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New Study Sees UK Offshore Wind Growing Five-Fold, Subsidy-Free, in 2030's

Offshore wind power capacity in the United Kingdom (UK) could soar five-fold, to 30GW, by the 2030's, fueled by ongoing technological advances and a “zero-subsidy CfD (contracts for difference) regime that could yield consumer savings of GBP20 (US$28) per annum, according to a new market research report from Berlin-based Aurora Energy Research. 

A world leader in offshore wind power R&D as well as installed capacity, the UK stands to realize society-wide benefits by continuing to support and foster growth in the renewable energy sector, Aurora Energy Research says. “Offshore wind is seen increasingly not only as a low carbon technology, but also as a key part of the GB (Great Britain) power system – able to provide not just power, but also potentially contribute to security of supply and balancing services,” the Berlin-based energy market research specialist says. 

The UK was the world’s largest offshore wind market, accounting for slightly less than 36% of global installed capacity as of year-end 2016, according to GWEC, the Global Wind Energy Council.  Germany ranked second at 29%, and China surpassed Denmark with installed capacity growing to represent 11%.   

Offshore wind power in the UK

All told, ten European countries accounted for nearly 88% (12,631 MW) of all offshore wind installations. Denmark accounted for 8.8% of installed wind power capacity globally, the Netherlands 7.8%, Belgium 5% and Sweden 1.4%. Deployed capacity offshore other countries, including Finland, Ireland, Spain, Japan, South Korea, the USA and Norway made up the remainder. 

Prime Minister David Cameron's Conservative-led government banned subsidies for onshore wind farms. That led to a surge in newly installed capacity, which reached a record-high 2.6GW in 2017. New onshore wind power capacity is expected to plummet this year, however; falling to 0.94GW and further, to 0.37GW in 2019, RenewableUK forecasts.

Aurora Energy Research foresees the possibility of a much different scenario unfolding in the UK offshore wind power sector. Maturing of the offshore wind industry supply chain, aggressive competition, rapidly falling costs and greater clarity regarding government energy policy and support combined and created substantial optimism and momentum in the UK' s offshore wind sector in 2017, Aurora highlights. 

New economics for UK offshore wind

The cost of new offshore wind power generation in the UK has been cut in half over the past five years, The Telegraph highlights in a September 2017 news report. Offshore wind costs came dropped below £58 (US$ ) per MWh, according to auction results published by the UK government.  The sharp drop means that more offshore wind farm developers will be able to apply for the £294 million (US$  ) in available government funding pot. UK offshore wind power investment is expected to surge as high at £17.5 billion (US$  ) as a result. 

"This shows what can be achieved by providing the necessary certainty for investment, which drives down the cost of decarbonization, benefits customers and the wider economy, and creates highly skilled jobs and stimulates growth in rural economies," Energy UK chief executive Lawrence Slade was quoted as saying. 

In its latest study, the energy market research specialist maps out a prospective pathway that it believes could see UK installed offshore wind power capacity surge 500 percent higher to 300GW by the 2030's. Aurora believes that can happen on a subsidy-free basis given the institution of a well designed, zero-subsidy CfD scheme.  

Developers submitted subsidy-free bids in recent offshore wind power project auctions in Germany and the Netherlands, Aurora points out. In addition, attempts were made to pre-qualify for UK onshore wind power permits by submitting subsidy-free bids in the Capacity Market T-4 auction. Also noteworthy, National Grid announced a trial in which wind and solar power generators would be allowed to participate in grid frequency response markets this year. 

Offshore wind policy, market mechanisms

Aurora sets out two policy mechanisms it believes would boost UK offshore wind power deployment further over the course of coming decades.

First off, government should continue its current policy of providing revenue stabilization through the Contracts-for-Difference mechanism until 2025, when Aurora believes offshore wind costs will have dropped to the point where they will be competitive in the wholesale electricity market.

“Stabilizing future market revenues via Contracts for Difference significantly reduces risks for investors and is critical in attracting financing and supporting further offshore wind build out, albeit some future price or merchant risk is transferred to the government and ultimately consumers,” commented Aurora report author and senior project leader Hugo Batten. 

Secondly, Aurora believes UK government leaders and market regulators could level the power and energy market playing field by adjusting offshore wind regulations so as to open up opportunities to capitalize on additional revenue streams, such as grid balancing and ancillary services, in a manner similar to that instituted for distpatchable power generation or energy storage. The need for grid balancing and stabilizing services is increasing in parallel with growing variable renewable energy generation sources, Aurora notes. 

Opening up opportunities for offshore wind power generators to participate in these markets and provide these energy services would enable them to take better advantage of the full range of energy services offshore wind farms can provide, according to Aurora.

“This would allow offshore wind assets to 'revenue-stack'. Offshore wind has the technical capabilities to provide a range of balancing and ancillary services to the grid – in particular, the ability to ramp-up and down generation rapidly to help balance demand and supply,” according to Aurora's study.

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