day generation costs from multiple sources. The Special Report Renewable Energy Sources (SRREN) produced for the International Panel hange quotes a wide range of estimates for PV, ranging from $120/MWh up to $520/MWh; a report produced by Google suggests the figure is $157/MWh, and a recent presentation by Bloomberg New Energy Finance put the range at $140-220/MWh.
For offshore wind, the spread is narrower, from $100/MWh (SRREN minimum) to a maximum of $320/MWh (Bloomberg). For onshore wind, the spread is $50-140/MWh (both from SRREN).
Cost trends to 2020
After a period during which there were some fluctuations, PV and wind-turbine prices resumed a downward trend from around 2008/9 onwards. Provided steel, copper and glass-reinforced plastic prices remain reasonably constant, the expectation is that wind-turbine prices will continue to fall.
The US DoE suggests offshore wind installed costs will fall to around $5,440/kW by 2020 and that the corresponding figure for PV will be $4,056/kW. The installed costs for onshore wind are expected to stay virtually constant. But if there is strong competition in the industry leading to significantly lower wind-turbine prices, this may mean their estimate of $2,412/kW for 2020 is too high. Figure 2 shows the projected installed costs quoted in the Annual Energy Outlook by the US Energy Information Administration (EIA).
There is uncertainty over future installed costs for offshore wind. Figure 3 shows six estimates from five separate sources. Although the general trend is downwards, an analysis for industry body RenewableUK suggests that installed costs will move slightly upwards, to reach $5,120/kW by 2020. This, in practice, is slightly less than the "business as usual" estimate from Google and the figure from the EIA; these two are almost identical. The upward movement in the installed costs in the RenewableUK report reflects the additional costs of building offshore wind at greater distances from the shore. However, higher wind speeds are to be found in these locations and so this does not necessarily imply that the generation costs will rise from present-day levels.
There is just as much variation in the projections for utility-scale PV costs in 2020 as there is for offshore wind. Figure 4 shows estimates from a number of sources.
As a benchmark, it may be noted that a couple of recently announced utility-scale PV projects have been priced at around $4,000/kW, and a recent report from the Berkeley Nuclear Laboratory in the US also suggested this was a realistic price for large PV projects — although some may be lower than this, around $3,000/kW.
The 2020 estimate from the EIA (just over $4,000/kW) may therefore be too high. The California Energy Commission and Google’s "business as usual" figures are in the same range ($2,400-2,900/kW).
The cheapest estimates for 2020 are from Bloomberg ($1,450/kW) and Google’s estimate assuming a breakthrough in the technology ($800/kW).
Offshore cost reductions
As the construction and operation of an offshore wind farm brings together many components and processes, it seems likely that there may be several opportunities for cost reduction. Several parties are investigating such prospects. For example, the UK’s Department of Energy and Climate Change has an Offshore Wind Cost Reduction Task Force. This will recommend areas to be targeted by industry and government for potential cost reduction, to enable the UK to unlock the full potential of its offshore wind resources. The aim is to set out a path and action plan for reducing the levelised costs of offshore wind to £100/MWh ($160/MWh) by 2020.
An analysis carried out for this study by the Carbon Trust has identified areas where costs might be reduced. Turbines — which account for about 33% of the cost of an offshore wind farm — are likely to come down in price and could reduce the installed cost of offshore wind by at least 7%. More efficient foundations could save 5-6% and improved installation could account for another 3-4%. If the cost of obtaining permits, making meteorological measurements and carrying out site surveys could be roughly halved, that would bring down the installed cost of an offshore project by around 20% to just over $3,600/kW. Figure 5 shows how the costs of the various components of an offshore wind farm might be reduced in order to reach the goal of a 20% cost reduction.
If operation-and-maintenance costs could be reduced by a third, the overall reduction of the cost of energy for offshore wind could reach about 25% in total.
Estimates of generation costs in 2020 from the various sources that have been discussed are shown in figure 6. Under Google’s "business as usual" scenario, PV — at £150/MWh — comes out to be slightly cheaper than offshore wind, at $166/MWh. A breakthrough in either technology immediately puts that one in the lead, with Google suggesting generation cost could be as low as $45/MWh. A modest reduction in offshore wind costs — in line with the analysis carried out by the Carbon Trust, puts offshore wind, at $116/MWh, cheaper than PV in northern Europe ($167/MWh), but not in sunnier climes such as Mexico. Finally, onshore wind remains cheaper than PV in northern Europe, but might be slightly undercut in the sunniest climes.