United Kingdom

United Kingdom

Lack of visibility hampering cost reduction

UK: The lack of visibility in the UK's offshore sector is the biggest risk of it failing to reach the £100/MWh (€129/MWh) target by 2020, according to a new report.

E.on's 216MW Humber Gateway was completed in 2015
E.on's 216MW Humber Gateway was completed in 2015

Now in its second year, the 'Cost Reduction Monitoring Framework 2015' report by ORE Catapult and the Offshore Wind Programme Board highlights the concerns and achievements of the market.

The report said 12 out of the 13 indicators it tracked were on target or ahead of schedule in reaching the desired 2020 targets to contribute to cost cutting. Generally, the report found the market on track to reach the 2020 target.

However, the growth and scale segment of the market was behind its target, and this is the biggest risk for missing the £100/MWh target, according to the report's respondents.

"Growth and scale was assessed as behind target, and this is despite a reassessment of the milestones for this indicator in 2014 when the UK target was reduced to reflect the cost reduction potential of a smaller (11GW by 2020) market," the report said.

The report said a contracts for difference (CfD) auction by the end of 2016 and two further auctions by 2020 — as promised by energy minister Amber Rudd in November — could get the segment back on target.

In November, Rudd said the any future auctions would only go ahead "if, and only if, the government's conditions on cost reduction are met". However, these conditions have not been made public and details of an auction in 2016 have yet to be revealed, depsite pressure from the European Wind Energy Association

A lack of visibility was emphasised by the entire supply chain, the report found, increasing from just turbine manufacturers and developers in the 2014 report, indicating the issue having a greater effect.

This barrier, according to the report, is also stopping small and medium businesses "with innovative solutions" from entering the market.

Among its recommendations, the report calls on the government to offer greater clarity on the dates and size of future CfD auctions and to encourage inter-market collaboration to continue cost-reduction, which had been affected by the introduction of competitive auctions.

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