The point of no return by Alun Roberts

In 2012, we asked the question whether £100/MWh was achievable for offshore wind projects reaching FID in 2020. In doing our analysis for The Crown Estate Offshore Wind Cost Reduction Pathways Study, we quickly faced a dilemma. When we rationally combined the innovations described to us by industry, we found that even when we were cautious about their impact we anticipated that not only could LCOE reach £100/MWh but also that it could do so comfortably. Would industry really manage to deliver and would Government trust industry to deliver such spectacular progress in such a short time?

With the latest results from the Cost Reduction Monitoring Framework (CRMF) published this week, we can now see that we should not have worried: the offshore wind industry has reduced LCOE rapidly. The CRMF suggests a weighted cost of capital (WACC) of 6% today and this suggests that £100/MWh is achievable today. Feedback from industry and internal BVGA analysis suggests that some projects could hit £90/MWh in 2020. Despite this great news, the industry is aware that it needs further reductions and needs to match other low-carbon technologies that can be deployed on a large scale. Quite rightly, following significant price support over several years, the Government and consumers want to see a more level playing field for energy technologies, albeit with priority given to low carbon, indigenous  sources.

What does the CRMF tell us about where the reductions have and can come from? Much of the progress so far has been made by turbine manufacturers and developers, with larger and more reliable turbines and lower project risk. These companies have achieved this in the knowledge that their future was tied up with the success of offshore wind; they had to make it work . Key areas are foundation design, manufacture and installation. In the years after 2020, we expect their commitment to yield further reduction but we will need all parts of the supply chain to make progress.

 

Alun Roberts

Associate Director

BVGA

2017-05-12T15:18:27+00:00 16/03/2016|Views|