Based on an assumed installed capacity of 30 GW of offshore wind by 2022, and using in-depth studies by consultancy group BVG of more than 67 projects, the report shows how under the most favorable conditions, energy costs could fall to £0.10/kWh by 2022, although a cost of nearer £0.12/kWh is more likely. This will be despite future offshore wind farms being built ever farther from shore and in deeper waters. Looking to the future, it seems likely that costs will continue to follow in the period to 2022.
For the forseeable future, the UK is likely to be the largest market for offshore wind with a combined pipeline of nearly 50 GW of projects. What happens in this market is therefore likely to be replicated across other European regions, where offshore wind is expedcted to be the fastest growing source of renewable energy.
Key areas highlighted for potential cost reductions are in operation and maintanence, improved power output and reliability of turbines. Upfront costs (capital expenditure) are expected to remain high for the forseeable future, unless there is an improvement in external factors, such as the cost of steel. Improvements in operational expenditure and energy yield are expected to be enough to reduce costs to the £0.12 / kWh mark within ten years.
At the publication of the report at the UK Offshore Wind Conference in Liverpool, some commentators expressed concerns about the slow pace of change outlined. Responding to the criticism, members of the panel, which included companies such as Vestas, Areva and Siemens, defended the wind industry's record on cost reductions, saying that the long lead-in time on offshore wind projects meant that innovations being developed now would take many years to enter commercial development. They also claimed that the offshore wind sector needed time to mature, saying that every time a new technology was developed, the supply chain needed time to catch up, bringing things back to the prototype stage and raising costs.
The large scale deployment of offshore wind in the UK would bring huge benefits, including up to £60 billion ($100 billion) in industrial development and an additional £14 billion ($22.4 billion) in government revenue between 2011 and 2022. At the same time emissions of carbon dioxide could be reduced by up to 800 million tonnes of CO2 over the same period.
Despite the upbeat tone of the report, its findings also underline the vulnerability of the offshore wind sector. Rising steel prices or fluctuations in the exchange rate could wipe out these cost reductions, as could the withdrawal of political support for the industry. Political stability has been a key request from manufacturers and developers. There is a huge amount of money ready to flow into offshore wind in Northern Europe, and it is up to the region's governments to ensure that they get it right.