Offshore wind energy is one of the renewable energy sources for the Netherlands with large potential. Currently the Levelized Cost of Energy (LCoE) of offshore wind energy is much higher than the market price of energy. This practice focuses on reducing the costs, by applying different scenarios for the roll out of offshore wind energy farms during the next decade.
Questions this practice may help answer
- How can the Levelized Cost of Energy (LCoE) of offshore wind energy by reduced by using a medium and long term vision?
- What scnearios can be used in the development of new offshore wind energy parks?
- Which technological changes contribute to a reduction of costs of offshore wind energy farms?
- Which market and supply chain developments contribute to a reduction of costs of offshore wind energy farms?
- Which changes in financing of the wind farm contribute to a reduction of costs of offshore wind energy farms?
Offshore wind energy is one of the renewable energy sources for the Netherlands with large potential. Currently the Levelized Cost of Energy (LCoE) of offshore wind energy is much higher than the market price of energy. In order to develop (part of) this large potential in offshore wind, identifying the optimal way to generate further reduction of the LCoE is key. That requires vision and setting policies for developing larger scale offshore wind for the period 2023-2030/50. In this setting, the Netherlands Enterprise Agency (RVO-Ministry of Economic Affairs) and TKI Wind op Zee have commissioned Royal HaskoningDHV and Ecofys Consultancy to conduct an Offshore Wind Sector Consultation. With the use of this research The Dutch government is able to ensure a stable roll-out program both in capacity (MW) as in planning (years). This is needed to increase competition in the market and to ensure scale and growth effects. A stable roll-out program will eventually reduce the day-rates and the risk premium, which will accordingly reduce the LCoE.
Aspects / Objectives
- Assessing the possibilities for further and continued cost reduction.
- Outline the (political) offshore wind agenda for the coming years by determining the required actions in the short and medium term.
This practice investigates the potential for large scale implementation of offshore wind in locations further offshore and its impact on the LCoE in the Dutch part of the North Sea. The basic assumptions of this consultation are summarized in Table 1.
Under the current Energy Agreement a cost reduction of 40% is foreseen. After 2023 autonomous innovation in technology and learning effects are expected to continue to bring costs down. Figure 2 presents the LCoE of an wind farm with a Financial Investment Decision (FID) in 2010.
Royal HaskoningDHV and Ecofys conducted an offshore wind sector consultation to tap into the large amount of knowledge and expertise available in the offshore wind sector and other sectors with relevant expertise. The consultation was conducted via the Delphi method. The sector consultation existed of two written rounds of consultation, which allowed participating organisations to discuss and prepare internally, before sending in their response. This was followed by an integration workshop, where the outcomes of the consultation were presented and followed by more detailed discussions.
This sector consultation is looking for the differentiators in cost reduction as a result of large scale roll-out of wind energy far offshore. In the consultation three scenarios were compared:
- The base case, or business-as-usual, with 2*350 MW tenders each year, for a period of 7 years, according to the current way of tendering where the contract is awarded to the lowest bidder.
- Future phased-approach, with four tenders of 1250 MW, to be constructed in the following 4 years.
- Future single-approach, where 5000 MW is tendered to one large consortium at once to be constructed in 4 years.
The options for cost reduction could materialise due to
- Technological changes
- Market and supply chain developments
- Changes in financing of the wind farm
Main Outputs / Results
The report summarizes the main conclusions, which form the input for the policy agenda.
Two scenarios for roll-out are suggested:
- A roll-out of 1250 MW per year over a period of four years. This would allow for competition, standardisation, economies of scale, learning curve and mass production effects. However, when the size of a project increases, the risk profile increases accordingly but a stable roll-out program will lower the risk profile.
- Anchor tenant model. This model transferred to the IJmuiden Ver area would mean a roll-out of 1250 MW per year over a period of 4 years, a large consortium could be responsible for 625 MW per year, developing the industrial infrastructure. While the rest of industry can piggy bag from smaller tenders dividing the other 300 to 350 MW per year.
It is expected that a potential LCoE reduction of 6% can be realised when a roll-out of 1250MW annually for a period of four years is applied in future large scale development of offshore wind energy. The cost reduction potential of the WTG and foundation costs have the largest impact, since these are relatively large contributors to the LCoE.
A detailed long term vision should be developed on the most cost efficient way to integrate large scale additional production of offshore wind energy into a high voltage grid on the North Sea connected to the surrounding countries and the required means (including interconnection) to ensure grid stability.
Collaboration with neighbouring countries is essential to achieve large scale implementation of offshore wind and the required cost reduction. Collaboration related to e.g. the electrical grid (interconnectors), the construction of a work island or the harmonization of the subsidy regime could result in a substantial cost reduction which may not be possible when each country acts on its own.
There is an urgent need to formulate a broader and stable policy on the Dutch energy transition beyond the horizon of the current Energy Agreement, on two levels:
- Energy Agreement 2.0, providing a vision on the planning of offshore wind to continue construction in 2023 directly after the end of the current Energy Agreement without a gap. This would mean that before the end of 2017 the Energy Agreement 2.0 should be approved to arrange for new offshore tenders by 2019.
- ´A longer term policy towards 2030/2050 providing a wider vision on the Dutch approach to the transition towards a low carbon economy.
The scenarios used and the changes in technology, market and supply chain and financing of wind farms are relevant for many countries. The information collected in this practice can therefore be used as input for other countries or regions. However, this practices focuses on The Netherlands specifically, with a Dutch institutional background. This means that the recommendations can only be applied for in The Netherlands.
Costs / Funding Source
This practice was commissioned by RVO (Netherlands Enterprise Agency) on request of the TKI Wind op Zee (TKI Offshore Wind).
HASKONINGDHV NEDERLAND B.V.
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