|Credit: London Array|
|If offshore wind is to maintain its pace of growth and compete without subsidy against other generation sources, then the cost of electricity generated from future projects has to come down, writes Benj Sykes of Dong Energy|
Renewable energy is playing a crucial role as the UK remains on course to transition to a low carbon energy supply and meet its carbon reduction targets.
Renewable energy now accounts for 15 per cent of the electricity generated in the UK – double the amount supplied in 2010. And, unsurprisingly for a country boasting Europe’s longest coastline and best offshore wind conditions, the offshore wind sector is one of the most fascinating threads in this great success story.
The total offshore generating capacity in UK waters provides around 8 TWh of electricity annually, equivalent to the electricity consumption of around two million homes. In the first quarter of this year, output grew by over 50 per cent to 4.4 TWh when compared to the first quarter of 2013.
According to a report from the Department of Energy and Climate Change (DECC) published in July, called Delivering UK Energy Investment, “The UK is the clear world leader in offshore wind and has more installed capacity (3.8 GW) than any other country, supporting 18,300 jobs. By 2020 we could see capacity reach 10 GW, enough to power almost seven million homes.”
This is all very good news for the UK, which is bracing itself to lose around a quarter of its current generating capacity by the end of this decade as existing coal-fired power stations are retired, through age or inability to meet tough carbon reduction targets. And more than 50 per cent of current capacity will be retired by 2030.
The UK government reaffirmed its support for the future role of the technology when five of the eight support contracts it awarded in April this year were for offshore wind farms. The contracts – three of which were for projects in which Dong Energy has an interest – will provide production-based financial support for the first 15 years that these wind farms are in operation.
With such government support available, you might think that the offshore wind industry is about to rest on its laurels and get a little complacent. However, you’d be wide of the mark.
Though we’ve made considerable progress so far, there is a huge job still to be done if offshore wind is to maintain its pace of growth and compete without subsidy against other generation sources in the next decade.
DECC recognizes this issue in their new energy investment report: “We believe offshore wind will be key for expanding renewable electricity generation in the next decade, so it’s important to drive costs down now.”
The cost of electricity is the offshore wind industry’s new battleground. At around €160/MWh, the cost of electricity generated from future offshore wind farms has to come down. The industry has known this and has been on the case for some time.
The Offshore Wind Industry Council (OWIC) also has cost reduction very much in its sights. OWIC’s role, as a strategic partnership between the government and the offshore wind industry, is to drive offshore wind deployment, bring down costs and build a successful, competitive UK-based industry. The council oversees delivery of the Offshore Wind Industrial Strategy, which sets out how the industry and government work together to deliver growth in the sector.
Published in August 2013, the strategy sets out the actions that government and industry need to take in order to capitalize on the potential of the UK offshore wind market. It contains a SWOT (strengths, weaknesses, opportunities, threats) analysis which cites high energy costs in comparison with other renewable energy sources as a significant potential weakness for offshore wind. A variety of approaches have been identified to tackle this issue.
Within the industry, cost reduction is being achieved through innovation. The Offshore Wind Accelerator (OWA) was set up as a joint industry project by the Carbon Trust in 2008. Comprising nine offshore wind developers with over 70 per cent of the UK’s licensed capacity, it aims to reduce the cost of offshore wind by 10 per cent by 2015.
Technology challenges are identified and prioritized by OWA members based on the likely savings and the potential for the OWA to influence the outcomes. Projects are then carried out to address these challenges, often using international competitions to inspire innovation and identify the best new ideas. The most promising concepts are developed, de-risked and commercialized as the OWA works closely with the supply chain throughout the process.
Following an international competition, the OWA recently awarded contracts to three cable manufacturers to help commercialize the development of 66 kV offshore wind farm intra-array cables. It is providing funding of £400,000 ($663,000) to accelerate the time to market of the cables for use in the large scale UK Round 3 offshore wind farms. Testing of two of the new cable designs is due to be completed as early as the end of 2015.
The OWA also identified the potential for higher voltage electrical arrays to deliver significant cost benefits to the design of future offshore wind farms. It was found that moving to 66 kV can demonstrate a material improvement in lifecycle costs compared with 33 kV. Moving to the higher voltage becomes even more attractive as wind turbines continue to increase in size.
The Carbon Trust has calculated that a move to 66 kV cables could cut the cost of offshore wind energy by 1.5 per cent.
In July, the OWA received an encouraging boost when the Scottish government announced that it is to provide £2.2 million ($3.6 million) of backing to support its work.
