The ambitious 2020 Levelised Cost of Energy (LCOE) target of £100/MWh for offshore wind has been achieved four years ahead of forecast. Further opportunities for cost reduction are being developed and LCOE for offshore wind will continue to fall over the next decade. UK projects that made a Final Investment Decision (FID) in 2015/16 achieved an average Levelised Cost of Energy (LCOE) of £97/MWh; a 32% reduction from £142/MWh for projects reaching FID in 2010/11.
The reduction in LCOE has been driven by the development of turbines with higher power ratings, increased competition and the lower cost of capital as the risk profile of the sector improves. In a significant year, 7MW and 8MW turbines have become standard for new projects and the announcement of the 2nd CfD auction round has helped to provide visibility for the sector.
Further significant cost reductions can be achieved over the next decade from technology innovation and collaboration across the sector. It is recommended that a cost reduction implementation plan is developed to drive the activities needed to deliver new ambitious targets. This will secure offshore wind’s leading role in the UK’s low carbon future and maximise UK economic benefit through supply chain growth.