Wind Economics : Offshore industry aims for €80/MWh by 2025
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WORLDWIDE: The European Union's transport, telecommunications and energy council met on 6 June to discuss a range of energy issues.
Ahead of that meeting, a paper was submitted by 11 major players in the offshore wind sector including GE, MHI Vestas, Siemens, Statoil and RWE Innogy.
The purpose of the document was to emphasise the crucial role offshore wind can play in the European energy system. The signatories expressed confidence that, with the right regulatory framework, offshore wind can generate electricity at €80/MWh or below by 2025.
However, they emphasised the importance of a stable long-term market for renewables in Europe, and suggested that at least 4GW of projects each year would enable the industry to achieve significant costs reductions.
The paper drew on experience from the Netherlands and the UK. In the UK, a strike price of €141/MWh was awarded in a tender round in 2015, and the Dutch government has put forward a tender price trajectory that reaches €100/MWh by 2020, which is lower than the UK target of €123/MWh.
Denmark's Horns Rev 3 tender price of €103/MWh lies below these figures, but does not include a grid connection cost.
Dong surprises industry
Dong Energy surprised the industry in July by announcing it had been awarded the concession to build two Dutch offshore wind projects - Borssele 1 and 2 - for an average strike price of €72.7/MWh, well below the figures discussed above, and in the next section.
The wind farms will have a combined capacity of 700MW, so Dong will profit from economies of scale. The projects will also benefit from very good winds, around 9.5 m/s, and Dong does not have to pay the grid connection cost.
Even so, the news is very welcome and will be examined in more detail next month.
Note: the estimate of EUR80/MWh by 2025 corresponds to US $90/MWh for offshore wind, which is lower than the figure suggested by the International Renewable Energy Agency (Irena) below.
Solar comparison - Solar PV closing up fast on onshore wind
Irena recently published a comprehensive analysis of the likely cost trends for solar PV to 2025, with comparisons to wind, onshore and offshore. In 2025 onshore wind remains the cheapest technology, if only just.
Based on overall average data, the generation cost of onshore wind in 2015 was $70/MWh, which Irena predicts to fall to $50/MWh by 2025. The levelised cost of utility-scale solar PV was $130/MWh in 2015, but will fall to $60/MWh by 2025.
The report looks at two technological approaches to concentrated solar power (CSP): the parabolic trough collector type, where the sun heats a fluid in a tube at the focus of the parabola; and "solar towers", where numerous mirrors focus the sun's rays on a central tower to heat water (or another fluid) to generate steam.
Irena suggests the latter type will be the cheaper by 2025 at $80/MWh
Offshore wind prices will come down - from $180/MWh in 2015 to $120/MWh in 2025 - but will be dearer than CSP.
These figures are global averages and there is a wide spread of estimates. The spread for utility PV in 2025, for example, ranges from around $30/MWh to $114/MWh. The spread for onshore wind is $30MWh to $91/MWh, and for offshore $90/MWh to $150/MWh.
To put these figures in context, the National Renewable Energy Laboratory's annual technology baseline, published last year, puts the generation cost of combined-cycle gas turbines in 2030 ranging from $60-90/MWh, and $110-130/MWh for coal.
Nuclear is priced at $100/MWh. American prices are among the lowest in the world, but European generation costs are mostly higher than these values.
At a glance - This month's report conclusions
Submission to a meeting of the EU's Energy Council, 6 June, by offshore wind industry CEOs: Offshore wind can reduce costs to below €80/MWh by 2025.
Available on the Global Wind Energy Council website, www.gwec.net
With adequate support, offshore wind can produce electricity at or below €80/MWh by 2025.
The Power to change: solar and wind cost reduction potential to 2025, International Renewable Energy Agency, June 2016.
Analysis of likely trends in wind and solar technologies shows that onshore wind will be the cheapest technology by 2025.