Tenders show costs falling sharply
Last month's column briefly mentioned the record low price that Dong Energy bid for the 350MW Borssele 1 and 2 wind farms off the Dutch coast.
The €72.7/MWh price was significantly lower than any prices seen so far, and around EUR30/MWh cheaper than the previous lowest price — Vattenfall's €103.1/MWh bid for Horns Rev 3 in Denmark.
Taken together, the two contracts give a strong indication that the capital costs of offshore wind are coming down, although it should be noted that the capital costs of the grid connection will not be paid by either developer. Vattenfall suggested that Horns Rev 3 will cost "over €1 billion", which corresponds to about €2,500/kW.
The two 350MW Dutch projects will benefit from an excellent wind speed of around 9.5m/s, so the capacity factor of the turbines is likely to be more than 50%. If Dong can improve on the Danish build price, and squeeze operation-and-maintenance costs, that will allow the projects to be financed with a reasonable rate of return.
Nuclear bill rises as wholesale prices fall
The UK's National Audit Office (NAO), which is charged with scrutinising the cost-effectiveness of government policies, recently published a report that examined the economics of electricity generation in the UK. It looked, in particular, at the additional cost to the consumer of the proposed new nuclear power station at Hinkley Point.
The NAO concluded that top-up payments through the contract for difference (CfD) negotiated by the government's energy department would cost consumers £29.7 billion (€34.2 billion) over the 35-year life of the contract.
This has increased from £6.1 billion since the strike price of £92.5/MWh was agreed in 2013. The increase is due to a fall in wholesale electricity prices in the intervening period.
The supporting analysis shows how estimates of the levelised cost of solar, wind and nuclear have changed over the years (see top chart). In 2010, solar was significantly more expensive at around £180/MWh; offshore wind came next at around £140/MWh, while nuclear and onshore wind were both at just under £100/MWh.
In six years, solar went from dearest to cheapest, and is now roughly on a par with onshore wind at just over £50/MWh. Nuclear costs have risen to more than £100/MWh, putting it roughly on a par with offshore wind. Further reductions in offshore wind costs may be expected in the light of Dong's Borssele bid (see previous story).
Solar shows the biggest fall in US capital costs
The Union of Concerned Scientists has published projections of the capital costs for the main renewable-energy technologies in order to analyse the technical and economic feasibility of the US Environmental Agency's Clear Power Plan (see bottom chart, below).
The trend of rising nuclear-power costs is reflected in the projection, which starts at $5,000/kW (EUR4,500/kW) in 2010, rising to $5,420/kW in 2020, after which it stays constant. Offshore wind, in shallow water, falls from $5,450/kW in 2010 to $3,950/kW in 2020. That is likely to be a pessimistic projection, in the light of the recent Danish and Dutch tenders
Utility solar PV falls sharply from $4,464/kW in 2010 to $1,647/kW in 2020. That is very similar to the figure for onshore wind, but the higher capacity factor of onshore wind means its generation costs will be lower. The NAO report however, suggests that onshore wind and solar PV generation costs are now broadly similar.
AT A GLANCE - THIS MONTH'S REPORT CONCLUSIONS
Nuclear Power in the UK, National Audit Office, July 2016 The extra cost to consumers of the proposed nuclear power station has risen due to a drop in wholesale electricity prices. Nuclear cost estimates have risen in the past six years, those of solar PV and wind have fallen.
Accelerating towards a clean energy economy, Union of Concerned Scientists, May 2016 Tabulates capital cost projections of wind and PV to 2050.
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