press-releases

Cost of offshore wind energy falls sharply

A report issued today reveals that the cost of energy from offshore wind farms has fallen by almost 11% over the past three years, ahead of schedule on its path to delivering the UK Government’s target of £100/MWh by 2020, and providing clear evidence that offshore wind can play a significant role in the UK’s sustainable energy mix in the coming decades.

The report charts progress between 2011 and 2014 on cost reduction and is measured in lifetime costs. The results closely mirror the competitive result achieved in the Contracts for Difference (CfD) auction results announced today by DECC, which set 15 year strike prices for offshore projects commissioning from 2017 onwards.

The Cost Reduction Monitoring Framework (CRMF) was commissioned in 2014 by the Offshore Wind Programme Board at the request of industry leaders and government. Today’s report has been delivered by the Offshore Renewable Energy (ORE) Catapult in collaboration with The Crown Estate, providing analysis of data gathered by Deloitte and DNV GL from offshore wind farms in UK waters.

It shows that:

• The lifetime cost of energy from offshore wind has come down from £136/MWh in 2011 to £121/MWh for projects moving to construction between 2012 and 2014 (this is as measured across the longer whole life of a project, not just the 15 years covered by Government strike prices)
• The biggest single contribution to cost reduction has been industry’s early adoption of larger turbines. 6MW machines are now being rolled out, compared to the 3MW turbines that were standard until recently

The report shows that continued innovation and cost reduction depends on the scale of growth planned for the sector. It states that “whilst progress has been made in the face of a reduced deployment outlook, it is not safe to assume that the supply chain will continue to invest in the required technology innovations if the size of the market is not sufficient.”

The report provides analysis of how and why savings have been realised, and identifies the on-going opportunities and challenges to further cost reduction.

Commenting on today’s report, Minister for Energy Matthew Hancock, said:

“The Cost Reduction Monitoring Framework and today’s auction results are welcome evidence of the progress on cost reduction being made by the offshore wind industry.  We’ve created the right conditions for significant levels of investment and are now seeing costs come down towards the target of £100/MWh – and with the potential to go further still.  This strengthens the UK’s position as the world leader in offshore wind, and creates an opportunity for new high quality jobs and growing local economies.”

Benj Sykes, Co-Chairman of the Offshore Wind Industry Council (OWIC), said:

“Our Cost Monitoring work as well as today’s strike price announcements demonstrate that the industry is making rapid progress in bringing costs down, ensuring that offshore wind can play a central role in the UK’s future energy mix.  As an industry we remain committed to continuing our work to drive costs down further in the coming years”.

“The OWIC welcomes this report on the Cost Reduction Monitoring Framework, and the evidence that it provides of UK industry’s concerted efforts to drive down the cost of energy from offshore wind.

“Offshore wind is a UK success story. It is already providing enough power for 2 million UK households and thousands of UK jobs. But continued success requires ongoing cost reduction, and this report provides good news on the progress being made in delivering more affordable clean energy. It is crucial to understand that future progress will depend upon confidence in Government’s support into the next decade, as well as ongoing innovation and industry cooperation. Thanks go to the Offshore Wind Programme Board and ORE Catapult for this important piece of work.”

Andrew Jamieson, CEO of the ORE Catapult, said:

“Our CRMF report not only demonstrates excellent progress made in just a few years in making offshore wind a more cost-competitive, sustainable secure source of energy, but also illustrates the technology innovations and efficiencies required to deliver the targeted £100/MWh. Significant challenges lie ahead for the entire industry, and continued progress will require ever greater collaboration between industry, government and academia.”

Adam Bruce, Chairman of the Offshore Wind Programme Board, which has led industry effort on cost reduction, said “This new report demonstrates that industry is taking cost reduction seriously, and working hard to deliver on its commitments to become cost competitive.”

The report makes a number of recommendations on actions required to continue the reduction in costs for offshore wind, including:

• Clarity is needed on the future programme and scale for offshore wind in the UK. Industry investors and supply chain innovators need the market opportunity to be clearly illustrated, such that sufficient investment can be attracted to reduce costs and support industrialisation.
• New technologies for deeper water sites, e.g. foundations and electrical connections, are not being developed quickly enough. Opportunities to demonstrate these technologies should be facilitated by the offshore wind Industry.
• Rapid technology innovation means that a significant amount of uncertainty continues to be priced into projects. This can be overcome by increased collaboration and better monitoring to increase data availability and improve analysis tools.
• More focus is required to identify and address the gaps in skills and expertise required to deliver and operate offshore wind farms.
• Industry needs to continue work on standardisation of key components, such as sub-stations, to minimise duplication.

The CRMF summary report and the analysis of data gathered by Deloitte and DNV GL can be viewed and downloaded at https://ore.catapult.org.uk/reports-and-resources/reports-publications/ore-catapult-reports/