Wind Economics: Four factors can cut offshore costs by half

WORLDWIDE: A recent report from the New York State Energy Research and Development Authority, on the prospects for reducing the costs of offshore wind concluded that they can be halved through a combination of market stimulation, the use of advanced, large-scale wind turbines, sharing of site conditions and meteorology information, and investments in training and port facilities.

Reform… Studies suggest savings can be made during offshore consenting (pic:E.on)
Reform… Studies suggest savings can be made during offshore consenting (pic:E.on)

The baseline cost of energy for a notional 600MW offshore wind farm approximately 12 nautical miles (22 kilometres) off the coast of New York state and brought to financial close in the year 2020 was $291/MWh (€260/MWh), the authority calculated. By using 8MW wind turbines, in place of the 5MW machines used for the baseline study, and taking into account global trends in cost reduction, the cost of energy would be brought down to $226/MWh, the report found. If there were other offshore developments elsewhere in the US, which would give developers valuable additional experience, then the cost by 2022 would come down to $202/MWh.

A further package of measures to assist developers, in the shape of indirect support, such as the provision of information on the seabed conditions and meteorology, plus other measures specific to the state of New York, would bring costs down to $138/MWh (€123/MWh) by 2022, which is among the lowest of any costs reported for offshore wind. That contrasts with the initial baseline cost, which is higher than most costs quoted elsewhere, probably because of the lack of experience of offshore wind in the US.

A recurring theme throughout the discussion of the various scenarios is that the technology is evolving continuously, worldwide, and this will have an important bearing on the cost of energy.

A key message from the New York report, prepared by University of Delaware Special Initiative on Offshore Wind, is that generation costs can be reduced by a significant proportion - possibly as much as 30% - through assistance during the consenting process. Removal of some risks associated with the consenting process is also a feature of Danish offshore wind and has resulted in significantly lower electricity prices. The Horns Rev 3 contract, for example, was secured with a bid of €103/MWh, but the government had undertaken the seabed surveys.

Savings of €1.4 billion

A UK report, When the Levy Breaks, from the UK Institute for Public Policy Research (IPPR), suggests that the adoption of a similar policy in the UK would deliver savings of up to £1 billion (€1.4 billion), without substantial cost to the government. The IPPR notes that the Dutch government proposes to emulate the Danish approach and discusses the various stages in the UK consenting process, which it suggests is "lengthy and inefficient" and "hundreds of millions of pounds are being spent developing offshore wind farms which may never be built".

The IPPR adds that public ownership of offshore wind farms would deliver even higher savings, but acknowledges that this route is unlikely to be adopted by the present UK government.

CLIMATE CHANGE Perspective on carbon pricing

The International Energy Agency's Energy special report, Energy and Climate Change, aims to identify measures that would enable progress towards climate change targets to be accelerated beyond measures that are already in place. The report develops a so-called bridge scenario, which would enable this objective to be achieved, relying solely on proven technologies and policies, without changing the economic and development prospects of any region. The impact on gross domestic products, in other words, is neutral.

It suggests that 3.9TW of electricity generating plants would be needed between 2015 and 2030, of which 897GW would be wind.

It also charts the value of fossil-fuel subsidies, which totalled $500 billion in 2014. It notes that: "Currently, around 13% of global energy-related CO2 emissions are from fuels that are subsidised to a greater or lesser extent. This equates to an average incentive to emit CO2 of $115 per tonne." That puts the arguments for carbon pricing into perspective, as most of the current and proposed schemes set the cost of carbon at a lower figure. The competitive position of renewables would be considerably enhanced if carbon dioxide were taxed at $115/tonne.


New York Offshore Wind Cost Reduction Study, New York State Energy Research and Development Authority, February 2015 The cost of offshore wind off New York State could drop from $291/MWh to $138/MWh by 2022.

When the Levy Breaks, Institute for Public Policy Research (UK), 2015. Cutting cost and risk in the consenting process could save the government up to EUR1.4 billion and cut consumer costs.

Energy and Climate Change World Energy Outlook Special Report, International Energy Agency, Paris, 2015 Suggests "bridge scenario" to progress towards climate change, with 897GW of wind generation needed between 2015 and 2030.

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