The Offshore Renewable Energy (ORE) Catapult is another promising initiative. It was established last year by the UK government and facilitates the delivery of low-carbon, affordable energy from offshore wind, wave and tidal energy. It is one of seven such Catapults set up by the Technology Strategy Board in high growth industries.
The ORE Catapult has merged with the National Renewable Energy Centre (Narec), creating a unique organization that will accelerate the design, deployment and commercialization of renewable energy technology innovation, helping to attract overseas investment and to realize the enormous opportunity presented by the UK’s offshore renewable energy resources.
With extensive technical knowledge and world-class testing facilities, it works in collaboration with industry and academia to provide engineering, technical and commercial expertise to speed up the delivery, commercialization and scalability of innovative ideas to meet the challenges of harnessing low-carbon power from offshore wind, wave and tidal energy.
The industry is now working hard to drive down the cost of producing electricity from offshore wind energy.
Dong Energy has firmly nailed its colours to the mast on the need to reduce the cost of electricity from offshore wind. We are committed to achieving a reduction of 35 to 40 per cent, which means achieving €100/MWh for projects gaining financial investment decision in 2020.
We also realize that the subsidy levels will naturally tail off as the technology matures over the coming decade.
|Gunfleet Sands offshore wind turbine
Credit: Dong Energy
How are costs being tackled?
How is Dong Energy going about the challenge of making such a large reduction on our future electricity costs?
Scale is the first step. The next generation of offshore wind farms will be larger than today – the London Array, at 630 MW, is currently the largest offshore wind farm in the world. But not for long: the next generation will be 660 MW or bigger, and Hornsea, one of the projects in our development pipeline, will be in excess of 1000 MW. Economy of scale is one of the big levers in achieving cost reductions.
And it is not just the overall scale of the wind farm. The turbines themselves are getting larger too. We have already successfully demonstrated the Siemens 6 MW direct drive turbine, each with a swept area roughly equivalent to two and a half football fields. And MHI-Vestas, with their 8 MW turbine, have been named as preferred supplier for the Burbo Bank Extension project in Liverpool Bay.
Another important factor is the choice of site. We need to ensure that future wind farm sites are built in the best available locations with optimum wind and seabed conditions.
Standardization is another key factor which has proven to be transformational in other industries, as well as within the energy sector. The car industry took action back in the 1990’s to achieve as much as 75 per cent commonality of components between models with a 5 per cent annual cost saving delivered. And the combined-cycle gas turbine saw the costs of electricity reduced by 25 to 30 per cent through the introduction of standardized, repeatable plants.
To help drive standardization and get the benefits of large order volumes, Dong Energy has signed framework agreements for large numbers of wind turbines.
Cables are another target area for cost reduction. In the past they were engineered to operate at full capacity, though this is rarely required. By changing the specifications, reducing their diameter and using aluminium rather than copper, costs could be reduced by around a third.
Nearly 80 per cent of the parts for an offshore wind farm could be mass-fabricated and this will, in turn, give us savings of at least 50 per cent. The same applies to substations which are currently manufactured as one-offs for each wind farm. In future they will be standardized.
And the final piece of the jigsaw is speed. Dong Energy recognizes the need to build wind farms faster and more efficiently while continuing to improve safety standards. The cost of installation accounts for around 10 per cent of the total costs and offers some real opportunities to drive costs down.
|WMR offshore substation installed
Credit: Dong Energy
Working with suppliers
Even with all these factors addressed, Dong Energy won’t be able to achieve its costs reduction goals alone. It is going to take a massive collaborative effort with key suppliers who need to buy into the big picture of what we are trying to achieve.
We need to see keen competition between suppliers for our future projects, and we need those suppliers to share Dong Energy’s vision so we can collaboratively drive down costs.
This is an opportunity, not a threat for the supply chain. We recognize that we need to work in partnership with suppliers and give them the tools to investigate what changes they need to make to become more cost-effective.
We need suppliers to understand the big picture. This is about the future of the offshore wind energy business. In the UK, for example, we are fortunate to have buy-in from the government which recognizes the fantastic potential of a sustainable offshore wind industry contributing to the UK’s transformation to a low-carbon future. This is why it has gone to such lengths to maintain support mechanisms with the Electricity Market Reform programme.
However, the industry cannot rely on subsidies indefinitely. We need to make rapid progress towards the goal of being competitive with other energy sources.
Offshore wind is still an industry in its infancy compared with other technologies, but right now there is huge determination to overcome the challenges we face and ensure that it remains a key part of the energy sector success story.
Benj Sykes is the UK Wind Country Manager for Dong Energy and Co-Chair of the Offshore Wind Industry Council.
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