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Offshore wind cost reduction pathways study
13 June 2012
The Crown Estate publishes study on how to reduce the cost of offshore wind energy and make it competitive with other low carbon forms of energy.
Today we have issued an industry collaborative study demonstrating that significant reductions in the cost of offshore wind energy can be achieved in order to hit Government cost targets and deliver 18 GW of offshore wind capacity by 2020.
This is responding to the challenge set by Government in the 2011 Renewables Roadmap - to bring the cost of offshore wind down to £100 per megawatt hour in order to deliver 18 GW of capacity by 2020. Our study demonstrates that these cost reductions are possible: delivery will require developers and the supply chain to closely work together with Government providing long-term certainty for offshore wind investors. The prize will be significant: a world leading industry in the UK, creating jobs and inward investment, and achieving renewable energy targets as well as a diverse, secure energy supply. It would make offshore wind energy cost competitive with energy from nuclear and carbon abated fossil fuels.
Over 100 companies and organisations took part in a nine-month long study to develop evidence on the potential for cost reduction in offshore wind. Industry identified four pathways to achieve cost reduction - through combinations of improvements in technology, growth of the supply chain, and reductions in the cost of finance. Overall, the study shows that the cost of offshore wind energy could reduce to below £100 per megawatt hour or less through three of the identified pathways provided at least 17-18 GW of capacity is built out by 2020.
The study highlights seven key opportunities for cost reduction:
- Introduction of larger turbines with higher reliability and energy capture and lower operating costs.
- Greater competition in key supply markets - turbines, foundations and installation - from within the UK, Europe and the Far East.
- Early involvement of suppliers and improved windfarm design.
- Economies of scale and standardisation.
- Optimisation of installation methods.
- Mass produced deeper water foundations.
- Attracting lower costs of capital through de-risking construction, and operations and maintenance.
The report highlights that action is required to achieve cost reduction: business as usual will not deliver the Government's target on cost reduction. To build confidence in the sector, particularly within the supply chain, it is critical to have a steadily increasing market together with a predictable set of project timings. A key factor in achieving this is the smooth and timely implementation of current government policy such as the new Electricity Market Reform planning arrangements, and the offshore transmission regulatory regime. Developers, finance providers and supply chain companies must work collaboratively to create a culture of end to end cost and risk reduction throughout the industry. Another key requirement is an adequate pipeline of manufacturing sites and demonstration sites - which requires urgent attention from both industry and government.
Rob Hastings, Energy & Infrastructure Portfolio Director said: "We believe that there is no single solution to reduce the cost of offshore wind and all participants in the sector need to play their part. We've facilitated the production of this authoritative Pathways Study which identifies a highly credible way forward for industry and government to create a commercially sustainable offshore wind industry providing both environmental and social benefit. We welcome the industry-led Cost Reduction Task Force report, set up by DECC, who have applied the evidence of the study. The Crown Estate looks forward to working with the programme board, industry and Government on delivering the action plan as set out in the Task Force report."
Andrew Jamieson, chair of the Cost Reduction Task Force said: "I welcome this in-depth Pathways Study as it confirms offshore wind can reduce its costs significantly down to £100/MWh by 2020. This study has been used by the Cost Reduction Taskforce, also reporting today, as critical evidence in exploring what needs to be done by industry and government to achieve cost reduction. The detailed work facilitated by The Crown Estate has been hugely valuable to creating a comprehensive view of the challenges ahead, and I congratulate them on taking such an important initiative as we all look to the continued success of this world leading industry."
Maria McCaffery MBE, RenewableUK Chief Executive, said: "These ground-breaking reports from The Crown Estate and the Offshore Wind Cost Reduction Task Force work represent a crucial step forward. Both studies show that driving down costs is much more than a mere aspiration - the industry is working closely with key stakeholders such as The Crown Estate to chart the course ahead, laying out action plans which are credible and achievable. This will enable the sector to grow from strength to strength - not only generating low-carbon electricity and giving us a secure supply of energy, but also creating tens of thousands of jobs and revitalising manufacturing throughout the UK."
This will create a diverse, secure energy supply, supporting the development of a world leading industry, creating jobs and inward investment and making a vital contribution to renewable energy targets.
Please download the study here:
Offshore wind cost reduction pathways study (PDF, 3.4 MB)
For further information please visit our Offshore wind cost reduction study section.