Offshore Wind Could Hit Price Parity in UK by 2025, Grow Five-Fold by 2030
Offshore wind capacity in the United Kingdom could reach price parity by 2025 and grow as much as five-fold by the 2030, as long as turbine producers and their investors receive a few more years of government-sanctioned “contracts for difference” that have helped drive the industry’s rapid growth so far, according to a report by Berlin-based Aurora Energy Research.
“Guaranteed prices for power secured through auctions for the contracts have already halved in just a few years, to as low as £57.50 for the latest planned offshore wind farms,” notes Business Insider UK. The study concludes that prices will hit market levels by 2025, turning offshore wind into a “zero-subsidy” electricity option.
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“Some future price or merchant risk is transferred to the government and ultimately consumers,” acknowledged Aurora Senior Project Leader Hugo Batten. But he said that strategy is entirely appropriate: “Stabilizing future market revenues via contracts for difference significantly reduces risks for investors, and is critical in attracting financing and supporting further offshore wind buildout.”
As well as urging UK ministers to “continue their policy of ensuring a guaranteed price for electricity generated by offshore wind,” the report recommends a “level playing field to allow offshore wind to gain payments for providing balancing and other services to the grid, such as ramping up and down generation rapidly to help balance supply and demand,” Business Insider notes.
Such government measures “could help offshore wind capacity ramp up from six gigawatts in operation today to 30 gigawatts by the 2030s,” notes reporter Philip Gates, “significantly reduce carbon emissions from the power sector overall, and cut system costs by 7%, delivering annual savings of £1 to £2 billion for consumers by the 2030s.”