The true cost of wind power is staggering and, despite wild claims to the contrary, is becoming more even expensive, not less so.
Dr John Constable and Gordon Hughes have done what the mainstream media have never done and what renewable energy rent seekers would rather they didn’t: they’ve opened the books of account to show that where the true cost of onshore wind and solar is staggering, the cost of offshore wind power is out of this world.
The Costs of Offshore Wind Power: Blindness and Insight
Briefings for Britain
John Constable and Gordon Hughes
21 September 2020
Briefings for Britain
John Constable and Gordon Hughes
21 September 2020
The dramatically falling costs of renewables are now a political, a media, and conversational cliché. However, the claim is demonstrably false. Audited accounts show that far from getting cheaper, wind power is actually becoming more expensive. The failure of the British civil service to detect this fact and, hence, to protect the consumer and taxpayer from the consequences of the looming failure of the renewables sector raises important questions about the analytic competence of the Whitehall machine.
If we asked a random sample of broadsheet newspaper readers about the economics of offshore wind, it is practically certain that a majority of those interviewed would say they believed it was now cheap. A similar survey of investment analysts and advisors might return the same answer. Politicians and journalists would be certain about the matter. However, if pressed for evidence none of these groups could do much more than point to secondary sources. Some might remember that the Greenpeace sponsored an extensive advertising campaign in 2017, with full page adverts in the press. Others might point out that official bodies present offshore wind as the cheapest source of electricity. Those in financial circles might also indicate that almost every report or lengthy article on the future role of offshore wind power is accompanied by a chart which claims to show the rapid decline of costs over the last one or two decades, perhaps with forward projections to 2030 or 2040.
Incredible though it may seem, none of this is true. Neither offshore nor onshore wind has become cheaper; indeed, both have become more expensive over the last two decades.
How do we know this? Because one of us, Gordon Hughes, has compiled data from audited accounts on the capital and operating costs of 350 onshore and offshore wind farms in the United Kingdom, a set which covers the majority of the larger wind farms (> 10 MW capacity) built and commissioned between 2002 and 2019. It is the largest study of its kind to date and will be published shortly by the charity Renewable Energy Foundation, which John Constable directs.
In summary, analysis of the data reveals unequivocal findings:
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The actual costs of onshore and offshore wind generation have not fallen significantly over the last two decades and there is little prospect that they will fall in the next five or even ten years.
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While some of the components which feed into the calculation of costs have fallen, the overall costs have not. For example, the weighted return for investors and lenders has declined sharply, especially for offshore wind, because of a fall in perceived risk. In addition, the average output per MW of new capacity may have increased, particularly for offshore turbines. However, these gains have been offset by higher operating and maintenance costs (O&M).
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Far from falling, the actual capital costs per MW of capacity to build new wind farms increased substantially from 2002 to about 2015 and have, at best, remained constant since then. Reports of the costs of building new offshore wind farms in the early 2020s imply that their costs may fall by 2025, but such reports are consistently unreliable as well as being incomplete. Final costs tend to be significantly higher, so little weight can be attached to forecasts of future costs.
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Far from falling, the operating costs per MW of new capacity have increased significantly for both onshore and offshore wind farms over the last two decades. In addition, operating costs for existing wind farms tend to grow even more rapidly as they age. The increase for new capacity seems to be due to the shift to sites that are more remote or difficult to service. Much of the increase with age is due to the frequency of equipment failures and the need for preventative maintenance, both of which are strongly associated with the adoption of new generations of larger turbines – both onshore and offshore.
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Turbine manufacturers and wind operators appear to be relying on an increase in load factors (a measure of the generator’s energy productivity) via (i) an increase in hub heights to take advantage of higher wind speeds, and (ii) changes in the engineering balance between blade area and generator capacity. However, the inferior reliability of new turbine generations leads to a more rapid decline in performance with age, so that the ultimate effect on average performance over the lifetime of new turbines is not clear.
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The combination of increasing operating and maintenance costs with the decline in yields due to ageing means that at current market prices the expected revenues from electricity generation will be less than expected operating costs after the expiry of contracts guaranteeing above-market prices. The length of these contracts has been reduced, implying a need to recover capital costs over a shorter economic life which pushes up the effective capital charge.
2 Comments
David Victor Lawson · July 1, 2021 at 9:02 am
The cost may be rising as costs will but how does one MW of renewable electricity compare with one MW of conventional produced electricity. The above report makes no comparison.
Christopher Hamilton · July 7, 2021 at 6:37 am
I think this report needs to be sent to every politician in the country !