The offshore wind industry welcomes bold and clear statement of government intentions. Such statements give confidence in future pipeline, make investments easier and further reduce costs. The UK Government’s recent Energy Security Policy Paper announced a 10GW increase in target to 50GW of offshore wind by 2030. What will such a target mean for the cost of offshore wind?
Offshore wind has grown thanks to the relentless pursuit of cost reduction. Offshore wind is now one of the cheapest forms of new electricity generation. So what impact is the Energy Policy paper likely to have on the costs of UK offshore wind?
On the positive side, the increased target should mean a reduction in perceived risk and thus finance costs. The Paper’s commitment to CFDs eliminates revenue risk as well as providing some protection for bill payers. The expanded volume increase economies of scale and learning. The stated intent to reduce consenting times should enable project revenue to come on stream earlier. This will increase the lifetime value of projects.
Some of the Energy Policy announcements may increase costs. To reduce the consenting time, the aim is to ‘offset environmental impacts through ‘strategic compensation environmental measures.’ This could be more expensive than current site by site assessments, depending on what’s involved. As ‘… by 2030 over half our renewable generation capacity will be wind’, curtailment could increase. Much of that capacity will be produced at the same time – not always when it is needed. The even more ambitious targets for floating offshore wind pose cost challenges too. Floating costs will fall as the technology matures but it is unlikely to be cost competitive with fixed foundations until after 2030.
We’re helping our clients across the offshore wind supply chain assess what the Energy Security Policy Paper means for them. Headlines are easy to generate, it is the detailed deliverables behind those headlines that determine the actual implications.