References

This page is mainly based on two reports. The first, Positive Energy: how renewable electricity can transform the UK by 2030, from WWF-UK, outlines how renewable energy, including wind, can transform the UK by 2030. The second, Great Expectations: the cost of offshore wind in UK waters – understanding the past and projecting the future, from the UK Energy Research Centre (UKERC), goes into much more detail about current and future costs for offshore wind. The executive summaries at the start of these reports are very useful if you don’t want all the detail.

The Cost of Offshore Wind

This note is a very pared-down version, comparing the cost of offshore wind with information on the cost of energy from gas and nuclear sources. Costs are also converted to the price per kilowatt-hour (kWh) since readers can then compare the wholesale generation costs easily with the retail price of electricity, typically in the neighbourhood of 14p per kWh.

Onshore wind is described in the WWF report as ‘the lowest cost low-carbon technology, at appropriate locations’. The UKERC report states that ‘the costs of onshore wind energy fell fourfold in the 1980s and halved again in the 1990s through a combination of innovation and economies of scale’.

Offshore wind is a different story. To quote the WWF report again:

‘The current cost of offshore wind is around £150–£169 per MWh [15.0–16.9p per kWh]. This follows unforeseen price increases due mainly to the falling strength of the pound against the euro and commodity prices. ... Currency fluctuations were the primary reason for the 26–33% increase in the capital costs of offshore wind during 2008–10. This is mainly due to 80% of the components of offshore wind turbines installed in the UK between 2005 and 2010 being imported into the country. ... With the currency impact removed, underlying capital costs would have increased by only 4–7% since 2008’.

‘We should not be particularly surprised that we have arrived at a point in the history of a particular emerging technology when costs have increased ... many technologies go through such a period, and still go on to offer cost-effective performance in the long run.’

‘Reducing the cost of offshore wind to £100 per MWh [10p per kWh] by the early 2020s has become a key objective for the DECC, with a taskforce now in place to achieve this goal. Costs of offshore wind may fall further beyond the early 2020s with future levelised cost projections of £70-80 per MWh [7p–8p per kWh] by 2020–2030 forecast ...’ .

Comparison

How do other forms of generation compare?

Other types of electricity generation have also seen cost increases, again due to commodity price increases (steel, for example), and the pound/euro and pound/dollar exchange rates affecting the cost of imported components.

Gas generators, for example, are relatively cheap. Nevertheless, the cost of gas turbine-generated electricity has gone up from £42 per MWh [4.2p per kWh] to about £80 per MWh [8.0p per kWh] in the same period.

Nuclear is more difficult to compare. Cost projections for new nuclear power stations are very often (wild) underestimates (see our nuclear energy page). Most of the cost of nuclear is the construction cost. The same is true for wind, so we will compare that with offshore wind construction costs. Offshore wind cost £1.50 per watt installed in 2004, but for reasons mentioned earlier is now around £3.00 per watt installed. (If you like big numbers, you can also think of that as £3.0 million per megawatt installed, or £3.0 billion per gigawatt installed). The UKERC report says that this has probably peaked and will gradually reduce in the future.

For nuclear, the estimated cost of new nuclear power stations for the UK seems to be in the range £2.8 to £4.5 billion each, which is £1.75–£2.80 per watt installed. That is getting quite close to the cost of offshore wind, and note that the estimate is pre-Fukushima so additional safety measures could well increase it. And if we look at the actual costs of the EPR reactors that are proposed for the UK, we see that the two now under construction in Finland and France – the first reactors built in western Europe since Three Mile Island – are currently running at more than double their projected timescales and more than double their projected budgets: one of them is currently at €6.0 billion and the other at €6.6 billion, i.e. £3.20 per watt installed and £3.50 per watt installed respectively. That is more than the current cost of offshore wind Note also that the cost given for nuclear does not include the high cost of decommissioning nuclear reactors.

Conclusion

The cost of offshore wind in the UK has gone up rather than down, and it is indeed high although it may well come down in the future. But statements that use words like ‘unaffordable’ and ‘eye-wateringly expensive’ do not seem to have taken account of the increases in the costs of other technologies. These are due to the world-wide increase in commodity prices, and the sinking value of the pound coupled with the lack of manufacturing in the UK that makes it necessary to import most of what’s needed.

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