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Floating Offshore Wind Costs

July 30, 2021

By Paul Homewood

 

 

Good work from Andrew Montford:

 

 

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Last year, I wrote a blog post setting out the financial situation of Hywind, the UK’s first commercial floating offshore windfarm, and indeed the first in the world. It was an ugly tale, with a hugely lossmaking operation kept in the black only by a vast transfer of subsidies. However, Hywind has recently published its second set of financial results since it became fully operational, and so we can now start to get a handle on its operational performance and underlying costs, and publish what I believe is the first estimate of the levelised cost of floating offshore wind.

Situated off Peterhead, in what appears to be something of a sweet spot for wind, it is unsurprising that Hywind’s performance is rather better than your typical offshore windfarm. Renewables advocates are keen to point out that its capacity factor (the electricity generated as a percentage of the theoretical maximum) has reached 57%. However, in 2020/2021, that fell back to just 51%, which is only a few points ahead of recent fixed offshore windfarms.

Meanwhile its costs are extraordinarily high. We already knew that its capital cost, at £8.9m/MW. was around three times the that of fixed offshore wind. But its opex costs are also much higher than might be expected. As a rule of thumb, fixed offshore wind opex starts at around £100,000/MW per year, and then rises from there as the turbines age. However, Hywind seems to have started out from a much higher base – its opex costs have averaged over £200,000/MW per year since it became operational.

With only marginally better operational performance than fixed offshore, and costs that are several times higher, there is no hope that Hywind’s overall levelised cost will be anything other than disastrously expensive. I estimate the LCOE figure as £224/MWh, a value that is unchanged since last year, suggesting that the value is reasonably robust. This is approximately double that of fixed offshore wind, and perhaps five to six times what we would expect for electricity from gas turbines. (As always when comparing wind and gas, we should note that the comparison is misleading, since wind should carry a considerable extra cost burden because of its intermittency, which is expensive to correct).

There can therefore be little doubt that Hywind is a failure. Kincardine, the UK’s second floating offshore windfarm, looks as though it will be more expensive still. It seems beyond doubt that floating offshore wind is a financial disaster.

Unsurprisingly, the government is ploughing ahead with it regardless.

https://www.thegwpf.com/levelised-cost-floating-offshore-wind/?mc_cid=2201b8fe90&mc_eid=870a48a53b

Currently Hywind is subsidised under the Renewable Obligations scheme, which is worth about £190/MWh to them, on top of what they earn from electricity sales. This seems to confirm the costs that Andrew has calculated.

The OPEX costs, which he gives at £200,000/MW/Yr, equate to about £45/MWh, assuming utilisation of 51%. This clearly cannot be a viable operation, when power prices are usually below £50/MWh, or even up to the current level of around £70.

13 Comments
  1. July 30, 2021 7:25 pm

    Why don’t they just burn the pound notes in a power station?

    • Mike Jackson permalink
      July 30, 2021 8:55 pm

      Just think of all that ash, Philip! That would really be carbon pollution!

      • Captain Flint permalink
        July 30, 2021 9:05 pm

        :-). Touche sir!

  2. Joe Public permalink
    July 30, 2021 7:26 pm

    The 30-day performance updated hourly, of our offshore fleet is available at bottom of page here:

    https://www.thecrownestate.co.uk/en-gb/what-we-do/asset-map/#tab-2

    Also lots of other interesting info. Real-time generation by individual wind farms etc

  3. John Hultquist permalink
    July 30, 2021 7:49 pm

    So who is getting all this money? Asking Wikipedia – –

    75%: Equinor ASA (formerly Statoil and StatoilHydro) is a Norwegian state-owned multinational energy company headquartered in Stavanger. It is primarily a petroleum company, …
    and
    25%: Masdar, is a renewable energy company based in Abu Dhabi, United Arab Emirates. Masdar is a subsidiary of Mubadala Development Company and was founded by the UAE government in 2006.

    The first of these is listed on the NYSE, so I may be participating in the spoils via broad mutual funds.
    UK citizens, I thank you, if that is the case.

  4. Captain Flint permalink
    July 30, 2021 9:04 pm

    It would be so easy – if the UK govt had any financial awareness at all – to engage one of the big audit firms like PWC or KPMG to take an objective look at projects like these. In the context of what is being spent, this would take almost no money and provide a sound and savvy financial assessment before any more time and money is wasted. (Unless, of course, these firms have also been corrupted by the financial gravy train of renewable energy largesse)

    I can’t believe how dumb and/or dishonest the western political establishment is. The lack of judgement is deeply, deeply worrying.

    • Graeme No.3 permalink
      July 30, 2021 9:35 pm

      Captain Flint:
      You err in blaming the politicians alone, since they probably don’t make the decisions but merely do what they are told to do Oops! I mean advised to do by bureaucrats.
      The latter seem to have a simple objective of spend lots of money, which means more control, which means more bureaucrats employed. Do you remember Yes, Minister?
      The politicians go along with this spending because they can boast to gullible people about how they are “saving the planet” and a few thousand million sounds quite impressive.

      • Dave Fair permalink
        July 31, 2021 7:14 pm

        The Deep State is manifest.

  5. July 30, 2021 9:49 pm

    Don’t tell the virtuous greens in California. Floating offshore wind is supposed to be the salvation for the state’s grid when they shut down the last nuclear and the gas fired power plants.

  6. Adam Gallon permalink
    July 31, 2021 7:16 am

    https://www.turbulenttimes.co.uk/news/front-page/politics-bought-and-paid-for/
    Follow the money.
    Who’s giving their £250,000 or £500,000?

  7. July 31, 2021 10:20 am

    The UK government seems addicted to trying out any and all schemes that can be passed off as ‘renewable’, however unrealistic and expensive. Taxpayers have no say as most MPs either don’t care or believe it’s all marvellous, regardless of cost.

  8. Gamecock permalink
    July 31, 2021 3:45 pm

    ‘Renewables advocates are keen to point out that its capacity factor (the electricity generated as a percentage of the theoretical maximum) has reached 57%.’

    That’s a head fake. It’s the minimum output that’s critical.

  9. Ray Sanders permalink
    July 31, 2021 10:09 pm

    It is actually very easy to get a high capacity factor for any wind turbine, all you have to do is fit a generator that is under rated for the blade length. It will cut in at lower wind speed and hit maximum output at a relatively low wind speed. It will obviously not be efficient but if the object of the exercise is to give a deceptively high figure than it is “successful”.

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