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Does offshore wind cost vastly more than other energy sources?

At the end of 2012 the UK had more installed offshore wind power capacity, 3 GW, than any other country in the world, and this is growing rapidly. Offshore wind tends to be more productive and reliable than onshore wind, and avoids many environmental objections made against onshore wind turbines. However, offshore wind is considerably more expensive and also poses maintenance problems. In view of many comments about the high cost of offshore wind energy, this short note expands on the wind energy section of our green energy page to try to put the costs in context.


This page is mainly based on two reports. The first, Positive Energy: how renewable electricity can transform the UK by 2030, from WWF-UK, outlines how renewable energy, including wind, can transform the UK by 2030. The second, Great Expectations: the cost of offshore wind in UK waters – understanding the past and projecting the future, from the UK Energy Research Centre (UKERC), goes into much more detail about current and future costs for offshore wind. The executive summaries at the start of these reports are very useful if you don’t want all the detail.


The Cost of Offshore Wind

 Solar energy

This note is a very pared-down version, comparing the cost of offshore wind with information on the cost of energy from gas and nuclear sources. Costs are also converted to the price per kilowatt-hour (kWh) since readers can then compare the wholesale generation cost of offshore wind easily with both the wholesale market price, which is currently around 5p per kWh, and the retail price to consumers, typically in the neighbourhood of 15p per kWh.

Onshore wind is described in the WWF report as ‘the lowest cost low-carbon technology, at appropriate locations’. The UKERC report states that ‘the costs of onshore wind energy fell fourfold in the 1980s and halved again in the 1990s through a combination of innovation and economies of scale’.

Offshore wind is a different story. To quote the WWF report again:

‘The current cost of offshore wind is around £150–£169 per MWh [15.0–16.9p per kWh]. This follows unforeseen price increases due mainly to the falling strength of the pound against the euro and commodity prices. ... Currency fluctuations were the primary reason for the 26–33% increase in the capital costs of offshore wind during 2008–10. This is mainly due to 80% of the components of offshore wind turbines installed in the UK between 2005 and 2010 being imported into the country. ... With the currency impact removed, underlying capital costs would have increased by only 4–7% since 2008’.

‘We should not be particularly surprised that we have arrived at a point in the history of a particular emerging technology when costs have increased ... many technologies go through such a period, and still go on to offer cost-effective performance in the long run.’

‘Reducing the cost of offshore wind to £100 per MWh [10p per kWh] by the early 2020s has become a key objective for DECC, with a taskforce now in place to achieve this goal. Costs of offshore wind may fall further beyond the early 2020s with future levelised cost projections of £70-80 per MWh [7p–8p per kWh] by 2020–2030 forecast ...’ .


How do other forms of generation compare?

Other types of electricity generation have also seen cost increases, again due to commodity price increases (steel, for example), and the pound/euro and pound/dollar exchange rates affecting the cost of imported components.


Gas generators are relatively cheap. Nevertheless, the cost of gas turbine-generated electricity has gone up from £42 per MWh [4.2p per kWh] to about £80 per MWh [8.0p per kWh] in the same period.


Nuclear is more difficult to compare. Cost projections for new nuclear power stations are very often (wild) underestimates (see our nuclear energy page). Most of the cost of nuclear is the construction cost. The same is true for wind, so we will also compare nuclear and offshore wind construction costs. In 2004 offshore wind cost £1.5 per watt installed, but for reasons mentioned earlier is now around £3.0 per watt installed. (If you like big numbers, you can also think of that as £3.0 million per megawatt installed, or £3.0 billion per gigawatt installed). The UKERC report says that this has probably peaked and will gradually reduce in the future.

However, there is an important point that is often missed: whereas a nuclear plant typically runs flat-out at its peak output rating most of the time, wind power is intermittent. Offshore wind is more reliable than onshore wind, but the typical output is still only around 40% of the peak rating. This means that we should perhaps multiply the installed cost per watt by about 2.5, giving a cost of roughly £7.5 per watt installed of effective offshore wind power.

The estimated cost of new nuclear power stations for the UK was originally estimated to be in the range £2.8 to £4.5 billion each, which is £1.75–£2.8 per watt installed. Looking at the actual costs of the EPR reactors that are proposed for the UK, the two now under construction in Finland and France – the first reactors built in western Europe since Three Mile Island – are currently running at more than double their projected timescales and nearly triple their projected budgets: €8.5 billion each, i.e. about £4.5 per watt installed. And in late 2013 the estimated cost for the proposed EPRs at Hinkley Point in the UK had increased to £8 billion, which is about £5.0 per watt installed. It is important to note that these costs for nuclear do not include the very high costs of disposing of the radioactive nuclear waste and of decommissioning nuclear reactors at the end of their working lives. Regarding the cost of the generated electricity, for the first EPRs in the UK the government is guaranteeing a wholesale price of £92.50 per MWh [9.2p per kWh].

Putting all this together, it appears that at present the cost of offshore wind power, either as the cost per effective watt installed or the cost per kWh, is about 50% higher than nuclear power. However, nuclear has been getting more expensive (and the added costs of radioactive waste disposal and decommissioning are very uncertain), while the cost of offshore wind might (or might not) come down as more of it is built.


The cost of offshore wind power in the UK has gone up rather than down, and is indeed high although it may well come down in the future. But statements that use words like ‘unaffordable’ and ‘eye-wateringly expensive’ do not seem to have taken full account of the increases in the costs of other technologies. These are due to the huge increase in the cost of nuclear power, the world-wide increase in gas and commodity prices, and the sinking value of the pound coupled with the lack of manufacturing in the UK that makes it necessary to import most of what’s needed.

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