Offshore Wind Parks – Costs will Decrease as Capacity Multiplies

Offshore Wind Parks which are clusters of giant offshore Wind Turbines built near the coast in the middle of the water have become the fastest growing segment of the Wind Power Industry.Offshore wind farms are increasing as government heavily subsidize and support Offshore Wind Energy.Just like Electric Vehicles,offshore wind farms though not economic today will help immensely in the fight against Climate Change in the future.Though the costs of offshore wind parks are much higher today,they will decrease as the installed offshore wind capacity increases from around 3 GW today to around 75 GW which is being foretasted globally by 2020.Note every industry sees costs declining with large capacity except the mature industries.For example a rule of thumb for solar power costs are that they decline by around 20% for every 100% increase in installed capacity.Offshore Wind Power today suffers from higher costs as the industry and the ancillary infrastructure is not well devloped.However as companies gain experience and build capacity,the prices will be cut as costs come down and volumes increase.So what is the cost of offshore wind power and what are the cost drivers of this industry.

1) Wind Turbines and Cost of Steel – Wind Turbines form the biggest cost component of a offshore wind farms.Wind Turbines make between 45-50% of the cost of a Wind Project.Note Wind Turbines are expected to go down in cost with improvement in technology and materials.Larger capacity turbines being deployed will decrease the costs further.Note Wind Turbines of 15 MW  capacity (Gamesa) are in developement.

2) Logistics and Foundation Costs – The logistics of transporting Wind Turbine components is much more expensive than transporting over land.Heavy vessels are needed which are not quite mainstream yet so the cost of using heavy cranes and vessels are quite high.Foundation costs are also higher as they have to withstand not only the weight of the huge Wind Turbines but also the pressure from the wave and tidal energies.Foundation costs can range between 15-25%

3) Electrical Infrastructure – The cables needed to transmit the electricity from the offshore wind turbines to the land based power grid  also leads to higher costs.Note this adds up to the costs and contributed to around 20% of the cost of the offshore wind project.Recently Google and Green Energies agreed to invest in a large tranmission network near the eastern coast of the USA which would help in supporting wind farms being built there.

4) Project Finance,Planning Costs – This makes up the rest of the costs . For  some projects this can  be very high compared to the 7-10% as can be seen from the Cape Wind project which is fighting numerous legal battlers for over 10 years.

Total Costs of a Offshore Wind Park

The cost of an offshore wind park can range between $4.5-5.5 per MW which is much higher than land based wind at around $2 million per MW.However the load factors for offshore wind are higher so they compensate somewhat for the higher capital and operating costs for offshore wind energy.Note the PPAs being signed for offshore wind range fro 20-25c/Kwh which is much higher than the 8-10c/Kwh given for onshore wind energy

Summary

Like any new technology and industry the cost of offshore wind parks is quite high but will come down in the future as the industry develops.Note big wind companies like Vestas,Siemens are putting vast sums of money as the potential is quite huge.While skeptics claim that the costs are too high currently they fail to look at the future.Fossil Fuel prices are increasing and this will make offshore wind much more competitive in the future.