Amidst growing concerns over the environmental impact that fossil fuels and their emissions have, support for clean energy sources is also increasing. Offshore wind is the latest technology to deliver decarbonized power to the grid.
While interest in and demand for the technology looked promising initially, the costs proved to be the biggest impediment to investment. Now that the cost of offshore wind production is in freefall, experts warn that the long-term costs still might not be sustainable.
Danish company Dong Energy shocked the industry when it won an offshore wind deal by quoting 72.5 € per megawatt hour (MWh), which is roughly half of estimates agreed upon almost five years ago.
Soon after, companies like Vattenfall (also out of Denmark) began quoting even lower bids of 60 € per MWh.
By comparison, the UK’s Hinkley Point nuclear project is comparatively far more expensive at about 112 € per MWh.
“The margins are too tight. They [wind companies] are overlooking the costs of operation and maintenance.” -Paul Bradley
Can Companies Sustain Affordable Offshore Wind Energy?
Fierce competition among energy companies is what has initially brought down the costs of offshore wind power and at the heart of this race is the fight to control the largest market share. European companies are not only weary of each other but also of Chinese wind companies, who alone accounted for half of the world’s wind development.
Recent advances in offshore wind technology reinforce companies’ confidence, as aerodynamic smart blades and sensors come standard.
Load capacity has doubled and production scale has grown immensely: each 700ft turbine churns out eight MW, thereby reducing the number of foundations necessary.
Moreover, favorable market conditions bode well for affordable offshore wind.
First, the downturn in North Sea oil exploration means that wind companies could theoretically lease vessels at clearance rates.
Second, the global price of steel has also been down.
Third, interest rates are low and lenders seem eager to get a stake in the new energy development. However, these benefits probably won’t last forever.
However, these beneficial market conditions probably won’t last forever, potentially making the low contract power cost not sustainable long-term.
Risk Versus Reward
Also high on the list of concerns is the fact that the new technology has not yet been thoroughly tested, which could lead to unforeseen complications, malfunctions, and even equipment failures.
For instance, the costs of resolving a catastrophic failure combined with regular maintenance costs could nearly double the original quoted price of offshore wind development.
As discussed, the long-term costs of offshore wind energy are unclear.
But, at the very least, if the development of wind power stays at a reasonable price, proves to be more efficient and cost effective than traditional fossil fuels, then the carbon-free energy offshore wind produces could help the energy industry transition away from fossil fuels.