Offshore wind competitiveness in mature markets without subsidy

Abstract

Offshore wind energy development has been driven by government support schemes; however, recent cost reductions raise the prospect of offshore wind power becoming cheaper than conventional power generation. Many countries use auctions to provide financial support; however, differences in auction design make their results difficult to compare. Here, we harmonize the auction results from five countries based on their design features, showing that offshore wind power generation can be considered commercially competitive in mature markets. Between 2015 and 2019, the price paid for power from offshore wind farms across northern Europe fell by 11.9 ± 1.6% per year. The bids received in 2019 translate to an average price of €51 ± 3 MWh−1, and substantially different auction designs have received comparably low bids. The level of subsidy implied by the auction results depends on future power prices; however, projects in Germany and the Netherlands are already subsidy-free, and it appears likely that in 2019 the United Kingdom will have auctioned the world’s first negative-subsidy offshore wind farm.

Access options

Rent or Buy article

Get time limited or full article access on ReadCube.

from$8.99

All prices are NET prices.

Fig. 1: Raw bids received by auctions for new offshore wind capacity in five European countries over the past eight years.
Fig. 2: Harmonized expected revenues for each offshore wind farm auctioned in Europe.
Fig. 3: Effective subsidy for each offshore wind farm auctioned in Europe.
Fig. 4: Effective subsidy given to offshore wind farms as a function of future real-term growth in wholesale power prices.

Data availability

The datasets used in this study are available in the ZENODO repository as Supplementary Data, DOI: 10.5281/zenodo.3840134 (https://doi.org/10.5281/zenodo.3840134). This includes the raw data for all results presented here and input data for Figs. 14. Source data are provided with this paper.

Code availability

The cashflow model produced for this study is available in the ZENODO repository as Supplementary Software 1, DOI: 10.5281/zenodo.3733604 (https://doi.org/10.5281/zenodo.3733604). The model is set up to recreate the results of this paper. Refer to the README in the instructions.

References

  1. 1.

    Renewable Energy Capacity Statistics 2020 (IRENA, 2020).

  2. 2.

    IEA. World Energy Outlook 2019 (OECD, 2019); https://doi.org/10.1787/caf32f3b-en

  3. 3.

    A Clean Planet for all: A European Long-term Strategic Vision for a Prosperous, Modern, Competitive Climate Neutral Economy – In-Depth Analysis in Support of the Commission Communication COM/2018/773 (European Commission, 2018).

  4. 4.

    Bosch, J., Staffell, I. & Hawkes, A. D. Temporally-explicit and spatially-resolved global onshore wind energy potentials. Energy 131, 207–217 (2017).

    Article  Google Scholar 

  5. 5.

    Arent, D. et al. Improved Offshore Wind Resource Assessment in Global Climate Stabilization Scenarios (National Renewable Energy Laboratory, 2012); https://doi.org/10.2172/1055364

  6. 6.

    Toke, D. The UK offshore wind power programme: A sea-change in UK energy policy? Energy Policy 39, 526–534 (2011).

    Article  Google Scholar 

  7. 7.

    Green, R. & Vasilakos, N. The economics of offshore wind. Energy Policy 39, 496–502 (2011).

    Article  Google Scholar 

  8. 8.

    Unlocking Europe’s Offshore Wind Potential. Moving Towards a Subsidy Free Industry (PwC, 2018).

  9. 9.

    The New Economics of Offshore Wind (Aurora Energy Research, 2018).

  10. 10.

    Offshore Wind Developers See Ripe Conditions for Zero-subsidy Bids (NewEnergyUpdate, 2018); http://newenergyupdate.com/wind-energy-update/offshore-wind-developers-see-ripe-conditions-zero-subsidy-bids.

  11. 11.

    Creutzig, F. et al. The underestimated potential of solar energy to mitigate climate change. Nat. Energy 2, 17140 (2017).

    Article  Google Scholar 

  12. 12.

    Schmidt, O., Hawkes, A., Gambhir, A. & Staffell, I. The future cost of electrical energy storage based on experience rates. Nat. Energy 2, 17110 (2017).

    Article  Google Scholar 

  13. 13.

    Heptonstall, P., Gross, R., Greenacre, P. & Cockerill, T. The cost of offshore wind: understanding the past and projecting the future. Energy Policy 41, 815–821 (2012).

