The R&D departments of all major players in the wind industry must have the same goal: to develop products that enable customers to deliver power at costs equal to or below the wholesale cost of electricity.
Once we reach the magic threshold of wholesale grid parity, we will change society’s legitimate question of “how can we afford wind power?” to “how can we afford not to use wind power?”.
Fortunately, through the industry’s continuous innovation efforts, the cost of onshore wind is getting closer to the magic threshold, and at the present cost-reduction rates, the target is within sight.
Not so for offshore wind, however. Here the cost gap remains considerable.
Offshore wind is a completely necessary contributor to the future electricity supply of Europe. There is no other way to reach the current targets for renewables.
Germany aims for renewables to have a 35% share in its total electricity production by 2020. The UK targets 30% by 2020, while Denmark aims for 50%. For the EU, 20% of total energy production will be supplied from renewable sources by 2020.
Other parts of the world may not yet have set similar targets. But the inherent benefits of offshore wind will drive demand forward: high capacity factors with steady output; no limits to power-plant size; higher public acceptance; and the ability to locate offshore wind farms in the proximity of load centres, as demonstrated by the iconic Middelgrunden wind farm outside Copenhagen, and the London Array.
Consequently, there are good reasons why predictions for future offshore wind expansion are high. In Europe, 40GW will be installed by 2020, and 150GW by 2030, according to the European Wind Energy Association. The US Department of Energy has identified a potential for up to 54GW in the country by 2030, and China plans to install 30GW by 2020.
However, there is a snake in this paradise — the offshore cost level. The above question from society — “how can we afford it?” — is being asked regularly, and from time to time the long-term viability of the offshore wind market is being questioned from some quarters.
We should not forget that in the recent past, the situation was exactly the same for onshore wind. In 1993, the cost of onshore wind electricity was in the order of $0.13 per kWh, when corrected for inflation to 2012 prices. Today, a modern wind turbine in the 2-3MW range will generate electricity at close to the wholesale level, which has for the past few years been $0.047/kWh. What at the time seemed impossible became possible through innovation, determination and the sheer effects of market pressure.
The offshore wind industry is now in its early twenties. The first-ever supply of offshore wind to the grid came on 13 July 1991, when the Vindeby project started production off Denmark. Since then, offshore wind has delivered what Vindeby promised.
Contrary to the belief from many sides at the time, offshore wind turbines stand up to the environment, operate reliably and deliver the energy as calculated. Aggregate installed power has reached the 5GW level and is growing every day.
Reaching wholesale grid parity with offshore wind will require the same efforts and remedies that have proven so successful for onshore wind — innovation and industrialisation.
As was the case for onshore wind 20 years ago, we cannot necessarily foresee all the future developments, but these will surely involve further moves towards larger and even more robust turbines, modular designs, integrated tower-foundation solutions, simplified electrical infrastructures, and industrialised installation methods.
In one critical aspect, offshore wind is actually quite different from onshore wind. While wind turbine manufacturers control two thirds of the value chain onshore, they control less than half that of offshore. Therefore, the offshore cost solutions will require stronger partnerships between developers, manufacturers and balance-of-plant suppliers, and we may even see competitors on the manufacturing side joining forces to facilitate the development of industrialised infrastructure solutions.
Can we do it? Can we bring down the cost of electricity from offshore wind to less than $0.10/kWh in 2020 and to wholesale grid parity during the next decade? Of course! Why not?
In Europe, with one of the world’s largest carbon-free, sustainable energy resources on our doorstep, we would be mad not to.
Henrik Stiesdal is chief technology officer of Siemens Wind Power