1. 1 Offshore wind costs David Milborrow david.milborrow@btinternet.com

2. 2 Aims Where are we? Where are we going? What is the competition?

3. 3 Salutary reminders All forecasts are wrong Prices are what you want them to be Much talk about “Level playing fields”, but.. How do we know when we have reached one? Note that wind very sensitive to test discount rates, but gas much less so

4. 4 A sound foundation Offshore wind builds on success of onshore 30% compound growth rate since 1990, worldwide No sign of slackening

5. 5 How much does wind cost? Changes in support frameworks mask cost reductions “Wind farms produce electricity at three times the cost of gas” Hansard – 8/1/03 "Cost of offshore wind > nuclear, and likely to remain so" - British Energy

6. 6 Generation costs - 2004 Source: Thermal plant - Energy White Paper; Renewables - OFFER Price range for renewables is for 200 MW dnc, from NFFO5 bids New CCGT New coal New nuclear RENEWABLES Landfill Gas Energy from waste Wind>1 MW dnc OFFSHORE WIND 01234567 Electricity price, p/kWh Minimum Range

7. 7 Costs of Nysted, DK Wind turbines: - £80M - £483/kW Foundations:- £30M - £181/kW Electrical  Internal - £10M- £60/kW  Grid - £20M- 120/kW Monitoring - £7M- £42/kW “Others”- £20M- £120/kW TOTAL- £160M- £986/kW

8. 8 Nysted economics Energy generation 524 GWh (36% cf) O & M budget: €13/MWh IF:-  Depreciation period is 20 years, and  Test discount rate is 6% Then generation cost is €39/MWh, which is max remuneration in DK

9. 9 Where next? Larger arrays – lower costs Large wind farms will spread costs of:-  Site investigations, including wind measurements (£20/kW for 30 MW; £1/kW for 1000 MW)  Cable connection to shore – weakly dependent on array size, scope for ~£100/kW savings  Specialist equipment for °transporting the turbine °installing foundations More efficient O&M strategies Banking and legal fees

10. 10 Other reasons why costs will fall Machines  Cost trends from last 15 years will continue °8-15% price reduction per doubling of capacity  Discounts for big orders  Taller towers see higher winds Foundation design  Monopiles now widespread Go further offshore to higher winds

11. 11 Future trends Larger machines: 6 MW and beyond? Improved production methods Fast running, with two (one?) blades? More use of lighter carbon fibre blades? Larger arrays - 1000 MW and more Even further offshore (higher winds)? D.C. links to shore? Floating turbines?

12. 12 Offshore winds Modelling based on upper air winds  Accuracy seems good Winds increase with distance from shore 30 km from shore, winds may be ~0.6 m/s higher That means 15-20% more energy

13. 13 Future prices Numerous studies expect prices to fall:-  Author (Windpower Monthly, April 2003)  Forum for the Future, PIU, EWEA  DTI Rough consensus is that generation prices will halve by 2020

14. 14 The competition Nuclear  Prospects improve if US implements a Production Tax Credit (similar to Renewables PTC)  Support within UK government, EU, etc  Not very popular Gas  Future price of gas increases slowly  Carbon trading penalty  Reliable technology  Electricity price not sensitive to discount rates

15. 15 Future comparisons Good prospects for price reductions with offshore wind from improvements in the technology Governments must deliver a level playing field

16. 16 Where might we be by 2010? Source: DTI, with modifications to ensure level playing field

17. 17 ….and by 2020? Source: DTI, with modifications to ensure level playing field

18. 18 Conclusions Industry well placed to deliver steadily reducing prices Governments must ensure level playing field But… No room for complacency Cannot expect support indefinitely, and Competition from gas and nuclear