    Article  Google Scholar 

  14. 14.

    Vieira, M., Snyder, B., Henriques, E. & Reis, L. European offshore wind capital cost trends up to 2020. Energy Policy 129, 1364–1371 (2019).

    Article  Google Scholar 

  15. 15.

    Dismukes, D. E. & Upton, G. B. Economies of scale, learning effects and offshore wind development costs. Renew. Energy 83, 61–66 (2015).

    Article  Google Scholar 

  16. 16.

    Bolinger, M. & Wiser, R. Understanding wind turbine price trends in the U.S. over the past decade. Energy Policy 42, 628–641 (2012).

    Article  Google Scholar 

  17. 17.

    Wiser, R. et al. Expert elicitation survey on future wind energy costs. Nat. Energy 1, 16135 (2016).

    Article  Google Scholar 

  18. 18.

    Hoffman, C. S. Financial Viability of Offshore Wind on the Texas Gulf Coast (The Univ. of Texas at Austin, 2019).

  19. 19.

    Klinge Jacobsen, H., Hevia-Koch, P. & Wolter, C. Nearshore and offshore wind development: costs and competitive advantage exemplified by nearshore wind in Denmark. Energy Sustain. Dev. 50, 91–100 (2019).

    Article  Google Scholar 

  20. 20.

    Beiter, P., Musial, W., Kilcher, L., Maness, M. & Smith, A. An Assessment of the Economic Potential of Offshore Wind in the United States from 2015 to 2030 (National Renewable Energy Laboratory, 2017); https://doi.org/10.2172/1349721

  21. 21.

    Noonan, M. et al. IEA Wind Wind Technology Collaboration Programme Task 26: Offshore Wind Energy International Comparative Analysis (National Renewable Energy Laboratory, 2018); https://doi.org/10.2172/1483473

  22. 22.

    Lazard’s Levelized Cost of Storage Analysis—v.12.0. (Lazard, 2018).

  23. 23.

    Transmission Costs for Offshore Wind Final Report April 2016 (OWPB, 2016).

  24. 24.

    Focus on the Cost of Offshore Wind Energy (Algemene Rekenkamer, 2018).

  25. 25.

    Aldersey-Williams, J., Broadbent, I. D. & Strachan, P. A. Better estimates of LCOE from audited accounts – a new methodology with examples from United Kingdom offshore wind and CCGT. Energy Policy 128, 25–35 (2019).

    Article  Google Scholar 

  26. 26.

    Kitzing, L. Risk Implications of Energy Policy Instruments (Department of Management Engineering, Technical Univ. of Denmark, 2014).

  27. 27.

    Design Options for Wind Energy Tenders (EWEA, 2015).

  28. 28.

    Fitch-Roy, O. An offshore wind union? Diversity and convergence in European offshore wind governance. Clim. Policy 16, 586–605 (2016).

    Article  Google Scholar 

  29. 29.

    Grothe, O. & Müsgens, F. The influence of spatial effects on wind power revenues under direct marketing rules. Energy Policy 58, 237–247 (2013).

    Article  Google Scholar 

  30. 30.

    Partridge, I. Cost comparisons for wind and thermal power generation. Energy Policy 112, 272–279 (2018).

    Article  Google Scholar 

  31. 31.

    Aldersey-Williams, J. & Rubert, T. Levelised cost of energy – a theoretical justification and critical assessment. Energy Policy 124, 169–179 (2019).

    Article  Google Scholar 

  32. 32.

    Heptonstall, P., Steiner, F. & Gross, R. The Costs and Impacts of Intermittency – 2016 Update A UKERC TPA Report (UKERC, 2017).

  33. 33.

    Cleijne, H. Cost of Offshore Transmission (DNV GL, 2019); https://www.tennet.eu/fileadmin/user_upload/Company/News/Dutch/2019/20190624_DNV_GL_Comparison_Offshore_Transmission_update_French_projects.pdf

  34. 34.

    Hundleby, G. Dong’s Borssele Costs – A Landmark Dutch Auction by Giles Hundleby (BVG Associates, 2016); https://bvgassociates.com/dongs-borssele-costs/

  35. 35.

