Three of Europe’s largest offshore wind firms this week launched a joint declaration of their commitment to cost reduction as their top priority, as a new report from analysis firm EY detailed where savings can be made.
Offshore wind in Europe could be cost-competitive with gas- and coal-fired power generation by 2023, the report found – but only if the industry can find cost savings amounting to 26 per cent of its current spend. And the report, Offshore Wind in Europe: Walking the Tightrope to Success, found that large-scale deployment of offshore wind will depend not only on how much the industry can reduce its costs, but also on how fast. The industry must significantly reduce costs over the next five years, EY said.
Among the report’s recommendations for areas where savings can be found were deploying larger turbines to increase energy capture (which could save up to 9 per cent in costs); fostering competition between industry players (7 per cent); commissioning new projects (7 per cent); and supply chain optimization and logistical integration in areas such as construction facilities and installation equipment (3 per cent).
The report also noted that some areas where cost is a factor may not be within the wind industry’s control, such as a need for clear policy signals on regulation and support schemes within Europe’s 2030 energy framework – which EY called “a blank page waiting to be written by policymakers”.
If policy signals are favourable and the required cost savings are achieved, the report said, offshore wind’s levelized cost of energy (LCOE) could drop to €90 ($96)/MWh by 2030.
However, the report called 2020 the “make-or-break” year for Europe’s offshore wind sector. If the industry does not have an installed capacity of 20+ GW by that year, and is not near to achieving a LCOE of €100/MWh, EY said that “failure to meet both of these criteria will not see the offshore wind industry advance into 2030 and beyond.”
And it further warned that “the turbines in the water are only as good as the grids connecting them to consumers”, saying that construction of the necessary transmission and distribution infrastructure will need to transcend a “construction gap” predicted for 2016 due to the economic downturn, which has decreased investment over the past five years.
If the offshore wind sector can reach 64.8 GW in installed capacity by 2030, the report concluded, it will be able to supply 8.4 per cent of Europe’s total power demand. While onshore wind development is predicted to be constrained due to dwindling resource locations, the wind sector’s total contribution to Europe’s power mix should reach 25.7 per cent.
The sector appears to be listening. This week DNV GL announced three Joint Industry Projects (JIPs) aimed at developing design practices and methods, lowering risks and reducing costs for the global wind industry. In addition, three of the largest offshore wind firms have launched a joint declaration of their commitment to cost reduction.
Under the Joint Declaration for a United Industry initiative, developer Dong Energy and OEMs MHI Vestas and Siemens Wind Power pledged this week to reduce costs across their entire value chain, jointly and individually. The firms say their actions will deliver “major long-term and tangible advancements which are necessary for the development of an affordable energy source and a large, strong and competitive industry that creates jobs in Europe”.
The declaration said that “to fulfill its ambitions, the industry needs to stand united and committed to deliver a strong and dedicated effort to cost reduction.”
The three firms said they would commit to “Keep cost reduction as the main goal in our innovations; continuously ensure our products and services contribute to the reduction of Cost of Energy; seek to work together and develop partnerships; share best practice; support the development of standards in the offshore wind industry; engage proactively in dialogue with authorities to ensure cost-efficient regulation.”
The European Wind Industry Association (EWEA), which sponsored the initiative, said the firms had “taken the extraordinary step of putting their names to a document intended to unify the sector at a critical point in its history”.