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United Kingdom

Price pressure lacking

Costs of offshore wind projects for 2007-2011 are predicted to be 42% higher than with projects built over the past five years, according to research by energy analysts Douglas-Westwood. The company's John Westwood cites a number of reasons.

At present the offshore wind industry lacks economies of scale and there is not enough competition in many parts of the supply chain. "Installation vessels are a particular case in point with only one major installation vessel operator currently in the market," he says. "Bottlenecks will occur and costs will undoubtedly increase." Turbine costs are also expected to rise with only a few major suppliers active in the sector, he says.

One reason for slow development of the supply chain has been the lack of the continuous stream of projects needed to justify capital investments. "The UK, which has announced two rounds of projects, so far will soon become the world's largest market, but must quickly move ahead to announce a third round or risk this potentially important new industry stalling around 2015." Germany will be the next major market to develop, he says. It has potential for excellent domestic supply chain content due to its highly developed onshore wind power industry.

Two recent developments give rise to optimism and a boost in activity, claims Westwood. First, the UK government has announced its intention to increase the allocation of Renewables Obligation Certificates (ROCs) for offshore wind power from one ROC a megawatt hour to 1.5/MWh. Second, Germany is requiring grid operators to pay for the connection of offshore wind farms. The effect of both will be to lower overall project costs and encourage investment, says Westwood.

Turbine reliability remains an issue. "I believe that the root cause of so many technical difficulties in the sector has been the approach of taking relatively unadapted onshore systems into the marine environment where the costs of site access are much higher due to more restricted weather windows," he says.

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