Substantial fall in offshore wind generating costs

1 November 2016


Auction programmes in The Netherlands and Denmark, in which developers bid for projects at the lowest electricity price they can offer, have added major impetus to the downward path of costs in offshore wind, according to Bloomberg New Energy Finance. Its latest study of levelised cost of electricity (LCOE) for all the renewable and fossil fuel generating technologies puts the benchmark (weighted average) estimate for offshore wind globally at $126 per megawatt-hour in the second half of 2016. This is down 22% from H1 2016, and 28% from H2 2015.
BNEF’s work on levelised costs draws on thousands of data points collected by the company’s analysts and researchers. Seb Henbest, head of Europe, Middle East and Africa at BNEF and in charge of the levelised cost modelling work, said: “This study shows that the economics of offshore wind are now improving fast, with the best sites getting closer to striking distance of more mature technologies.”
Tom Harries, offshore wind analyst at BNEF, added: “Behind this improvement is the use of much bigger turbines, enhanced know-how on managing the construction of arrays in the North Sea, and the impact of auction programmes in Europe. The latter have simplified development by providing transmission and a permitted site, and have led to fierce competition among bidders.”
In September, two offshore wind projects in Danish waters totalling 350 MW were awarded to Vattenfall with a record-breaking bid of just 60 euros ($67.33) per MWh. In July Dong Energy won a contract to develop a 700 MW Dutch offshore array at 72.70 €/MWh. Other projects, such as those in deep UK waters, are going ahead at higher cost, and this explains why the global benchmark, while falling rapidly, is well above these recent figures from Denmark and the Netherlands.
Offshore wind is one of several renewables technologies that have significantly improved on LCOE this year: onshore wind’s global benchmark estimate is $68 per MWh for the second half of 2016, some 16% below the first half of the year. BNEF’s latest benchmark estimate for the LCOE of crystalline-silicon solar photovoltaic projects reaching financial close in H2 2016 is $100 per MWh, with a wide range either side of this. The range for each technology reflects the fact that generating costs can vary greatly between projects, based not just on technology type, but also the quality of the resource
By way of comparison, BNEF’s levelised cost estimates for fossil fuel generation differ greatly by region. In H2 2016, coal-fired power stations have LCOE benchmark estimates of $51 in Asia-Pacific, $55 in the Americas and $88 in Europe, while gas-fired plants average $53 in the Americas, $78 in Europe and $99 in Asia-Pacific.  

 



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