For the First Time, Wind Power Will Be Profitable Without Subsidies

In Europe, new tech boosts the appeal of previously pricey offshore wind.

Europe’s offshore wind power industry recently achieved a major milestone: three projects to be built without government subsidy.  Bent Christensen, who is responsible for energy-cost projections for Siemens’s wind power division, credits industry-wide cost cutting that has outstripped expectations.  “We’re three to four years ahead of schedule,” says Christensen.

Projects taking shape in European waters this summer, meanwhile, will demonstrate the ongoing innovation required to deliver on those bids—innovations that could make offshore wind farms more attractive to both financiers and grid operators.

Detractors have long derided offshore wind power as a niche segment.  In spite of fantastically strong wind gusts, building offshore-ready equipment and installing it in the punishing marine environment has been pricey.

In 2013, when new projects were delivering electricity for about €160 (US $179) per megawatt-hour, the industry collectively set what Christensen calls a “realistic stretch goal” to squeeze that to €100/MWh by 2020.  Christensen, who is also senior vice president of Siemens’s wind turbine business, Siemens Gamesa Renewable Energy, says that by his math the industry is already there.

Christensen’s estimate is echoed by the financial advisory firm Lazard, which projects the unsubsidized cost of newly commenced projects at €105/MWh ($118/MWh)—a 27 percent reduction since 2014.  Lazard’s December 2016 analysis finds that offshore wind is cheaper or on par with coal-fired generators, rooftop solar arrays, and nuclear reactors.

Recent bids for near-shore projects, meanwhile, rival the cost of onshore wind and utility-scale solar energy.  Several projects in Denmark and the Netherlands promise offshore wind power for less than €75/MWh, and then there are the subsidy-free German bids this April by Copenhagen-based Dong Energy and the German utility Energie Baden-Württemberg.  Ulrik Stridbaek, Dong’s senior director for regulatory affairs, estimates its projects’ power cost at €62/MWh.

According to Stridbaek, competition, innovation, and scale all contribute to the rapid cost declines that have been achieved throughout the industry’s supply chain—from turbine manufacturing to installation to power transmission.  But Stridbaek says that “the decisive factor is scale.”

Read more at For the First Time, Wind Power Will Be Profitable Without Subsidies