WindEconomics: US offshore costs down to European levels

The US entered the offshore-wind sector late, but a number of projects are now under development. Generation costs were initially high compared to European levels, but recent power purchase agreements (PPAs) suggest they are now very similar.

The costs for US offshore are predicted to come down by 2025 as more projects are built (pic: Ionna22/wikimediacommons)

A recent report by the National Renewable Energy Laboratory (NREL) sheds light on the technical and economic issues relevant to the Vineyard Wind project, a two-stage development comprising two 400MW wind farms, sited around 75km off the coast of Massachusetts and 22km from the island of Martha’s Vineyard.

The first phase, expected to be commissioned in 2022, has a 20-year PPA for $74/MWh (2022 prices), while the second phase has a PPA for $65/MWh (2023 prices).

These prices do not reflect the levelised cost of energy (LCoE), as the operators will benefit from investment tax credits.

For this reason, NREL estimated LCoE and produced a uniform database by appropriate adjustments to UK, Dutch, Danish and German prices to allow for differences in contract lengths and other factors.

Figures from the European projects are very similar to those from Vineyard Wind, as shown in the chart.

The worldwide trend in offshore-wind generation costs reveals not only that costs roughly halved between 2019 and 2024, but the spread of estimates has also become smaller.

The Vineyard Wind 2022 price is just over $100/MWh, nearly identical to the figure for a UK project (the "low" price for 2022 is for a Dutch project).

The 2023 Vineyard Wind price is slightly higher than the corresponding Dutch and German prices for 2023 projects.

It may be noted that there may be an upward trend after 2024, possibly due to pricing of the risk five years ahead.

The data used by NREL to derive the generation cost estimates are shown in the box (left).

Where data was not in the public domain, NREL made estimates.

The analysis was based on the assumption that 8MW turbines would be used, but the developer subsequently announced that the preferred supplier is MHI Vestas, which will provide 9.5MW machines.

This change is unlikely to materially affect the figures.


Major role for wind in renewables push

A new global report from the International Renewable Energy Agency (Irena) has estimated the implications of accelerating renewable-energy installations to reduce carbon emissions and meet the aspirations of the Paris Agreement.

It suggests the savings would be between three and seven times the extra costs, compared to a reference "business as usual" scenario.

An "REmap" is proposed, with renewable energy’s share of electricity generation rising from 55% (in the reference case) to 86% by 2050.

There would be 6,044GW of wind and 8,519GW of solar; with wind delivering around 20,000TWh per year – more than any other technology.

Global savings include the lower external costs associated with electricity generation by fossil fuels (see  chart, below).

These, together with fossil-fuel subsidies, would all be lower with more electricity generation from renewable sources.

The savings are set against the incremental energy system costs and it is concluded that the savings would lie between three and seven times the additional costs.

At a glance — This month’s report conclusions

The Vineyard Wind Power Purchase Agreement: Insights for Estimating Costs of US Offshore Wind Projects, Beiter et al, National Renewable Energy Laboratory, February 2019

An analysis of the power purchase agreements secured by Vineyard Wind finds the equivalent levelised cost of energy are very similar to European projects expected online in the same period.

Global energy transformation: A roadmap to 2050 (2019 edition), International Renewable Energy Agency, April 2019 

Examines the implications of accelerating renewable-energy deployment to meet the goals of the Paris agreement.  Covers carbon emissions, job creation, costs and benefits.