Offshore Wind Costs:

The Past, the Present, the Future

PO.
84

Marios Papalexandrou

Mott MacDonald
Abstract
This paper examines the development of costs in offshore wind industry from the first pilot projects, to the current and future costs of different available and future technologies. The study is based on a cost model developed to calculate capital and operational expenditures, supported
by an updated offshore wind cost database, based on Mott MacDonald experience. For this study, a number of scenarios are developed, based on different water depths and technologies to be deployed Current costs are based on monopile and jacket foundations using 3+ and 5+ MW
turbines for water depths up to 30 meters using HVAC transmission technology. Future costs are based on jacket foundations using 6+ to 10MW turbines for water depths up to 50 meters using HVAC and HVDC transmission technologies. Future costs take into account inflation rate,
material intensity, technology maturity and predicted market conditions. The paper examines how new technologies, new markets and market players may affect the future costs of offshore wind.

The past

The future

The Present

Middelgrunden

Bligh Bank

Project: Middelgrunden Offshore Wind farm

Country: Denmark
Developer: Copenhagen utility, Cooperatives (local)
Year online: 2001
Turbine Type: 2MW
Total capacity: 40 MW
Water Depth: 5-10 m
Distance to shore: 2.5 km
Export cable: 30kV AC
CAPEX/MW: 1.2million (2001 prices)

Alpha Ventus

Project: Bligh Bank Offshore Wind Farm, Phase I

Country: Belgium
Developer: Evelop (Renewable project developer)
Year online: 2010
Turbine Type: 3MW
Total capacity: 165 MW
Water Depth: 15-30+ m
Distance to shore: 46 km
Export cable: 150kV AC
CAPEX/MW: 3.5million

Project: UK Round 3 Wind Farm/ German Offshore Wind Farm

Country: UK/Germany
Developer: Large Utility/ Multimillion Euro Company
Year online: >2015
Turbine Type: 5+MW
Total capacity: >500MW
Water Depth: 30-50+ m
Distance to shore: 50 km UK/100 km Germany
Export cable: 220kV AC/ 400kV HVDC
CAPEX/MW: ? million

CAPEX, OPEX and Cost of Energy overview

Past, Present and short term future up to 2014

Mid term future 2014 to 2018

CAPEX in 2001 was 1.2million/MW while today it has climbed to

3.0-3.5 million per MW with expectations to further rise in the
short term up to 4million due to moving to deeper waters further
offshore. Current OPEX is at 100/kW and COE at 150-180/MWh.

Long term future 2018 onwards

Mid Term CAPEX costs are expected to stabilize at in the short

term to 3.6 million/MW. OPEX is expected to slightly decrease to
95/KW; while COE is expected to follow similar pattern as
CAPEX stabilizing at 165/MWh.

Future CAPEX costs are expected to decrease between 2018-2022

to 3.2 per MW. OPEX is expected to further decrease to 80/KW;
and COE is expected to decrease to 145/MWh with further
reduction after 2020.

The following reasons justify this:

1. First UK Round 3 projects will be installed in deeper waters and using
larger turbines than ever before (5+ MW)
2. Turbine prices start to stabilize or even drop due to large orders and
start of competition. Asian companies entering the EU market
3. Foundation prices increase due to deeper waters
4. Electrical Infra increases due to high lengths and first HVDC
technologies employed
5. Installation costs increase due to harsher environments.
6. OPEX costs are decreased due to fewer and more reliable turbines
installed
7. Yield production is increased due to offshore conditions and turbine
type used

The high increase in offshore costs the last decade is justified due to:
1. A Sellers market dominated by two turbine manufacturers (3+MW) till
recently
2. Scarcity of capable vessels to provide installation services, having high
charting rates
3. A growth of the market that has not been followed by strong supply
chain growth due to supplier/contractor uncertainty
4. High risks that contractors have to include in their prices
5. Going to challenging sites, further offshore and to deeper waters
increases CAPEX costs considerably
6. High complexity leading to additional contingencies to ensure project
completion
7. Inflation rate and material price increase.

The following reasons justify this:

1. WTG competition is high: moving towards a buyers market
2. Lessons Learnt from First UK Round 3 Projects are applied
3. Standardization in supply and installation processes of equipment
brings costs down
4. Economies of scale start to dominate
5. Long term agreements with suppliers and contractors contributes to
lower rates
6. Volume of sector attracts oil and gas contractors increasing
competition in the balance of plant and bringing further offshore
experience
7. Yield production is increased due to enhanced reliability

Modeling Results
COE cost for each period examined

CAPEX cost for each period examined

Electrical Infrastructure

Foundations

Rest Costs

Turbines

Long Term: 6+MW/50m/80km

Long Term: 6+MW/50m/80km

Long Term: 6+MW/40m/80km

Long Term: 6+MW/40m/80km

Long Term: 6+MW/30m/80km

Long Term: 6+MW/30m/80km

Mid Term: 5+MW/50m/50km

Mid Term: 5+MW/50m/50km

Scenarios

Scenarios

Rest Costs

Mid Term: 5+MW/40m/50km

Mid Term: 5+MW/30m/50km
Short Term: 5+MW/30m/30km

Short Term: 5+MW/20m/30km

Short Term: 3+MW/20m/30km

Short Term: 3+MW/20m/30km

Present: 3+MW/20m/30km

Present: 3+MW/20m/30km

OPEX

Short Term: 5+MW/30m/30km

Short Term: 5+MW/20m/30km

Turbines

Mid Term: 5+MW/30m/50km

Short Term: 3+MW/30m/30km

Foundations

Mid Term: 5+MW/40m/50km

Short Term: 3+MW/30m/30km

Electrical Infrastructure

Wind farm CAPEX (million/MW)

30

60

90

120

150

180

Cost of Energy (/MWh)

*Rest Costs include development costs and contingency

Conclusions
Offshore wind is continuously evolving with an increased pace at present and with an expected big momentum from 2015 onwards where the UK Round 3 projects will start being constructed together with German, French, Danish and
other offshore wind developments. We have seen that project costs have increased significantly the past decade due to supply chain restrictions and industry immaturity. Prices are expected to continue to rise in the short term up to 2015
due to challenging site conditions. The volume of the market in conjunction with technology improvements and supply chain competition will stabilize the costs between 2015 and 2017. The involvement of large industrial groups (Alstom,
Areva, Mitsubishi and others) will bring to the market financial and engineering capabilities larger than ever before. The competition will increase during this period in the supply chain that would also see Asian manufacturers entering the
European market. This increased competition together with the industrialization of the market and the establishment of long term agreements between supply chain players would bring further costs down and increase confidence of
financing parties towards offshore wind.
In real cost terms current prices of CAPEX are 3.0-3.5 million per MW with expectations to further rise in the short term up to 4million due to moving to deeper waters further offshore. Then market is expected to stabilize at 3.6million
in mid term and fall to 3.2million and even more in the long term after 2020. OPEX costs will decrease while moving to larger turbines from 100/kW today to 80/KW beyond 2020. Cost of energy is currently at 150-180/MWh. It is
expected to stabilize at 165/MWh in the mid term and fall at 145/MWh in the long term due to increased turbine reliability and more efficient capture of energy.

EWEA OFFSHORE 2011, 29 November 1 December 2011, Amsterdam, The Netherlands