United Kingdom

United Kingdom

Action must be taken now to cut UK offshore costs

Steps necessary to meet £100/MWh target outlined

The UK's offshore wind industry can cut its costs by around 30% over the next seven years, but it must be proactive in order to achieve this, conclude two reports published simultaneously on 13 June.

The Crown Estate's Offshore Wind Cost Reduction Pathways Study considers four scenarios, from which cost reduction 'pathways' have been developed. Three of the four scenarios deliver a levelised cost of energy (LCOE) of £100/MWh or below by 2020 compared to the current level of £140/MWh, the study concludes.

Under a 'rapid growth' scenario, a favourable set of circumstances prevail. Bottlenecks are avoided and maximum achievable cost reductions made. The LCOE falls to £115/MWh by 2017 and to £89/MWh by 2020 under this scenario.

A 'supply chain efficiency' scenario would involve the industry focusing on 4MW and 6MW turbine classes, undertaking investment in large-scale facilities and operating in a competitive set of markets. In this case, the LCOE dips to £121/MWh by 2017 and to £96/MWh by 2020.

Meanwhile, under a 'technology acceleration' scenario there would be rapid product evolution and diversity in the design of turbines, foundations, cabling and methods. This would result in the supply chain remaining fragmented and with slightly higher technology risks. Here, the LCOE falls to £118/MWh by 2017 and to £100/MWh three years later.

The exception is a 'slow progression' scenario, where markets grow slowly, the supply chain lacks maturity and technology development is stunted. Here, cost savings are minimal and the UK offshore wind sector's LCOE remains well above £100 though still below its current level; at £134/MWh in 2017 and £115/MWH by 2020.   

The Offshore Wind Cost Reduction Taskforce (OWCRT) Report also concludes that costs can be reduced significantly, provided pro-active steps are taken. Established in autumn 2011, the purpose of the industry-led taskforce has been to investigate the feasibility of meeting the £100/MWh goal set by the UK government.

The OWCRT report sets out 28 specific recommendations for the industry to adopt. These cover the supply chain, innovation, contracting strategies, planning and consenting, financing and grid integration.

Its overarching recommendation is that an industry/government Offshore Wind Programme Board (OWPB) be established, charged with addressing pertinent issues. Its membership should extend beyond developers and representatives of the UK Department of Energy and Climate Change (DECC) to encompass organisations in the wider supply chain and from elsewhere in government. Windpower Offshore understands that the composition of the programme board will be announced in the autumn.

On the supply chain, the report argues that bottlenecks should be identified, the government should engage more actively with companies, project visibility should be enhanced, SMEs more actively backed, and investment by turbine manufacturers secured.

On innovation, the report says a standardisation body should be created, test sites delivered and recommendations developed on how further testing capacity can be quickly delivered. Windpower Offshore understands that The Crown Estate plans to announce a strategy to support the development of offshore test sites this autumn.

Regarding contracting strategies, the report says alliancing should be encouraged, a common knowledge forum established and work be undertaken to standardise processes, technology and contracts. The aforementioned forum should identify and address barriers to successful alliancing.

The report also makes seven recommendations on planning and consenting. Among them, the report calls for the new OWPB to monitor the offshore consenting process closely. Implementation by the UK government of key recommendations made in the habitats and wild birds directive implementation review is also called for.

Four recommendations relating to grid and transmission issues, including the need to speed up installation of HVDC cables. It is also suggested that the production of industry-wide project performance reports be explored.

Finally, on finance, the report recommends that innovative deal structures be developed, the Green Investment Bank be deployed in the sector as early as possible, vehicles for pooling wind assets be investigated, the insurance sector more closely engaged with, and long-term risk capital encouraged into the sector.

It is a long list of recommendations, many of which will not be easy to implement.  The scale of the challenge and the need for industry and government to be pro-active has been acknowledged by Andrew Jamieson, chair of RenewableUK and chair of the OWCRT, but he is also optimistic. "It is crucial that we all begin work immediately", said Jamieson. "I am confident that we can achieve our cost saving goal and create huge economic opportunities for the UK in both the domestic and international energy markets".

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