We demonstrated that a wind farm optimised for LCOE would not necessarily maximise profit when supplying electricity in a merchant market. In a merchant market we showed that on typical sites in a particular market:

  • Adding energy storage can be attractive if storage costs become low enough.
  • Overplanting is usually not attractive.
  • A larger turbine rotor is attractive, and
  • Modifying control and operational strategies can provide a useful small benefit.

As a result, the client is in a position to bid effectively for projects whether they are linked to a power purchase agreement, or to merchant electricity supply.

A European developer is considering bidding in an upcoming offshore wind auction. Some auctions may allow bidding at ‘zero subsidy’ (directly into the merchant electricity market), as an alternative to a fixed-price power-purchase agreement.

Supplying into the merchant electricity market means LCOE models are not sufficient to drive the best design choices for the wind farm. This is because LCOE values every MWh of electricity produced the same. In a merchant market, the price for each MWh varies significantly over time.

We collected and matched hourly offshore wind speed data and hourly electricity market price data for three representative years and derived a relationship between wind speed and average market price. We projected how that relationship would change as more wind is expected to be added to the system over the next 20 years.

Using an approach for levelized cost of energy at market price (LC-Emp), we evaluated the impact of four strategies to increase the value of electricity generated:

  1. Combining the wind farm with 1, 2 and 4 hours of energy storage.
  2. Overplanting the wind farm by 5% and 10%.
  3. Increasing the turbine rotor area by 10%, and
  4. Modifying control and operational strategies to optimise use of turbine life based on current electricity price.

“BVGA cost modelling expertise allowed us to formulate our market entry strategy with a greater degree of confidence. Their work provided unique, robust insight into the challenges of a no-subsidy/merchant market for offshore wind electricity generation”

Principal client, Financial Manager