This week the offshore wind cost reduction progress assessment was published. The focus of the study is explaining recent development in offshore wind cost reduction by examining cost reduction trends in the offshore wind market. These trends were modelled by introducing cost reduction levers into the TKI Wind op Zee cost model.
The cost reduction levers with the largest impact were:
- Design improvements in wind turbines and innovations and improvements in foundation design;
- Reduced financing costs (reduced debt interest and return on equity rates);
- CAPEX reduction through portfolio effects, multi-contracting, purchasing power, increased risk appetite & increased competitiveness, and explicitly excludes technological improvements;
- Policy improvements such as the preparatory work for the projects by the government.
The competitive tender process that was organised by the Dutch and Danish governments materialised these cost reductions in the tender results (in €/MWh). This analysis shows that the cost modelling results approach the tender results for Borssele I&II and the Danish Nearshore tender within a modest margin. The cost reduction impact on Horns Rev III resulted in lower prices than the tender result, indicating an overestimation of the impact of the cost reduction levers. Another explanation could be that the full cost reduction potential of the Horns Rev III tender was not realised, due to a less efficient tender process.
The sensitivity analysis has shown that further cost reductions are feasible under slightly more aggressive (but not unreasonable) assumptions. The resulting cost level is in line with the more recent tender result for Borssele III & IV and Kriegers Flak.
Finally, the role of externalities is investigated showing that even though trends such as steel price and interest rate developments have a significant share in the cost reduction, the majority of the cost reduction is not dependent on these externalities. Via this link you find this interesting report on cost reduction in offshore wind.