As prices plummet, offshore wind wins German power auction — with no subsidy.
The price of offshore wind power has been dropping so quickly that it threatens to upend the electricity industry around the world.
Last month, Denmark’s Dong Energy, the world’s largest provider of offshore wind farms, won a German power auction without needing any subsidies. Dong is a rebranding from Danish Oil and Natural Gas, as the company sells off its fossil fuel businesses to become a clean energy leader.
Average global prices of off-shore wind dropped a game-changing 28 percent last year. Ray Thompson, chief of business development at Siemens Gamesa Renewable Energy said last month that “it’s staggering to think that in not much more than five years, we could have turned a technology seen as prohibitively expensive into the lowest cost, utility-scale technology available.”
By 2016, offshore wind prices had nearly dropped to the level the UK government offers for new nuclear plants — and would “likely” soon beat them, Thompson told the EnergyCollective. That’s doubly true given the historical cost escalations of nuclear power.
And based on current forecasts, explained Thompson, “the point at which offshore wind can compete with the lowest cost of new electricity plants [new combined cycle gas plants] is surely in sight.”
Offshore wind has two very desirable features: First, it’s near where many people live and pay high prices for power, but where other renewable resources are often limited. About half the U.S. population lives in coastal areas, for instance.
Second, “offshore winds tend to blow harder and more uniformly than on land,” explains the U.S. Interior Department’s Bureau of Ocean Energy Management (BOEM). That matters because the energy produced by wind is directly proportional to wind speed cubed. A site where wind speed averages 16 miles per hour delivers 50 percent more power than one where it averages 14 mph.
Also, with steadier winds, offshore farms have a high capacity factor, which is the percentage of a power plant’s maximum generation that is actually achieved over a full year. An onshore wind farm that can put out 100 megawatt hours of electricity during times of peak wind, for example, typically only produces 25 percent averaged over a year. That’s a 25 percent capacity factor. The average capacity factor for solar is even less.
But the capacity factors keep getting better for wind, as this as Bloomberg New Energy Finance (BNEF) chart shows:
Wind farms in the windiest locations now generate full power the equivalent of half the time. But the windiest locations on land are often far from population centers, whereas the steadier coastal winds are close by.
New offshore wind turbines are already at a 50 percent capacity factor — and as they get taller and more efficient that will rise to 60 percent and higher.
As capacity factors and prices improve, offshore wind will become even more attractive. Once built, the marginal cost of operating a wind (or solar) plant is “pretty much zero — free electricity — while coal and gas plants require more fuel for every new watt produced,” as BNEF explained last year. Choosing free zero-pollution power over costly dirty power isn’t a tough choice for utilities or most countries.
That trend led BNEF to a stunning conclusion: “As natural gas and coal plants are increasingly idled in favor of renewables, their capacity factors will take a big hit, and lifetime cost of those plants goes up. Think of them as the expensive back-up power for cheap renewables.”
Offshore wind is now competitive with nuclear power, and gas is ‘in sight’ was originally published in ThinkProgress on Medium, where people are continuing the conversation by highlighting and responding to this story.