How much will offshore wind cost in the future?
- 07 Feb 2013, 10:00
- Robin Webster
The inside page of this week's
Sunday Telegraph argues consumers might
have to pay £120 billion for new offshore windfarms, based on the
assumption that the cost of offshore wind are not going to fall
while the windfarms are built. Meanwhile, the government hopes to
reduce the cost of the technology by nearly a third by 2020. So
what's going to happen?
Telegraph says Round Three will cost £120
The Telegraph says subsidies amounting to £120
billion will go to pay for "nine giant wind farms" to be
constructed in the seas around Britain - and that consumers will
foot the bill. It quotes the Renewable Energy
Foundation (REF) - an organisation known for its
opposition to windfarms - which
originally calculated the figure.
In 2010 the Crown Estate, which
manages the UK seabed,
leased nine offshore sites to companies
to build wind turbines, under a scheme called Round 3. REF
calculates new wind farms being constructed under the programme
will receive about £6 billion in subsidies every year for 20
A key assumption behind this calculation is that the
cost of wind will remain steady while the windfarms are built. But
not everyone agrees.
Quoted in the same Telegraph article, the Department
of Energy and Climate change (DECC) says the estimate is "pure
speculation". It argues: "We are clear that costs
[of offshore wind] must come down".
DECC suggested to us that there is a direct
relationship between how much it costs to generate electricity from
a technology and how much subsidy it gets. If the costs of a
technology stay about the same, then it is likely that the
subsidies will as well. If they go down, DECC say that the
subsidies will go down as well.
REF defends its assumption in a
response published on its website. A spokesperson for REF told
"[I]n our judgment it is extremely
speculative of DECC to suggest that the future costs of offshore
wind and necessary subsidies will fall. A fall in costs is
possible, but so is an increase. [...] We have prudently assumed
that the costs of offshore wind remain stable at current
Offshore wind costs - going down?
Let's examine DECC's assumption first. Generating
electricity from offshore wind is expensive because it requires
constructing and maintaining complicated pieces of kit out at sea.
In technical terms,
offshore wind currently costs about
£149 per megawatt hour (MWh) of electricity it produces. This
compares, for example, to about £90 per MWh to generate electricity
The government aims to reduce the costs of offshore
wind to £100 per MWh by 2020. In a
study undertaken for government with
the renewable industry, the Crown Estate concluded that that this
is possible, and published
four pathways showing how it can be
done last year.
Other energy experts think costs will fall, but seem
more sceptical about the government's prediction for how fast that
Guy Doyle, chief energy economist from Mott
McDonald, told us that the government's target of a cost
reduction to £100/MWh by 2020 is "a big ask" which assumes that
very little goes wrong in the meantime.
Doyle says the costs of offshore wind will go down as
more efficient turbines are developed and economies of scale start
make developing wind farms easier. But the more turbines are built,
the further out to sea they will be - so building them in deeper
water will offset some of the cost reductions by making the process
more difficult. Overall, he says Mott McDonald expects "significant
cost reductions in the long run", but energy companies may struggle
to achieve them over the next five years.
UK Energy Research Council (UKERC)
study from 2010 also concludes the cost of offshore wind will fall.
It suggests that, at a "best guess", the costs of offshore wind
will fall to around £115 per MWh by the mid 2020s. This would be a
significant fall, but the government still wouldn't hit its
More recently, one of the UKERC report authors, Rob
Gross, published an
infographic showing a range of
forecasts for future offshore wind costs, drawn from a number of
sources - including consultancies Mott MacDonald,
Brinkerhoff and Arup. The various estimates show costs
falling over the next few years - but by 2020, they would still be
hovering somewhere just below £130 per MWh by 2020.
REF disagrees with these estimates, basing its
critique on a study
written for the organisation by
Professor Gordon Hughes, an academic at Edinburgh University and an
advisor to climate skeptic think tank the Global Warming
Policy Foundation. Hughes argues that offshore wind
turbines will have around half the lifespan the renewable industry
predicts, raising costs.
DECC have told the
Financial Times that its expectation
that offshore wind turbines will last between 20 and 25 years is
"based on rigorous analysis and evidence".
How much wind by when?
The Telegraph article is based on the assumption that
26 gigawatts (GW) of new offshore wind
farms will be constructed under Round Three. This is on top of the
8.5GW already constructed under
Rounds One and Two -
which would make 33.5GW of offshore wind.
The Telegraph says that the Round Three windfarms are
expected to be "largely operational by 2020". But this is an
over-estimate, according to the current level of government
ambition. DECC wants
18GW of new offshore wind to exist by
2020, in total, while the Crown Estate has set a
target of 25GW of offshore wind
"commissioned or under construction" by 2020, in
This doesn't make REF's prediction for the total
amount of offshore wind constructed under Round Three wrong - but
it does mean it may take a while for it all to be built.
Greater falls in costs are predicted after 2020, so
wind farms constructed in the 2020s may cost less in subsidies. And
if the cost of offshore wind falls over time, then the government
says the cost of subsidising it will fall as well.
Falling costs - but still
Most expert opinion seems to fall somewhere between
the government's and the Telegraph/REF predictions. Many experts
disagree that the cost of offshore wind will remain steady over the
next two to three decades. But they still think the government may
struggle to hit its target cost reduction for the
As ever with future predictions there are clearly
many uncertainties - not least with regard to the amount of wind
energy the UK can expect to develop over the next couple of
decades, as well as the predicted changes in costs. Offshore wind
will remain more expensive than onshore wind. But it appears likely
that wind farms installed further into the future are likely to be
less costly as bigger and more efficient wind turbines are
developed. This means that the Telegraph figure is likely to be an