The Government’s plan to turn UK into world leader in offshore wind energy receives boost as electricity price halves in five years.
Offshore windfarms are set to become a cheaper source of electricity than the Hinkley Point nuclear power plant and are also on track to undercut coal-fired power stations.
The Government, which has been trying to support offshore in the hope of turning the UK into a world-leader in the sector, plans to hold an auction next month in which generators will bid for a guaranteed price for their electricity, with the lowest offer declared the winner: If the market price for electricity falls below that level after the turbines are built, the taxpayer will step in to make up the difference.
The planned nuclear plant at Hinkley Point in Somerset has been given a guaranteed price of £92.50 per megawatt-hour (mwh) for 35 years. A generous deal that was required to reassure investors they would see a return on the hefty upfront costs of the plant.
Across Europe, the price of building an offshore wind farm has fallen 46 percent in the last five years, 22 percent last year alone. Erecting turbines in the seabed now costs an average $126 for each megawatt-hour of capacity, according to Bloomberg New Energy Finance. This falls well below the current $155 a megawatt-hour price for new nuclear developments in Europe and closing in on the $88 price tag on new coal plants.
And now the industry is now predicting the UK will see offshore wind become cheaper than some of the more traditional sources of power generation.
While the Government has an official policy against onshore wind, it has sought to promote the more expensive offshore turbines, partly because of the chance to establish a new industry in the UK based on the expertise developed by the North Sea oil and gas industry. It appears this may be starting to pay off years earlier than anyone expected.
Keith Anderson, chief corporate officer of Scottish Power, one of the main players in the wind industry, told The Independent that he was confident the April auction would see an offshore wind generator bid below the ‘strike price’ given to Hinkley Point.
“I am very hopeful the auction will come in below the Hinkley contract. I feel very positive about that,” he said. “And these contracts are for only 15 years, 20 years shorter than the Hinkley contract.”
And Dong Energy, the Danish wind power giant, went even further. Henrik Poulsen, the firm’s chief executive officer, told Bloomberg that offshore wind could already compete with coal, depending on the conditions: “If you have a sufficiently large site with the right wind speeds, then I do believe you can build offshore wind at least at the same price as new build coal in many places around the world…”
The industry even is taking hold in the US which for years shunned the technology as too costly for a place that historically enjoys lower power prices than Europe.
A federal auction in December for rights to develop wind farms off the coast of Long Island resulted in a bidding war. Rhode Island has commissioned one plant, and developers are also considering work in Maryland, New Jersey and North Carolina.
Despite President Trump’s declaration that offshore wind was “monstrous” when it came into conflict with his golf course in Scotland, the U.S. government’s official goal for now is to install 86 gigawatts of turbines at sea by 2050. That’s six times the 14 gigawatts of capacity now in place worldwide, according to the Global Wind Energy Council.
At a time where the effects of climate change are increasingly being felt, offshore wind remains a beacon of hope in the U.K. Which remains one of the hottest markets owing to the need to replace ageing power plants.
