The future is offshore

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With projects comparable in size to gas-fired power stations going ahead, offshore wind moved centre stage in the power generation arena last year. In a windy area at sea, a wind station costing EUR 1500/kW to install will deliver electricity for around EUR 0.06/kWh -- making the power a little more expensive than coal and on a par with mid-range nuclear. If coal's external costs are included, offshore wind is level with coal. In sheltered waters with winds of just 6.5 m/s, wind's production cost is around EUR 0.09/kWh (fig 1).

Big scale makes sense at sea. Installation of many large turbines spreads the costs, particularly of specialist vessels and grid connections. How this affects the overall production cost is gradually becoming clearer as more projects develop. If the downward trend in offshore costs continues -- and there is every reason to believe it will -- wind power generation at sea is on course to be fully competitive with gas at today's price by as early as 2010.

Turbines for offshore use tend to be 10-15% more expensive, taking the machine price to around EUR 750/kW, mainly because they need additional protection from salt spray. The foundations, installation and grid connection are usually significantly more expensive -- adding up to 100% to turbine costs compared with 15-30% on land. With these balance of plant costs offshore equalling the turbine price (fig 5), the installed cost offshore is coming in at EUR 1100-1600/kW, with a consensus that the typical cost will be EUR 1400-1600/kW. Onshore, the lowest price last year was EUR 750/kW, though more typically EUR 1000/kW (main story).

As with onshore wind, national market conditions account for significant differences in offshore generation cost estimates. A recent Danish report puts offshore costs as low as EUR 0.035-0.046/kWh, whereas the UK's Department of Trade and Industry suggests around $0.08/kWh. The difference is largely due to the lower interest rate and longer depreciation period used by the Danes. A more typically commercial 6.5% test discount rate and 15 year depreciation gives a real-world price of EUR 0.06-0.09/kWh, depending on wind speed.

Developers are expecting the extra cost of offshore construction to be at least partially made up for by higher wind speeds, leading to greater energy productivity. The Danish wind farm at Middlegrunden, off Copenhagen and built in 2000, is expected to produce 99 GWh a year, giving a capacity factor of 28%, net of availability, wake and electrical losses. Only a few Danish onshore wind farms can match 28%. The highest annual capacity factors for wind are found in the windiest sites in America and Britain, around 40-45%. Capacity factor is a measure of a wind plant's productivity expressed as a percentage of the energy it would have generated had it been blessed with winds allowing it to operate continuously at full power for the whole year.

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