    Müsgens, F. & Riepin, I. Is offshore already competitive? Analyzing German offshore wind auctions. In 2018 15th International Conference on the European Energy Market (EEM) (Eds. Mielczarski, W., Wierzbowski, M. & Olek, B.) 1–6 (IEEE, 2018); https://doi.org/10.1109/EEM.2018.8469851

  36. 36.

    Egli, F., Steffen, B. & Schmidt, T. S. A dynamic analysis of financing conditions for renewable energy technologies. Nat. Energy 3, 1084–1092 (2018).

    Article  Google Scholar 

  37. 37.

    Energy and Emissions Projections (BEIS, 2019); https://www.gov.uk/government/collections/energy-and-emissions-projections

  38. 38.

    Pfenninger, S. & Staffell, I. Long-term patterns of European PV output using 30 years of validated hourly reanalysis and satellite data. Energy 114, 1251–1265 (2016).

    Article  Google Scholar 

  39. 39.

    Staffell, I. & Pfenninger, S. Using bias-corrected reanalysis to simulate current and future wind power output. Energy 114, 1224–1239 (2016).

    Article  Google Scholar 

  40. 40.

    Aldersey-Williams, J., Broadbent, I. D. & Strachan, P. A. Analysis of United Kingdom offshore wind farm performance using public data: improving the evidence base for policymaking. Util. Policy 62, 100985 (2020).

    Article  Google Scholar 

  41. 41.

    Smith, A. Offshore Wind Capacity Factors https://energynumbers.info/ (2020).

  42. 42.

    Saint-Drenan, Y.-M. et al. A parametric model for wind turbine power curves incorporating environmental conditions. Renew. Energy https://doi.org/10.1016/j.renene.2020.04.123 (2020).

  43. 43.

    Staffell, I. & Green, R. How does wind farm performance decline with age? Renew. Energy 66, 775–786 (2014).

    Article  Google Scholar 

  44. 44.

    Olauson, J., Mikael, B., Edström, P. & CarlstedrN.-E. Wind turbine performance decline in Sweden. Wind Energy 20, 2049–2053 (2017).

  45. 45.

    Porté-Agel, F., Bastankhah, M. & Shamsoddin, S. Wind-turbine and wind-farm flows: a review. Bound.-Layer. Meteorol. 174, 1–59 (2020).

    Article  Google Scholar 

  46. 46.

    Zeng, Z. et al. A reversal in global terrestrial stilling and its implications for wind energy production. Nat. Clim. Change 9, 979–985 (2019).

    Article  Google Scholar 

  47. 47.

    Hdidouan, D. & Staffell, I. The impact of climate change on the levelised cost of wind energy. Renew. Energy 101, 575–592 (2017).

    Article  Google Scholar 

  48. 48.

    Ziegler, L. Assessment of Monopiles for Lifetime Extension of Offshore Wind Turbines. Thesis, Norwegian Univ. of Science and Technology (2018).

  49. 49.

    Geuss, M. Offshore, Act Two: New owner repowers 20-year-old wind farm off Swedish coast. Ars Technica (2018); https://arstechnica.com/information-technology/2018/12/offshore-act-two-new-owner-repowers-20-year-old-wind-farm-off-swedish-coast/

  50. 50.

    Smith, P., Costa-Ros, M., Lange, B., Stiesdal, H. & Pollicino, F. Question of the week: are offshore projects built to last? Windpower Monthly (2014); https://www.windpowermonthly.com/article/1320109/question-week-offshore-projects-built-last

  51. 51.

    Foxwell, D. Research claims 30-year lifespan is within reach for offshore wind projects. Riviera Maritime Media (2017); https://www.rivieramm.com/news-content-hub/research-claims-30-year-lifespan-is-within-reach-for-offshore-wind-projects-28324

  52. 52.

    Kolios, A. & Martínez Luengo, M. The end of the line for today’s wind turbines. Renewable Energy Focus (2016); http://www.renewableenergyfocus.com/view/43817/the-end-of-the-line-for-today-s-wind-turbines/

  53. 53.

    Wiese, F. et al. Open Power System Data—Frictionless data for electricity system modelling. Appl. Energy 236, 401–409 (2019).

    Article  Google Scholar 

  54. 54.

    ENTSO-E Transparency Platform (ENTSO-E, 2019); https://transparency.entsoe.eu/

  55. 55.

