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Offshore Wind Development - Cost Reduction Potential

Isles, Lisa (2006)
The International Institute for Industrial Environmental Economics
Abstract
Offshore wind farms are believed to have significant potential as a renewable energy technology; although the current costs are far from competitive. Consequently the future development of offshore wind farms depends on cost reductions. The trend for a large number of renewable energy technologies has been that as experience increases the costs associated with the technology will decrease; experience is generally measured in terms of cumulative capacity. In this study the development of total installation costs for offshore wind farms has been analysed through the use of experience curve methodology with emphasis on the collection and verification of good data. The trends observed have been opposite to what was expected; total installation... (More)
Offshore wind farms are believed to have significant potential as a renewable energy technology; although the current costs are far from competitive. Consequently the future development of offshore wind farms depends on cost reductions. The trend for a large number of renewable energy technologies has been that as experience increases the costs associated with the technology will decrease; experience is generally measured in terms of cumulative capacity. In this study the development of total installation costs for offshore wind farms has been analysed through the use of experience curve methodology with emphasis on the collection and verification of good data. The trends observed have been opposite to what was expected; total installation costs have been observed to be increasing with increasing experience. The main reason for the trends observed has been attributed to the use of price data as opposed to cost data. The differences between price and cost data have been attributed to market structure. In the case of offshore wind farm development the apparent disconnect between price and cost data is predominantly due to a lack of competition amongst turbine manufacturers; this lack of competition is mostly as a result of the high risk of investment in offshore wind farms combined with accelerated development of onshore wind farms. The booming onshore industry makes investment in high risk offshore projects even more unattractive. The costs of producing and installing offshore wind turbines is still anticipated to be following a trend where costs are decreasing relative to increasing experience. This trend of decreasing costs will only be evident in the total installation cost (essentially price) curve once the market stabilises; when prices will track at a relatively constant increment above costs. This study of the development of offshore wind farms has highlighted the need to use additional and complimentary methods of analysis in combination with experience curve analysis. (Less)
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author
Isles, Lisa
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
offshore wind, experience curves, wind farm cost, wind farms, wind farm economics, renewable energy development, Environmental studies, Miljöstudier
language
English
id
1329395
date added to LUP
2006-09-19
date last changed
2012-04-12 15:57:19
@misc{1329395,
  abstract     = {Offshore wind farms are believed to have significant potential as a renewable energy technology; although the current costs are far from competitive. Consequently the future development of offshore wind farms depends on cost reductions. The trend for a large number of renewable energy technologies has been that as experience increases the costs associated with the technology will decrease; experience is generally measured in terms of cumulative capacity. In this study the development of total installation costs for offshore wind farms has been analysed through the use of experience curve methodology with emphasis on the collection and verification of good data. The trends observed have been opposite to what was expected; total installation costs have been observed to be increasing with increasing experience. The main reason for the trends observed has been attributed to the use of price data as opposed to cost data. The differences between price and cost data have been attributed to market structure. In the case of offshore wind farm development the apparent disconnect between price and cost data is predominantly due to a lack of competition amongst turbine manufacturers; this lack of competition is mostly as a result of the high risk of investment in offshore wind farms combined with accelerated development of onshore wind farms. The booming onshore industry makes investment in high risk offshore projects even more unattractive. The costs of producing and installing offshore wind turbines is still anticipated to be following a trend where costs are decreasing relative to increasing experience. This trend of decreasing costs will only be evident in the total installation cost (essentially price) curve once the market stabilises; when prices will track at a relatively constant increment above costs. This study of the development of offshore wind farms has highlighted the need to use additional and complimentary methods of analysis in combination with experience curve analysis.},
  author       = {Isles, Lisa},
  keyword      = {offshore wind,experience curves,wind farm cost,wind farms,wind farm economics,renewable energy development,Environmental studies,Miljöstudier},
  language     = {eng},
  note         = {Student Paper},
  title        = {Offshore Wind Development - Cost Reduction Potential},
  year         = {2006},
}