Visibility can cut costs

Monday, 27 July, 2015 - 08:15

BVG Associates has published a quantitative study of the effect of UK government policy on cost of energy from offshore wind during the 2020s. The main result: government policy can accelerate the industry and save billions for UK energy users. The main driver is visibility.

The study commissioned by the Committee on Climate Change (CCC) considers the effect of a range of policy drivers in the context of a predominantly pan-European market. It shows that simply by giving better visibility and confidence of future levels of deployment to the offshore wind industry, the Government could cut £1.9 billion in the 2020s from the cost to UK energy users of offshore wind projects built between 2021 and 2030 compared with the current approach. Visibility in the shorter term means rolling clarity on the anticipated size of CfD auction pots. In the longer term, visibility and confidence come from a stable policy environment based on a rational framework for low-carbon energy that prioritises technologies offering the lowest cost solutions.

Furthermore, the study shows what could happen if the UK Government, along with others in the rest of Europe, decided to facilitate an accelerated programme of deployment. In this case, offshore wind would generate 35 % more electricity in 2030, but at a cost increase to UK energy users, for offshore wind during 2020s, of only 4 %, due to the increased pace of cost of energy reduction. It also shows that under a holistic combination of policy drivers, the cost of offshore wind energy could fall to around 80 £/MWh for projects first generating in 2030. By then, it will already be cost-competitive with other new-built electricity generation technologies, including combined cycle gas turbines.

The study was commissioned by the Committee on Climate Change (CCC). The CCC is an independent organisation set up by Government to advise it on emissions targets and preparing for climate change, including the energy generation sector. “The CCC set us a tough challenge, to unpick the impact of government policy on a diverse supply chain in a dynamic sector. With the help of deep engagement with the industry, we have for the first time separated a range of different policy drivers and quantified their impact on each of the key areas of that supply chain”, says lead-author Chris Willow. “We hope that in being robust and transparent, we will provide real substance into the discussion between industry and governments, as they work together to establish a way forward for cost effective energy generation in Northern Europe.”

Katharina Garus

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