US outlines offshore targets; UK to extend CfD mechanism beyond 2020

Wind energy news you need to know.

Image credit: U.S. Department of Energy, U.S. Department of the Interior.

Related Articles

US targets 86 GW of offshore wind by 2050

The U.S. Department of Energy (DOE) and the U.S. Department of the Interior (DOI) have announced a new national strategy to pave the way for the construction of 86 GW of offshore wind in the U.S. by 2050.

U.S. offshore wind has a technical resource potential of more than 2,000 GW of capacity, or 7,200 TWh of generation per year, according to the National Offshore Wind Strategy: Facilitating the Development of the Offshore Wind Industry in the United States, published on September 9.

This is enough to provide nearly double the total electric generation of the United States in 2015.

Offshore wind speeds at 100-meter heights as narrowed down for calculating the technical resource potential. Source: NREL.

According to the strategy, in some areas of the U.S., offshore wind could be competitive with incumbent forms of generation in the next decade.

A new cost analysis published by the National Renewable Energy Laboratory (NREL) in September shows credible scenarios for cost reductions below $100/MWh by 2025 in some locations, and more widely around the country by 2030.

U.S. offshore wind net technical energy potential (7,203 TWh/year) divided by state for water depths of less than 60 m (blue) and greater than 60 m (red). Source: NREL.

Lower installed project costs and improvements in capacity factors are pushing wind power pricing down. After topping out at nearly 7 cents/kWh in 2009, the average levelized long-term price from wind power sales agreements has fallen to around 2 cents/kWh — though this nationwide average is dominated by projects in the lowest-priced central region of the country, according to a report by the Lawrence Berkley National Laboratory (LBNL) published in August.

Wind turbine prices have dropped 20% to 40% from 2008, and these declines are pushing project-level costs down. Wind projects built in 2015 had an average installed cost of $1,690/kW, down $640/kW from the temporary peak in 2009 and 2010, LBNL said.

Bigger turbines are also enhancing wind project performance. According to LBNL, since 1998-99, the average capacity of wind turbines installed in the U.S. has increased by 180% to 2 MW in 2015, the average turbine hub height has increased by 47% to 82 meters, and the average rotor diameter has increased by 113% to 102 meters.

Meanwhile, the average 2015 capacity factor among projects built in 2014 reached 41%, compared to an average of 31% among projects built in 2004–2011 and 26% among projects built in 1998–2003.

Significant siting and development opportunities are already available today in U.S. waters, according to the federal government's roadmap. By the end of 2015, the DOI had awarded 11 commercial leases for offshore wind development that could support a total of 14.6 GW of capacity in areas already vetted for preliminary siting conflicts.

The U.S. Bureau of Ocean Energy Management also has a number of potential wind areas that are currently in the planning stages.

The government intends to focus on three strategic areas to support its 2050 offshore wind strategy: reduce technical costs and risks by standardizing data collection, and work to increase annual energy production and reliability of offshore wind projects; make the regulatory process more predictable, transparent and efficient; and improve market conditions for investment by quantifying grid integration impacts to help states craft policies supportive of development.

Vattenfall wins Danish coastal tender

Swedish energy company Vattenfall has won the Danish Near Shore Wind Tender (DNS) with a record-breaking bid of DKK 47.5/kWh (Euro 6.38/kWh) for two wind farms in the North Sea totalling 350 MW, the company announced on September 12.

The bid price is about 12% lower than the previous record set by Dong Energy in the Netherlands in July, though the site for the Vattenfall wind farm is unusually close to the shore, leading to lower costs for foundations and transportation. The Danish government has already developed the area, which will shorten the construction time and potentially lower equity-hurdle rates.

The project is scheduled to start construction in 2019 and produce the first power in 2020, pending final approval from the Danish government.

The government is currently reviewing support policies for the nearshore sector, which is seen by some as expensive and damaging for the coastline. The Danish Ministry of Energy Utilities and Climate is expected to make a final decision on coastal wind power when it negotiates its 2025 plan.

The ministry said in a statement on September 12 that regardless of Vattenfall’s low bid, building the two wind parks will be costly for the country.

The total support for the projects in 2020-2032 is estimated at DKK 3.6 billion, almost double the projected DKK 1.9 billion in the energy agreement from 2012, due to lower-than-expected power prices.

UK to extend CfD mechanism beyond 2020

The U.K. government plans to make the Contract for Difference (CfD) support system for renewable energy available beyond 2020, removing a key barrier to long-term low carbon investment in the country, the Department for Business, Energy and Industrial Strategy announced on September 6.

Following a five-week consultation in July, the government has said it will extend the delivery period for CfD from March 31, 2020 to March 31, 2026, which will enable the running of future allocation rounds.

The CfD is a private law contract between a low-carbon electricity generator and a government-owned Low-Carbon Contracts Company, whereby the generator is paid the difference between the strike price – a price for electricity reflecting the cost of investing in a particular low-carbon technology – and the reference price – a measure of the average market price for electricity in the U.K. market.

In March, the U.K. government set aside up to £730 million (€869 million) under the Contracts for Difference framework to support offshore wind and other less established renewable generation projects commissioning in the period 2021-2026.