Floating wind is racing towards viability

Written by
Giles Hundleby

19 Oct 2017

19 Oct 2017 • by Giles Hundleby

It seems that with every new set of auction results, the levilised cost of energy (LCOE) for offshore wind achieves new record lows. In the latest results, from the UK’s CfD round, the winning bids were some 50% less than those of just five years ago.

Offshore wind is now a low-cost as well as clean and sustainable source of electricity, significantly undercutting new large-scale nuclear.

But could these cost reductions, for projects that will use ‘traditional’ fixed foundations, sink the market for floating foundations before it has really launched? Our analysis suggest that floating will be able to match the 50% reduction in costs by 2030 but fixed foundations will also see continued reductions.

So, as can be seen in the figure here using France as an example, it could be floating is likely to always be more expensive than fixed foundations, at least in the foreseeable future.

However, that apparent lack of price competitiveness does not mean that floating foundations will always struggle to achieve any sort of market buoyancy.

Although interesting for wind LCOE fanatics such as myself, the comparison between average floating and fixed costs is misleading. Fixed and floating foundations will rarely, if ever, be competing technologies for any given site. The comparison is akin to saying four-wheel drive cars will never be successful as they’re more expensive than front-wheel drive cars. Solutions solving different problems will generate different levels of cost.

Instead, the costs of energy from floating foundations should be compared to the costs of other new generation solution in each specific region or market. As the chart shows, floating will quickly join fixed foundations in becoming cheaper than the conventional alternatives for new generation capacities.

It is important to consider that without floating technology, many nations will be unable to take advantage of the large-scale deployment potential of offshore wind and be forced to continue to rely on land-based renewable and fossil fuels, with all the consequent environmental and economic risks that brings.

Floating foundations will allow offshore wind to be deployed close to population centres where waters are too deep for fixed foundations. Areas such as the West Coast of the US, the Mediterranean Sea, large parts of the Far East and many islands will need turbines with floating foundations if they are to reap the benefits of offshore wind generation.

This potential demand has provided much needed market momentum for floating technology after several years of the sector providing advances in technological but without providing a clear commercial purpose. The soon-to-be operational Hywind and FloatGen demo projects is a physical testament of floating’s move from the technologically interesting to the commercially viable.

Even in northern Europe, where the North Sea provides a great opportunity for fixed offshore wind there is a clear opportunity for floating. Our recent studies identified that by 2030 the economically attractive potential – that is offshore wind zones that could provide power at €65/MWh ($77/MWh) or less – could be 2,600TWh/year in the baseline scenario, of which 14% would be provided by floating offshore wind. In the upside case, floating would be providing half of the nearly 6,000TWh/year potential.

Floating costs will benefit from the progress turbine manufacturers make in increasing turbine size as well as in floating-specific technologies.

Just as has been the case with fixed foundations, as project pipelines grow, economies of scale and learning will occur and the pace of cost reductions will accelerate.

Several floating-specific cost reductions from developing floating sub-stations, adopting innovative installation methods and from the ability to carry out port-side repairs will also drive the downward trajectory of floating foundation costs.

The ability to standardise floating foundation designs to a much greater degree than fixed foundations will also play a role.

The key challenge in realising its potential is for floating to demonstrate and deliver a robust cost reduction trajectory that supports increasing deployment, and allows learning and economies of scale to be achieved, even where the initial projects are spread across many sea basins and continents.

That should give the developers, supply chains and governments confidence that it is a technology that is worth providing investment and support to provide long term clarity of its role in the energy mix.

Giles Hundleby is director at UK-headquartered consultancy BVG Associates