Several energy companies joined together on Monday to sign an open letter pledging to be able to offer offshore wind power at prices low enough to compete with gas and coal.
RWE, Siemens and E.On from Germany, Statoil from Norway, Vattenfall from Sweden and United States based General Electric all came together at the start of this week and published the letter along with five smaller dedicated renewable companies.
Together, they said that they could produce energy from offshore wind farms at a cost of around €80 per megawatt hour by the year 2025. This would represent a fall in cost of nearly 50%, based on current costs.
This reduced cost, they said, is contingent on European policy favouring the construction of new renewable power generators more than it currently does, but the aims are nonetheless important if the pledges made in the Paris Agreement are to be upheld.
“This commitment”, the energy firms said in the open letter, “is only possible with a stable, long-term market for renewables in Europe. If the offshore industry is to realize its cost reduction goals, a strong pipeline of projects is needed.
“Policy makers at European and national level must set out clear visions for the industry after 2020 with robust laws that give investors peace of mind and visibility well into the future.
“In addition to stable regulation, regional cooperation on offshore wind between European countries is of vital importance, particularly in the northern seas. Closer regional cooperation, e.g. on planning, financial and regulatory issues, would help to reduce costs and remove barriers to investment.”
Europe has long been a world leader in terms of wind power generation, with total capacity reaching record levels in 2015 after some 12.8 GW worth of new generators were built during the year.
All in all, Europe now has around 142 GW worth of wind power capacity, of which 11GW is offshore. This amounts to more than 15% of Europe’s total energy capacity, with wind now the third biggest source of power in the continent.
However, over the last year, investment in renewables fell in terms of raw value in Europe, as subsidies have been withdrawn, particularly for solar PV, and question marks remain over government policy with regard to renewable generation.
Offshore wind power capacity has almost double worldwide since 2013 as costs have fallen and countries like the UK and Germany, the two leading providers, have offered subsidies to what is otherwise a fairly costly form of power generation compared to onshore wind.
Offshore wind does cost more to build, but has very high generational potential, and avoids the problems that many have with the aesthetics of onshore wind farms.
The increasing costs of nuclear power plants, with Hinkley Point as a prime example, are turning more and more heads towards offshore wind, and to renewables generally.
The 2025 date set by the energy companies who penned the open letter will be an important milestone, as it is also the year that the Hinkley plant is supposed to go live. It is also the same year in which the UK is supposed to finish phasing out all of the country’s unabated coal plants, according to the Department for Energy and Climate Change.
As well as the pledge signed by energy firms, a group of ten EU countries signed a ‘memorandum of understanding’ (MoU) on Monday, agreeing to work together to improve the viability and speed up the roll-out of offshore wind farms.
The MoU was signed by representatives from the UK, Belgium, France, Denmark, Ireland, Sweden, Norway, the Netherlands, Germany and Luxembourg.
The agreement involves setting out plans to help co-ordinate the roll-out of more offshore wind capacity, including by correctly timing the offering of government tenders to independent companies, and setting out provisional ideas for subsidy programs.
The chief executive of WindEurope, Giles Dickson, said: ““The agreement signed in Luxembourg today is a major step forward to fully realising the potential of offshore wind in Europe. It is a good combination of top-down and bottom-up: top-down political commitment to take bottom-up practical action to reduce costs and facilitate the deployment of offshore wind. We congratulate ministers for the ambition they have shown and the Dutch presidency for having made this happen. It is a clear statement of intent that gives confidence to the offshore wind industry and will help drive further investments.”
He also praised the simultaneous publication of the open letter from the energy companies, saying: “The industry has reinforced the new commitments of the 10 governments by making its own new commitment on cost reduction for offshore wind. Costs can continue to come down quickly, but the volumes must be right. The main challenge facing offshore wind today is the visibility of market size and regulation after 2020. Clear targets for deployment and tendering will unlock new investments, reduce the cost of capital and allow us to meet the cost reduction target. We now look to the 10 member states to deliver on the work programme. The industry stands ready to support. Together we can make offshore wind a central piece of a secure, affordable and sustainable energy system in Europe.”
