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Wind Power Economics – Rhetoric and Reality

Renewable Energy Foundation|Professor Gordon Hughes|November 4, 2020
United Kingdom (UK)Offshore Wind

This important analysis by Professor Gordon Hughes of the School of Economics at University of Edinburgh highlights the true costs of wind energy, including offshore wind. He shows how offshore wind costs can be expected to rise, not fall and explains that current estimates of costs are highly optimistic and based on an expectation that costs will drop. The first document on this page contains the talk Prof. Hughes gave on his paper. The second is the actual paper that is the subject of his talk. 


[I]n my work I have adopted a completely different approach. My starting point is the actual data reported by companies in their accounts over the last two decades. This is possible because the standard commercial arrangement is that solar, wind and other projects are operated via legal entities known as Special Purpose Vehicles whose accounts are usually audited and are filed with Companies House. I have collected data for more than 350 SPVs responsible for wind projects that have filed accounts since 2005. The dataset is unique and provides the basis for a detailed analysis of the actual costs of wind power. 

Figure 1 shows the evolution of capex costs for onshore wind since the early 2000s when the modern technology using turbines with a capacity of 2+ MW became standard for utility scale projects of 10+ MW. There are large variations in unit capex costs across sites but overall the dashed line shows that there has been a significant increase in the average capex cost per MW as the amount of installed capacity has increased. Onshore wind generation has been a mature technology for at least 15 years. Global installed capacity was about 58 GW in 2005 and reached 540 GW in 2018. If actual capex costs per MW in the UK have been rising for 15 years, there is no reason to believe that the trend will abruptly change. 

Figure 2 shows the equivalent data for UK offshore wind projects. In this case the average capex costs include the cost of the offshore transmission system, since this is an essential element of any project. There are two points to note. First, offshore wind is a pan-European industry with the major operators having projects spread over North-West Europe. Hence, I have used installed offshore capacity in Europe as my capacity variable. Second, the outlier with a very high capex cost per MW is the Hywind floating turbine project. Capex costs for floating turbines are typically 50% to 100% more expensive than for turbines fixed to the sea bed. 

Offshore wind is less mature with global capacity of 3 GW in 2010 reaching 24 GW in 2018. The trend line shows that, leaving out the Hywind project, actual offshore capex costs for UK projects have increased by 15% for each doubling in European capacity. Figure 3 shows the same results but over time with markers that indicate the typical water depth for each wind farm. Statistical analysis confirms that one factor contributing to the increase in costs over time has been the need to use deeper water sites as offshore capacity has grown. This is a more powerful influence than distance from the coast. Underlying costs are likely to continue to increase because the number of suitable offshore sites with shallow or medium depths is limited. As for offshore oil & gas the costs of building and operating offshore wind farms located at deep water sites in hostile marine environments will inevitably be higher
than for the initial set of shallow water projects. 

But there is worse to come.

Attachments

Gordon Hughes Ref Wind Economics Webinar

January 27, 2022

Performance Wind Power Uk Gordon Hughes Compressed

January 7, 2024


Source:https://www.ref.org.uk/attach…

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