Offshore wind came it at a new UK record low of £39.65/MWh ($48.8/MWh) as it dominated contract-for-difference (CfD) awards for 6GW of renewable energy announced today by the British government.
Developments awarded 15-year deals under the latest CfD round include three 1.2GW projects at Dogger Bank to be built by Equinor and SSE, and Innogy's 1.4GW Sofia wind farm, all off England, plus 454MW at the Seagreen project off Scotland.
The winning bids also included 275MW of remote island onshore wind, eligible to compete for the first time and matching offshore wind at the £39.65/MWh mark at three of four successful projects.
The low rate, at 2012 prices, marks a 30% reduction on offshore wind power costs seen at the last CfD round in 2017 when the lowest rate seen was £57.50.
The UK government said the total of 12 new projects – six offshore wind, four remote island wind and two bioenergy – will power seven million homes once they are exporting to the grid by 2025.
Richard Howard, research director at UK-based Aurora Energy Research, told Recharge the low prices were both “surprising” and “impressive”, while also noting the huge role the Dogger Bank zone – site of the three Equinor/SSE projects and Innogy's Sofia – will play in the future sector.
“Overall it is impressive continuing cost decline for offshore wind. And part of that must have been predicated by the introduction of larger turbines,” said Howard.
“You have heard this week about GE starting to get orders for the 12MW [Haliade-X] turbine. I think an important part of how you get the costs down to around £40/MWh will have been really big turbines on really windy sites on Dogger Bank.”
Wood Mackenzie senior research analyst Shimeng Yang noted: “The UK government expects a negative notional budget impact of deploying offshore wind based on their reference price. The actual CfD top-up payment will be determined by the wholesale power price over the next 15 years. However, we expect this would lead to a positive gain for the UK government.”
Equinor said along with SSE it will now have the chance to develop what it claimed will be the world's largest single offshore wind complex at Dogger Bank.
Dogger Bank will constitute an industrial wind hub in the heart of the North Sea.
Eldar Sætre, CEO of Equinor, said: “A full-scale development of Dogger Bank will constitute an industrial wind hub in the heart of the North Sea, playing a major role in the UK’s ambitions for offshore wind and supporting the net zero ambition. Excellent wind speeds, shallow waters and scale make Dogger Bank well positioned to deliver low cost renewable electricity to UK homes and businesses.”
The Norwegian energy giant's senior vice president for wind, Stephen Bull, said: “It is a new frontier in offshore wind for us. And it something we take very seriously and something we were conscious of when we bid into all three Dogger Bank projects [Creyke Beck A and B and Teesside A]. It is a game-changer for us a broadening energy company.”
He told Recharge that Dogger Bank would be developed with next-generation high voltage direct current technology that would “turn the Achilles of the project, that it is 130km from shore, into a competitive advantage, as it draws on our experience on [several] power-from-shore [offshore oil and gas platform] projects.
Bull added that the project would be a “digital flagship from development to operations and maintenance”, which would inform all future Equinor offshore wind projects. “Dogger Bank will be the template … for projects we develop off Poland, for instance, and elsewhere,” he said. “With this award we are really ready to tackle the big players in the global game.”
Hans Bünting, COO renewables at Innogy said: “We are delighted to have won a CfD for Sofia, the largest project in our offshore wind portfolio.
“The sector has targeted innovation, competition and skills to bring costs down, and at the same time the UK Government’s supportive frameworks and instruments have boosted investor confidence and given both scale and certainty to the UK supply chain.”
The announcement of the latest CfD award, which offer developers guaranteed 'strike prices' for the power they produce, comes a day after the UK Crown Estate announced a 7GW-plus future leasing round for new seabed development rights into the 2020s.
Creyke Beck A Dogger Bank. Equnior/SSE 1.2GW £39.65/MWh
Creyke Beck B Dogger Bank. Equnior/SSE 1.2GW £41.61/MWh
Dogger Bank Teesside A. Equinor/SSE 1.2GW £41.61/MWh
Seagreen 1. SSE 454MW £41.61/MWh
Sofia. Innogy 1.4GW £39.65/MWh
Also successful were the 12MW Forthwind demo project at £39.65/MWh, and three remote island wind projects: Costa Head Wind Farm (16MW); Druim Leathann Windfarm (50MW); Hesta Head Wind Farm (20MW); Muaitheabhal Wind Farm (189MW), all £39.65/MWh except Druim Leathann, £41.61/MWh.
Source: DBEIS, 2012 prices
· Update adds quotes from Equinor SVP Stephen Bull and Wood Mackenzie analyst Shimeng Yang