Rapidly falling offshore wind power prices in key European markets could also bode well for the emerging U.S. sector, according to findings from a peer-reviewed study in Nature Energy.
Why it matters: This is a turning point in the economics of offshore wind — a potentially massive source of carbon-free power.
- Researchers analyzed years of developers' winning bids in offshore wind power auctions in five countries that represent three-fourths of global capacity. They found that the bid price for power from proposed wind farms in northern Europe fell by roughly 12% annually from 2015 to 2019.
- "[O]ffshore wind power generation can be considered commercially competitive in mature markets."
- "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."
How it works: The auction designs mean subsidies that helped establish the sector are due to pay for themselves or even provide a financial benefit to governments and consumers when it comes to the latest projects coming online in the next few years.
- "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," per the report.
Yes, but: The wider question of cost vs. return to governments depends in part on whether grid connection costs are borne by developers or socialized via national infrastructure investments. Most nations choose the latter, they point out.
- However, upcoming projects in the U.K. are effectively zero-subsidy even if developers paid these costs, as co-author Iain Staffell of Imperial College London describes in a Twitter thread.
The big picture: The paper comes amid a growing pipeline of planned projects in the U.S., where there's currently just a tiny amount of offshore wind.
- BloombergNEF projects that the U.S. will have 20 gigawatts of installed capacity by 2030, and the Nature Energy paper underscores how Europe's experience is aiding the sector here.
- "Regions of Asia and North America also benefit from shallow waters, and could expect some of the learning of Europe (for example, turbine size increase, construction techniques and financing) to play a key role in achieving similar results," it states.
The intrigue: Growing price competitiveness is only one factor in achieving very large commercial-scale development in the U.S., which is decades behind Europe.
- The Washington Examiner's coverage of a virtual Atlantic Council event Monday looked at some of them, including...
- "Major upgrades to the electric transmission system will be needed to accommodate all of the offshore wind Northeast and Mid-Atlantic states are planning to bring online, and there’s not a planning process in place yet to support those upgrades, said Hannes Pfeifenberger, a principal at the Brattle Group."