Offshore wind industry is confident of driving costs down by 2020
This year Global Offshore Wind will be organised in Manchester, UK, from 21 to 22 June. A big theme for the offshore wind business is to bring down the levelised cost of energy (LCOE) to be more competitive with other energy sources. And, according to a report from ORE Catapult (the second Cost Reduction Monitoring Framework), the industry is confident of driving costs below GBP 100/MWh by 2020 on the back of long-term market certainty. Offshore wind costs are falling fast, with 12 of 13 cost indicators on or ahead of target. The report shows that investment in turbine technology has delivered significant cost benefits, but that further reduction will need to come from the innovations in ‘balance of plant’, such as foundations, cables and substations. The report warns that investment in research and development and manufacturing industrialisation to deliver such improvements will only come with greater visibility of future rates of deployment and market size as government sets out details of contracts for new offshore wind farms.
Other new figures show that competitive tendering is cutting the costs for connecting offshore wind farms to the UK high-voltage grid by at least GBP 700 million. The main reasons the savings are being made are because when bidders have to compete against each other they will offer a better deal on financing and operating costs compared with monopoly network companies. Also, as they are bidding to operate the link for 20 years it gives them stable long-term revenue. This lowers the financial risk they face meaning they can offer a more competitive bid. The tender regime is run by Ofgem, which chooses the most competitive bids made by firms to own and run links to offshore wind farms over a 20-year period.
It is not just in the UK that cost reductions seem likely. The Netherlands Enterprise Agency (RVO) has recently opened the first offshore wind tender for the Borssele I and II project sites. MAKE expects the tenders to hold significant potential for cost reduction due to a number of market factors. This is the first of five tenders that will result in 3.5GW of new capacity, increasing the country’s cumulative offshore capacity to 4.5GW by 2023. The government has a target of approximately 40% in LCOE reduction at final investment decision (FID), from 170 EUR/MWh in 2010 to 100 EUR/MWh in 2020. LCOE for offshore wind in the Netherlands may reach approximately 100 EUR/MWh for Borssele I and II, with FIDs expected to be taken in 2017, thus meeting the 2020 LCOE target. So far, three parties have submitted their bid for the first two sites.
New innovations are also important to drive down costs, and in this issue we present an article from Accio Energy, a US company that ‘thinks outside the box’ and is investigating electrohydrodynamic (EHD) wind energy. EHD wind energy is a new way to produce power by converting the kinetic energy of offshore winds into electricity with mechanical simplicity. EHD wind energy technology does not employ blades, rotors or electromagnetic generators. Instead, EHD technology uses wind and a positively charged water mist to create a strong electric field and produce high-voltage direct current power. On page 6 you can read the full article about this innovative technology.
Enjoy reading,
Floris Siteur