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The False Hopes of Offshore Wind

Sometimes you have to go with your gut reactions. When it came to offshore wind I did not and as a result I got it wrong. At the start of 2011 I put out a research report predicting that Europe would have 14GW of offshore wind-capacity by 2015 with another 25GW following over the next five years to bring us to 40GW of installed capacity in 2020. How wishful I was in my thinking!

The number for 2015 is going to be much lower perhaps as low as 9GW of installed capacity across  Europe and that despite very generous support mechanisms in particular in the UK and Germany which are at levels 2-3 times that of other technologies such as solar and onshore wind as well as the wholesale power price. And going forward, the 2020 goal of 40GW is a distant dream. Bloomberg New Finance believe we will hit 30GW by 2020. I personally think that is still too aggressive. So what has gone wrong?

Costs have not come down as initially expected noting that in 2009 the European Wind Energy Association (EWEA) published a report entitled The Economics of Wind Energy in which they predicted costs of €1.5m per MW for capital costs this year. Currently they are at circa €4m per MW…

What annoys me is that I should have known it. I saw it. I just did not go with my gut reaction.

When I visited the Repower test 5MW turbine many years back I was amazed by its size and magnificence; an engineering masterpiece with a rotor diameter of 126m weighing in total some 655 tonnes plus another 730 tonnes for the jacket placement or platform on which that turbine sits! But I also realised how difficult it was going to be to manufacture, to transport, to install, to operate, to maintain and above all to reduce costs especially given the huge amounts of metal that is in each of them. I suppose I had in my head that most turbines are batch processed and that there could be economies of scale. Alas any economies of scale benefit for offshore wind turbines will also be captured by onshore wind turbines which means that they will also get cheaper.

The dream of offshore is that the capacity factors are higher, and this is certainly the case. The wind clearly blows more often on the sea than on land but there is a huge cost for that. Expensive turbines have to be placed on very costly structures that rest on the sea bed and again they are made of steel. Then there is the high cost installation costs, the underwater power cables that have to be laid and the servicing infrastructure that has to be built up and maintained. In a nutshell, there is no Moore’s Law effect in offshore wind.

And so when the Danish utility Dong Energy tell us that “offshore will be as competitive as gas-fired power — costing on average 85 euros ($97) per kilowatt-hour to generate — by 2025, I say too little too late. Onshore wind and solar are both below these levels  now across much of Europe and with the wholesale power price in Denmark at currently at €35 offshore wind will be still way out of the money by 2025. I can only wish Dong good luck with their strategy!

Does this all mean that we should abandon offshore wind? No of course not. We need offshore wind as part of our energy mix just as we need North Sea oil even though its costs of exploitation are much higher than say Saudi oil. How big a part of the mix offshore wind will be, depends on how non-wind turbine costs such as installation and servicing costs go down and if that is going to happen then we need the guys who have been operating in the North Sea for the last 50 years, Statoil, BP, Shell and the whole host of companies that service them to step up to the challenge and the opportunity!