The Government’s target to slash the cost of generating electricity from offshore wind by more than 30 per cent by 2020 can be achieved, but there are a great many challenges to overcome, according to an influential new report by a Government appointed task force.
The study, by the
Offshore Wind Cost Reduction Task Force, concludes the UK
offshore wind industry can reduce its
generation costs to £100 per megawatt hours (MWh) from the current £140 MWh over the next seven years – a target set by the Coalition Government. However, it warns that action must be taken now because the timescale and the significant challenge to the sector’s costs require the industry to cut costs faster "than would otherwise occur naturally".
The Offshore Wind Cost Reduction Task Force report is the first piece of research by the body since it was formed last year by the Department of Energy and Climate Change (DECC) following the publication of its UK Renewables Roadmap. In the roadmap, the Government says it wants to see 31 gigawatts (GW) of wind capacity up and running – 18 GW of this from offshore – by 2020. Currently, UK wind energy capacity is at 6 GW, a fifth of the target.
Launching the Task Force report at the first Global Offshore Wind Conference in London this morning, Charles Hendry, Energy Minister, gave his backing to offshore wind and said he was encouraged by the reports findings.
"This report shows that substantial cost savings can be achieved if action is taken and I welcome this valuable work. I look forward to working closely with industry to take this forward further and deliver these ambitious targets," he said.
Critical research
The findings in today’s report concur with a
recent report by the Crown Estate, the landowner that issues offshore wind farm licences. Both reports are seen as critical because the offshore wind industry offers huge potential to drive jobs and growth in the UK economy as well providing a significant share of the UK’s decarbonised energy mix.
However, critics say the technology is too costly and inefficient and there are deepening divisions within the Coalition Government about subsidising
renewables at a time of austerity. Both the Prime Minister David Cameron and the Chancellor George Osborne have said the cost of renewables has to come down. And
last week, it was reported that Osborne is demanding that subsidies for onshore wind be slashed.
Today, RenewableUK, the UK wind industry trade body which is holding this week’s offshore wind conference, said the cut in offshore wind costs would wipe over £3 billion annually off the cost of generating 18 GW of electricity from offshore wind farms by 2020. There is currently 19.5 GW of wind capacity under construction, consented, or in planning.
But today’s report raises a number of barriers to meeting this goal. It points out that costs in the offshore wind industry have actually been rising, not coming down. There are gaps in delivery and the supply chain is reluctant to increase capacity. Meanwhile, regulatory reforms and changes to subsidies are putting off investors and developers are only spending the bare minimum. All of this makes the task of bringing down the costs of offshore wind even harder.
Recommendations
To overcome them, today’s report makes no less than 28 recommendations on how the industry can reduce the cost of offshore wind. These cover everything from planning and consenting to financing and supply chain.
Key among these is a call for the industry to re-evaluate its contracting structures and embrace a "more inclusive and collaborative approach" between developers and supply chain, something known as 'alliancing' and pioneered by the North Sea oil and gas industry to reduce risk and bring down costs.
The Task Force also recommends the establishment of an Offshore Wind Programme Board to address issues affecting offshore wind development proactively and avoid unnecessary delay. The board should be made up of developers and representatives of Government, but should also include the supply chain and nature conservation advisors.
Andrew Jamieson, chair of the Task Force, said the recommendations were "challenging" but achievable if work began immediately. "I am confident that we can achieve our cost saving goal and create huge economic opportunities for the UK in both the domestic and international energy markets."
Investment and jobs
Some of the world’s biggest wind companies – including Vestas, Siemens, GE, Gamesa and Mitsubishi – are planning to set up factories, research facilities and other developments in the UK.
And according to RenewableUK, the wind and marine sector could employ over 77,500 jobs by the end of the decade – more than seven times what it employs today.
Maria McCaffery, chief executive, RenewableUK, said: "By committing to slash the costs of developing offshore wind the UK […] the sector will become more cost competitive and will play an increasing important role in meeting the UK's energy demands, as well as underpinning crucial economic growth."
Benj Sykes, director of UK Wind Operations, DONG Energy, which is behind the Gunfleet Sands offshore wind farm and will shortly be leasing Belfast Harbour, the UK's first bespoke installation facility for offshore wind, welcomed today’s reports saying: "We believe it's vital that industry and Government have the chance to sit down together and devise these sorts of solutions to get us to the £100 per MWh target. The timeline is tough so the industry must now work on implementing the ideas in this report".
Fergus Ewing, the Scottish Government Energy Minister, added: "Leases have already been granted for 10 GW of offshore wind developments in Scotland’s waters, with companies like EDPR and Repsol committed to developing our offshore potential. In addition, international companies such as Samsung, Mitsubishi and Gamesa, based here in Scotland, are developing the next generation of turbines. Important innovative work that will ensure offshore wind is a competitive and reliable source of renewable energy for decades to come."
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