UK Government halves offshore wind cost forecasts

The Department for Business, Energy and Industrial Strategy (BEIS) has slashed its forecasts for offshore wind energy costs through to 2030 by more than half, in the first update to predictions since 2016.

UK Government halves offshore wind cost forecasts

While the steepest decline is for offshore wind

According to the Department’s latest electricity generation cost report, offshore wind projects which come online between now and 2030 will produce power at an average cost of £47 per megawatt-hour over the course of their lifetime. BEIS’s previous forecast had placed the figure at £103 per megawatt-hour.

From both being forecast at £64/MWh in 2016, the equivalent figures for onshore wind and large-scale solar have also fallen, to £45/MWh and £39/MWh respectively.

In comparison, BEIS is forecasting that the levelised cost of energy (LCOE) for new gas will reach £82 per megawatt-hour by 2030 and that the LCOE for new nuclear will reach £93 per megawatt-hour within the same timeframe.

“Since 2016, renewables costs have declined compared to gas, particularly steeply in the case of offshore wind,” BEIS’s updated report states. “Across the renewable technologies, increased deployment has led to decreased costs via learning, which has then incentivised further deployment, and so on.”

Offshore wind has received particular policy support from the Conservative Government. While onshore wind, solar and energy storage were effectively banned from competing in the Contracts for Difference (CfD) auctions in 2015, offshore wind projects were still eligible to participate. This decision was only reversed in March 2020. Additionally, offshore wind is the only renewable energy sub-sector with a fully developed sector deal at present. The policy package has seen companies within the offshore wind sector commit to invest £250m over the next 11 years in exchange for participation in £557m of state subsidies. It additionally commits the offshore wind sector to boost annual exports fivefold by 2030, to reach £2.6bn.

In related news, wind accounted for a record 59.1% of the UK’s generation share on Saturday afternoon (22 August) as Storm Ellen hit.

Winds of change

The publication of BEIS’s update comes in the same week that milestones were reached for three major offshore wind projects in Lincolnshire, the Shetland Islands and Norfolk.

Off the coast of Lincolnshire, the installation of turbine foundations and export cables has been completed at the site of the Triton Knoll windfarm. Once the £2bn project comes online in 2022, it will have a capacity of 857MW.

RWE has a majority stake (59%) in the project, with Japanese firms J Power and Kansai Electric Power holding majority stakes. The array will play host to 90 giant turbines.

Triton Knoll secured support through the CfD in the second half of 2019, achieving a strike price of £74.50 per MWh.

Meanwhile, Equinor has signed agreements to lease seabed off the coast of Norfolk to expand the Sheringham Shoal and Dudgeon windfarms, in which it holds stakes. The energy major plans to double the size of both windfarms and create as much as 719MW of new generation capacity.

Equinor updated its climate targets in February and has laid out plans to develop a wind generation portfolio of at least 4-6GW by 2026, rising to 12-16GW by 2035, to meet its new emissions intensity goals.

SSE Renewables has also signed a contract with Vestas to supply 103 of the 117 turbines which will form the 443MW Viking windfarm in the Shetland Islands this month. Ofgem approved the transmission link back in June after SSE confirmed that it would be proceeding with the £580m project.

Sarah George

Comments (3)

  1. Richard Phillips says:

    But generation is still variable, is it not???

    Richard Phillips

  2. Colin Megson says:

    …The Department for Business, Energy and Industrial Strategy (BEIS) has slashed its forecasts for offshore wind energy costs through to 2030 by more than half…"

    How weird is that!

    If the BEIS decides to follow the National Grid’s FES 2020, and starting in 2020, by 2050, Wind And Solar Plants (WASPs) will be suppling 480 TWh of intermittent electricity. By then, it will have reached an annual capital investment figure of 13.21 billion (+ 2.70 billion per year for backup gas turbines).

    That’s 15.91 billion of investment required every single year – Forever & Ever & Ever.

    Alternatively, by 2030, Rolls-Royce will be manufacturing a 440 MW Nuclear Power Plant (NPP) for 1.8 billion (that’s 1/3rd less per MW than Sizewell C). It will have an operational lifespan of 60 years, with the high probability of circumstances dictating an economical life extension to 80 years.

    From 2030, to 2050, it would require a capital investment of just 12.42 billion per year. Then there would be an investment hiatus – no more investment required for 50 years. It works out as equivalent to $4.06 billion per year.

    Advanced NPPs require 75% less capital investment than WASPs.

    Now that would surely mean lower electricity bills for all of us, wouldn’t it?

  3. Richard Phillips says:

    Colin Megson is spot-on. This present policy emphasises the need for policy makers, in the system, to educate ministers on the technical and scientific basis, upon which their decisions must be based.
    Very few MPs have any scientific training beyond GCSE (School Cert and Matric in my day!!!! Does anyone remember?
    And we should looking properly at Fast Reactors, so much better fuel utilisation.
    I spent my career at AERE Harwell, so am rather in favour of nuclear energy!!

    Richard Phillips

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