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Until 2004, the cost of wind turbines generally followed the development of a medium-term cost reduction curve (learning curve), showing a learning rate of approximately 10 - namely, that each time wind power capacity doubled, the cost went down by approximately 10 per MW installed. This decreasing cost trend changed in 2004-2006, when the price of wind power in general increased by approximately 20-25. This was caused mainly by the increasing costs of materials and a strong demand for wind capacity, which implied the scarcity of wind power manufacturing capacity and sub-supplier capacity for manufacturing turbine components.
A similar price increase can be observed for offshore wind power, although a fairly small number of finished projects, as well as a large spread in investment costs, make it difficult to identify the price level for offshore turbines accurately. On average, the expected investment costs for a new offshore wind farm are currently in the range of 2.0 to 2.2 million €/MW.
In the following section, the medium-term cost development of offshore wind power is estimated using the learning curve methodology. However, it should be noted that considerable uncertainty is related to the use of learning curves, even for the medium term, and results should be used with caution.
The medium-term cost predictions for offshore wind power are shown in Table 2.10 under the following conditions:
- The existing manufacturing capacity constraints for wind turbines will continue until 2010. Although there will be a gradual expansion of industrial capacity for wind power, a prolonged increase in demand will continue to strain the manufacturing capacity. Increasing competition among wind turbine manufacturers and sub-suppliers, resulting in unit reduction costs in the industry, will not occur before 2011.
- The total capacity development of wind power is assumed to be the main driving factor for the cost development of offshore turbines, since most of the turbine costs are related to the general wind power industry development. Thus, the growth rate of installed capacity is assumed to double cumulative installations every three years.
- For the period between 1985 and 2004, a learning rate of approximately 10 was estimated (Neij, 2003). In 2011, this learning rate is again expected to be achieved by the industry up until 2015.
Given these assumptions, minimum, average and maximum cost scenarios are reported in Table 2.10.
Table 2.10: Estimates for Cost Development of Offshore Wind Turbines until 2015 Constant 2006 Euros)
Investment costs, million €/MW O&M Cap. factor Min Average Max €/MWh 2006 1.8 2.1 2.4 16 37.5 2015 1.55 1.81 2.06 13 37.5
As shown in Table 2.10, the average cost of offshore wind capacity is expected to decrease from 2.1 million €/MW in 2006 to 1.81 million €/MW in 2015, or by approximately 15 per cent. There will still be a considerable spread of costs, from 1.55 million €/MW to 2.06 million €/MW. A capacity factor of constant 37.5 per cent (corresponding to a number of full load hours of approximately 3,300) is expected for the whole period. This covers increased production from newer and larger turbines, moderated by sites with lower wind regimes and a greater distance to shore, which increase losses in transmission of power.
A study carried out in the UK (IEA, 2006) has estimated the future costs of offshore wind generation and the potential for cost reductions. The cost of raw materials, especially steel, which accounts for about 90 per cent of the turbine, was identified as the primary cost driver. The report emphasised that major savings can be achieved if turbines are made of lighter, more reliable materials, and if major components are developed to be more fatigue-resistant. A model based on 2006 costs predicted that costs would rise from approximately 1.6 million £/MW to approximately 1.75 million £/MW (2.37 to 2.6 million €/MW) in 2011 before falling by around 20 per cent of the total cost by 2020.
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