IRENA predicts 15% decline in offshore wind costs by 2022

The authors of Renewable Power Generation Costs in 2018 said they expect cost reductions for solar and wind power to continue to 2020 and beyond. Current auction and PPA data suggest that by 2020, onshore wind and solar PV will consistently offer less expensive electricity than the least-cost fossil fuel alternative and offshore wind and CSP will offer electricity in the US$0.06 to US$0.10/kWh range.

“For offshore wind, the average cost of electricity could fall by 15% to US$0.108/kWh, or 4% per year, by 2022,” says IRENA. Projects in 2022 would predominantly span US$0.06 to US$0.14/kWh, with projects in Europe in the range of US$0.06 to US$0.10/kWh, with some exceptions.

In 2018, global offshore wind power installations totalled 4.5 GW – almost exclusively in Europe and China. The global weighted average levelised cost of energy (LCOE) for offshore wind in 2018 was US$0.127/kWh – 1% lower than in 2017.

The 4.5 GW of new offshore wind capacity added in 2018 was concentrated in China (40% of the total), with a significant share of the growth in capacity in the UK (29%) and Germany (22%) although deployment is set to broaden to the US and Asia Pacific.

The decline in the global weighted-average LCOE of offshore wind projects in 2018 takes the long-term decline in LCOE between 2010 and 2018 to 20%, from US$0.159/kWh to US$0.127/kWh. The total installed costs of offshore wind projects commissioned in 2018 were 5% lower than those commissioned in 2010. The major drivers of this reduction in the cost of electricity from offshore wind have been innovations in wind turbine technology, installation and logistics; economies of scale in O&M; and improved capacity factors from higher hub heights, better wind resources and larger rotor diameters.

The trend towards larger turbines has helped reduce installation and project development costs, but IRENA said this reduction has been offset to a greater or lesser extent by the shift to offshore windfarms being located in deeper waters further from ports – but often with better, more stable wind regimes. These factors have helped to increase yields and have seen the global weighted-average capacity factor for offshore wind increase from 38% in 2010 to 43% in 2018. At the same time, O&M costs have been reduced by optimising O&M strategies; preventative maintenance based on predictive analysis of failure rates; and economies-of-scale.

In Europe, which has the largest deployment of offshore wind, for projects commissioned between 2010 and 2018, there was a 14% drop in LCOE, from US$0.156/kWh to US$0.134/kWh. The largest drop occurred in Belgium, by 28% between 2010 and 2018, with the LCOE dropping from US$0.195/ kWh to USD 0.141/kWh. In Germany and the UK, which were the biggest markets for commissioned projects in Europe in 2018, there were 24% and 14% drops between 2010 and 2018, with the LCOEs in Germany and the UK falling to US$0.125/kWh and US$0.139/kWh for projects commissioned in 2018, respectively.

In Asia, the LCOE reduction between 2010 and 2018 stands at 40% (from US$0.178/kWh to US 0.106/ kWh). This was driven by China, which has over 95% of offshore wind installations in Asia. The LCOE in Japan is high in comparison to China, at an estimated US$0.20/kWh given that projects to date are small in scale and are perhaps better categorised as demonstration projects.

Total installed costs of offshore windfarms have declined modestly since 2010. There is, however, a significant degree of year-on-year volatility in the total installed costs of newly commissioned offshore windfarms given the relatively low annual capacity additions in some years.