Britain currently has the largest installed offshore wind capacity in the world. Although it still accounts for a small proportion of overall electricity generated, its share is growing – in 2018 it was 8 per cent, compared with 6.2 per cent the year before. Ministers are keen for more and recently set a goal for a third of electricity to be supplied by offshore wind by 2030. The steep decline in costs of building and operating offshore wind farms since they began operating in the UK in 2000 has surprised even sceptics. In May, the cost of wind power will be back in the spotlight as companies battle for 15-year government contracts for projects in British waters. Developers will bid the lowest guaranteed price per unit of electricity – or “strike price” – they are willing to accept. Results of the government’s auction, which could be published from June, will show bids bringing costs closer to forecast market prices of electricity. This means the actual cost to taxpayers of the contracts could be minimal, as developers receive the difference between the strike price and a measure of average market prices. Companies will not be able to bid in the auction at a strike price higher than £56 per megawatt hour for projects to be delivered in 2023-24 and £53/MWh for wind farms that will be up and running in 2024-25, according to a government document. This compares with guaranteed prices in the last auction in 2017 that reached as low as £57.50/MWh, while in the first comparable auction in 2015 prices averaged £117/MWh. Rapid advances in the design and engineering of turbines have helped reduce costs, with turbines getting bigger and better, and the size of arrays increasing. More powerful machines mean fewer turbines to serve the same number of homes, cutting down dramatically on installation and maintenance costs. “Whilst the industry has achieved significant cost reductions, the CfD [government auction] remains critical to de-risking offshore investment by stabilising uncertain revenues over the long-term, enabling access to lower costs of capital,” he said.
FT 28th April 2019 read more »