Wind Energy FAQs: Offshore and Onshore Cost Trends

In this post we show the staggering decline in the cost wind energy for on- and off-shore wind in the last few years,

OFFSHORE WIND. The industry has sharply reduced winning auction prices for offshore wind bids between 2010 and 2019. In the United Kingdom, the market with the largest operating offshore wind capacity, the Levelized Cost of Energy dropped by 32% from GBP 142/MWh in 2010/2011 to GBP 97/MWh in 2015/2016.  This trend continued in 2017 with, in September, Ørsted (then called DONG Energy) being awarded a contract to build the world’s largest wind farm – of 1,386 MW – at a price of GBP 57.50/MWh or $77.34 at current exchange rates. It is expected to be operational in 2022.

Also of note: in 2017 zero-subsidy offshore wind contracts were awarded in Germany (Ørsted) and companies – including Shell, Statoil and Vattenfall, have bid on such contracts in Holland.

More recently, contract prices in the UK’s latest offshore wind bidding round are all in the region of £40/MWh which translates to $52/MWh: a price which is competitive with new-build gas in the UK and US and significantly cheaper than new nuclear and coal.

Also of note is this July 2020 peer-reviewed paper in Nature Energy was co-authored by researchers from leading European institutions including DTU in Denmark, as well as Imperial College, London + Germany, Belgium and Holland. Of note;

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…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.

These reductions in European procurement prices for offshore wind-produced electricity were made possible by a combination of favorable siting characteristics and increased project size; continued optimization of technology and installation processes; improved market, regulatory, and auction design structures; increased competition within the supply chain; favorable macroeconomic trends; and strategic market behavior. These are all things which are coming to the American market and which will reduce prices here just as they have done in Europe.

Indeed cost reductions achieved in the US have been much faster: the first US offshore project – the five-turbine 30 MW Block Island off Rhode Island – was awarded a contract at the end of 2009 at a price of $244/MWh and commenced operations at the end of 2016. Only 4 years later, Massachusetts contracted with Mayflower – a Shell/EDPR JV – for 800 MW of wind offshore Massachusetts at a cost of $58.47/MWh.

For a look at how offshore wind prices compete with other forms of generation – such as gas, coal and nuclear – check out this post.

ONSHORE WIND 1980-2019. The following information from 1980 to 2012 is taken from a White House blog during the Obama administration. For the period from 2013 to 2019, the data is from Lazard’s Levelized Cost of Energy Analysis.

The graph speaks for itself: the cost of onshore wind is down more than 93% in the 40 years since 1980.

Very good – but is wind competitive with other forms of generation today? In short: yes. Details in this post.