UK offshore wind hits cost reduction target four years ahead of schedule
A report published today reveals that the cost of energy from offshore wind has fallen by 32% since 2012 and is now below the joint UK Government and industry target of £100 per megawatt hour (MWh) four years ahead of schedule. It also shows high industry confidence of continued rapid cost reduction to below levels set by any other large-scale, low-carbon energy source.
The target, set in 2012, was expected to be met by 2020, but wind farms given final investment decision in 2015/16 are already achieving prices lower than this target. This rapid reduction is tracked in the third annual Cost Reduction Monitoring Framework (CRMF) report, delivered by the Offshore Renewable Energy (ORE) Catapult on behalf of the Offshore Wind Programme Board (OWPB).
The industry is now focusing on further cost reduction, growth and job creation says the report.
UK Energy Minister, Jesse Norman, said:
“The UK’s leadership in offshore wind clearly demonstrates that it is an attractive destination for renewable energy investment. This growing industry will be an important part of the Government’s new industrial strategy and will be underpinned by £730m of annual support for renewable energy over the course of this Parliament.
“Thanks to the efforts of developers, the UK’s vigorous supply chain and support from Government, renewables costs are continuing to fall. Offshore wind will continue to help the UK to meet its climate change commitments, as well as delivering jobs and growth across the country.”
Co-chair of the Offshore Wind Industry Council (OWIC), Benj Sykes, said:
“Offshore wind is a big success story at the very heart of the UK’s industrial strategy. The industry is cutting costs much faster than predicted while creating thousands of jobs and stimulating investment nationwide.
“But this is a story that is just beginning. We remain committed to delivering further significant cost reduction while working in partnership with Government to put in place a Sector Deal and build a sustainable industry that will benefit the UK for decades to come. Our industry’s goal is to be cost competitive with other generation sources, and this new data shows that ambition is realistic and that we are well on the way to achieving it.”
Offshore wind costs have fallen sharply through the adoption of larger turbines, increased competition and lower cost of capital. Projects are reaching a Final Investment Decision (FID) in 2015/16 with an average Levelised Cost of Energy (LCOE) of £97/MWh, compared to £142/MWh in 2010/11.
The report also reveals that UK content and jobs are a significant focus for the UK’s offshore wind sector, with the industry working hard to maximise its UK economic benefit. Supply chain plans required under the Contracts for Difference (CfD) process are now delivering significant growth for UK manufacturing, and the report identifies further potential to increase both UK content and jobs through a more coordinated approach to industrial strategy.
The 2016 Cost Reduction Monitoring Framework uses both qualitative and quantitative data from projects reaching either FID or Works Completion during 2015/16. The reports can be downloaded from https://ore.catapult.org.uk/crmf and our new, interactive CRMF website http://crmfreport.com
Since 2010, over £9.5bn has been invested in offshore wind in the UK, another £18bn will be invested in projects by 2021, making offshore wind the sixth biggest infrastructure programme in the UK. Offshore wind already generates 5% of the UK’s electricity, and by 2021 this will double to over 10%.
Offshore Wind costs differ across Europe due to differing regulating regimes. Considerably more development costs are borne by other European Governments than is the case in the UK. Across much of Europe, development of sites, including survey, consent and grid connection, are undertaken by the State in question, significantly reducing the risk and cost undertaken by the ultimate site developers. This difference, as well as significantly impacting upon required capital outlay also reduces risk and resulting cost of capital for European developments and this is reflected in the levelised costs of energy.
Cost Reduction Monitoring Framework (CRMF)
The Cost Reduction Monitoring Framework (CRMF) takes a structured approach, using qualitative and quantitative data, to assess the progress of cost reduction in UK offshore wind projects against key milestones. It was initiated in 2014 by the Offshore Wind Programme Board and the members of the Offshore Wind Industry Council, with the framework designed by ORE Catapult in conjunction with the Crown Estate.
Progress is tracked against milestones that assess the potential of innovations in technology, supply chain and finance to support cost reduction.
Offshore Wind Industry Council (OWIC)
The Offshore Wind Industry Council (OWIC) is a senior Government and industry forum established in May 2013 to drive the development of the world-leading offshore wind sector in the UK.
The OWIC is responsible for overseeing implementation of the Offshore Wind Industrial Strategy and is the sponsoring body of the Offshore Wind Programme Board – a joint government/industry body responsible for driving cost reduction in offshore wind.
Offshore Wind Programme Board (OWPB)
The Offshore Wind Programme Board (OWPB) brings together senior representatives from industry (including developers and supply chain), UK and Scottish government, The Crown Estate and Statutory Nature Conservation Bodies and was established following the recommendations in the Offshore Wind Cost Reduction Task Force report.
The Board’s objective will be to implement the Task Force’s recommendations to drive cost reduction, to treat the UK’s offshore wind sector as one business by assessing risks and barriers and tackle these by helping to find and implement solutions in partnership with the wider industry.
The Offshore Renewable Energy (ORE) Catapult
ORE Catapult was established in 2013 by the UK Government and is one of a network of Catapults set up by Innovate UK in high growth industries. It is the UK’s flagship technology innovation and research centre for offshore wind, wave and tidal energy and helps to reduce the cost of offshore renewable energy, supporting the growth of the industry and creating UK benefit.
 Offshore Wind Cost Reduction Taskforce, 2012