Introduction - Wind Power Integration: Connection and System Operational Aspects - page 12

180

Offshore Onshore

160

140

120

100

80

60

40

6 7 8 9 10

Mean wind speed, hub height (m/s)

Figure 1.4 Indicative comparisons between offshore and onshore wind energy

prices

higher construction costs but these may be offset by higher wind speeds and higher
energy productivity. Operation and maintenance costs, similarly, depend on ease of
access. Generation costs (strictly speaking, prices) depend on institutional factors
and particularly the robustness of the support mechanism. If this is perceived to be
relatively risk-free, then developers may be content with a modest rate of return on
the capital investment (6-8%, for example). If, however, remuneration for the
electricity generated is not guaranteed, then investors are likely to demand a higher
rate of return (10-12%, say). The time for which premium payments are made will
also influence the generation cost.
To provide an indication of how onshore and offshore energy prices compare,
Figure 1.4 shows data for a range of wind speeds, with the following assumptions
(National Grid, 2013):

Installed costs: onshore, £1,456/kW, offshore, £2,214/kW ●

O&M costs: onshore, £57/kW/yr, offshore, £141/kW/yr ●

20 year depreciation, 8% (real) weighted average cost of capital ●

Based on these assumptions, onshore wind costs between £124/MWh at a site
with a wind speed of 6 m/s, down to £55/MWh at a site where the wind speed is
9.5 m/s. Offshore wind costs between £166/MWh at a site where the wind speed
is 7 m/s, down to £92/MWh at a site with a wind speed of 10 m/s. The International
Energy Agency (2013) quotes wider ranges; $50-160/MWh (£32-104/MWh at
July 2013 exchange rates) for onshore wind, and $150-340/MWh (£97-221/MWh)
for offshore.
As part of its Electricity Market Reform programme, the UK government is
proposing CfDs for renewable energy sources. Onshore wind is likely to be paid
£100/MWh and offshore wind £155/MWh.
Comparable electricity prices for gas and coal plant, according to the IEA,
are around $40-130/MWh for gas (£26-84/MWh), and $40-90/MWh for coal