    Capros, P. et al. EU Reference Scenario 2016 (European Commission, 2016); https://doi.org/10.2833/9127

  56. 56.

    Twomey, P. & Neuhoff, K. Wind power and market power in competitive markets. Energy Policy 38, 3198–3210 (2010).

    Article  Google Scholar 

  57. 57.

    Engelhorn, T. & Müsgens, F. How to estimate wind-turbine infeed with incomplete stock data: a general framework with an application to turbine-specific market values in Germany. Energy Econ. 72, 542–557 (2018).

    Article  Google Scholar 

  58. 58.

    Collins, S., Deane, P., Ó Gallachóir, B., Pfenninger, S. & Staffell, I. Impacts of inter-annual wind and solar variations on the European power system. Joule 2, 2076–2090 (2018).

    Article  Google Scholar 

  59. 59.

    Future Energy Scenarios 2019 162 (National Grid, 2019); https://www.nationalgrideso.com/sites/eso/files/documents/fes-2019.pdf

  60. 60.

    Official Exchange Rate (LCU per US$, Period Average). World Bank Database (World Bank, 2019); https://data.worldbank.org/indicator/PA.NUS.FCRF?locations=GB-DK-XC

  61. 61.

    Inflation, GDP Deflator (Annual %). World Bank Database (World Bank, 2019); https://data.worldbank.org/indicator/NY.GDP.DEFL.KD.ZG?end=2017&locations=DE-DK-BE-GB-NL&name_desc=false&page=2&start=1971&view=chart

  62. 62.

    Alcidi, C., Busse, M. & Gros, D. Is There a Need for Additional Monetary Stimulus? Insights from the Original Taylor Rule CEPS Policy Brief (CEPS, 2016); https://www.ceps.eu/wp-content/uploads/2016/04/PB342TaylorRule.pdf

  63. 63.

    Wind Energy in Europe in 2018 – Trends and Statistics (WindEurope, 2018); https://windeurope.org/wp-content/uploads/files/about-wind/statistics/WindEurope-Annual-Statistics-2018.pdf

Download references

Acknowledgements

M.J. and I.S. were funded by the EPSRC under EP/R045518/1. F.M. acknowledges financial support from BMBF under project reference FKZ 01LA1821A. I.R. thanks BTU Cottbus-Senftenberg for a postgraduate scholarship (GradV).

Author information

Affiliations

Authors

Contributions

MJ., F.M., I.S. and I.R. conceived the study and developed the analysis. All authors contributed to data gathering and data analysis. All authors wrote and edited the paper.

Corresponding author

Correspondence to Malte Jansen.

Ethics declarations

Competing interests

The authors declare no competing interests.

Additional information

Publisher’s note Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Supplementary information

Supplementary Information

Supplementary Notes 1 and 2, Tables 1–5, Figs. 1–5 and refs. 1–68.

Supplementary Data 1

The datasets used in this study are available in the ZENODO repository as Supplementary Data, DOI: 10.5281/zenodo.3840134 (https://doi.org/10.5281/zenodo.3840134).

Supplementary Software 1

The cashflow model produced for this study is available in the ZENODO repository as Supplementary Software 1, DOI: 10.5281/zenodo.3733604 (https://doi.org/10.5281/zenodo.3733604).

Source data

Source Data Fig. 1

Data points and in-situ plot for all data points shown in Fig. 1. The source data can be accessed here: https://doi.org/10.5281/zenodo.3840134.

Source Data Fig. 2

Raw data points for Fig. 2. The source data can be accessed here: https://doi.org/10.5281/zenodo.3840134.

Source Data Fig. 3

Raw data points for Fig. 3. The source data can be accessed here: https://doi.org/10.5281/zenodo.3840134.

Source Data Fig. 4

Data points and plots for Fig. 4. Contains the entire set of results presented in this paper. The source data can be accessed here: https://doi.org/10.5281/zenodo.3840134.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Jansen, M., Staffell, I., Kitzing, L. et al. Offshore wind competitiveness in mature markets without subsidy. Nat Energy 5, 614–622 (2020). https://doi.org/10.1038/s41560-020-0661-2

Download citation

Further reading

Search

Nature Briefing

Sign up for the Nature Briefing newsletter — what matters in science, free to your inbox daily.

Get the most important science stories of the day, free in your inbox. Sign up for Nature Briefing