A new report confirms the critical importance of offshore wind in replacing aging power plants, saving up to £89bn from the UK’s energy bill, and has the potential to take a large share of a global £1 trillion market by 2050.
As well as reducing reliance on imported gas and meeting GHG emissions and renewable energy targets, offshore wind could offer business opportunities of up to £35bn to UK companies.
The UK has a large natural resource of wind power around its coast, and offshore wind power is a commercially available, proven technology to capture this resource, according to a Technology Innovation Needs Assessments (TINAs) report.
The Report produced by the Low Carbon Innovation Coordination Group (LCICG) predicts that by 2050 analysis suggests offshore wind could deliver c.20-50% of total UK electricity generation.
This depends primarily on the constraints (economic, technical or public acceptance) to alternatives (onshore wind, nuclear, and CCS), and on the overall energy demand.
However, it points out that offshore wind power is currently a relatively high cost source of energy. How much and how quickly it is deployed will depend on how successful innovation is in reducing costs.
“Innovation has the potential to drive down the costs of offshore wind by 25% by 2020 and 60% by 2050. Together with savings in the supply chain and financing, this could reduce the cost of energy to about £100/MWh by 2020 and £60/MWh by 2050. Such improvements would enable large deployment potential, and greatly reduce energy system costs.”
Energy and Climate Change Minister Greg Barker said: “Innovation is key to the growth of the low carbon economy here in the UK. This new analysis will help us better understand the value of these technologies to our growing green economy as well as the barriers to commercialisation, helping us put our available investment in the right place to spur on further innovation.”
The Report stresses that innovation is critical to enabling the deployment and cutting the cost of offshore wind, with an estimated saving to the energy system of £18-89bn to 2050. Innovation can also help create UK based business opportunities that could contribute an estimated £7-35bn to GDP to 2050. Significant private sector investment in innovation, catalysed by public sector support where there are market failures, is needed to unlock these opportunities.
It adds: “Over the next decade, offshore wind has the potential to replace much of the UK‟s aging power plant whilst helping to meet our GHG emissions and renewable energy targets and reducing reliance on gas and fuel imports. Offshore wind can be rapidly deployed at scale with fewer planning constraints than onshore wind, has a quicker development time than nuclear power and, unlike CCS, has already been proven at scale.”
Offshore wind power is currently a relatively high cost source of energy. How much and how quickly it is deployed will depend on how successful innovation is in reducing costs.
Innovation has the potential to drive down the costs of offshore wind by 25% by 2020 and 60% by 2050. Together with savings in the supply chain and financing, this could reduce the cost of energy to about £100/MWh by 2020 and £60/MWh by 2050. Such improvements would enable large deployment potential, and greatly reduce energy system costs. Successfully implementing innovation would save the UK in the range of £18–89bn to 2050.
As with marine renewable energy, the UK could become one of the leaders in a global offshore wind market, with a 5-10% share of a market with potential cumulative gross value-added of between £200 - 1,000bn up to 2050.
If the UK successfully competes in a global market to achieve the market share above, then the offshore wind industry could contribute £7 – 35bn to UK GDP up to 2050.
The LCICG members say to unlock this opportunity there is a strong case for targeted public sector intervention to catalyse private sector investment because there are significant market failures to innovation and the UK cannot exclusively rely on other countries to develop the technologies within the required timescales.
Market failures include lack of testing facilties, demand uncertainty, constraint on capital and infrastructure issues. But the UK has an earlier and greater need for offshore wind than other countries, and UK farms are further out to sea and in deeper water than other earlier adopters.
Innovation areas with the biggest benefit to the UK include blade testing facilities to increase reliability of turbines, cabling, low cost and deep water foundations and O&M vessels.
The Report estimates that offshore wind power currently costs about £3.1m/MW and over £140/MWh7 for a typical Round 2 site. However, the costs are very site-specific, driven by water depth, distance to shore, and wind speed. Round 3 sites are typically deeper and further from shore, which means costs are likely to be higher all other things being equal.
Compared to typical near-shore shallow-water site, moving to water depth of 40-60m can increase the cost of energy by 15-20%, and moving beyond 100km offshore can increase cost of energy by another 15-20%. However, this can be compensated for by higher wind speeds which improve the capacity factor – cost reductions of up to 20% can be achieved if the site is in a high-wind speed regime.
“Offshore wind costs (and those of other generation technologies) depend critically on factors such as the level of competition in the supply chain, efficient financing mechanisms, world commodity prices, and the value of the Pound. For example, the cost of offshore wind is believed to be about 50% higher than it might have been had the Pound held its value of 3 years ago, and commodity prices not risen.
“This analysis holds those other factors constant, focussing instead on the impact of innovation. As such, the anchor costs of £140/MWh does not necessarily represent the actual costs, but rather a reasonable base cost from which to assess the potential for innovation improvements.
“Therefore innovation must tackle not only the cost challenges of shallow-water near-shore sites, but also deliver new technologies for Round 3 and beyond which will reduce the sensitivity of cost to water depth and distance-to-shore.”
The UK is well positioned to become one of the leaders in the global offshore wind market, achieving a market share of 5-10% in 2050. It can leverage its capabilities from the offshore oil and gas, maritime, aerospace and other sectors which allow the UK to create a strong position in turbines, foundations, installation and O&M.
“If the UK successfully competes in a global market to achieve the market share above, then offshore wind could contribute c.£2.6bn (£0.8 – 7.4bn) in GVA per annum by 2050, a cumulative contribution of c.£37bn (£14 – 69bn) to 2050.”
Offshore wind comprises a much larger share of UK renewable resource than in most other countries
The UK lags behind its European peers on renewable deployment with only 4% of electricity demand compared to a 15% EU average. Germany and China both have ambitions to deploy double-digit GWs of offshore wind capacity, but have fewer pressing requirements driving for significant deployment by 2020.