Costs of offshore wind energy 2018

12-02-2019 | Publication

The Dutch Ministry of Economic Affairs and Climate requested PBL to conduct an update on SDE+ base amounts and grid connection costs of offshore wind energy in the Netherlands, based on current market insights. This note presents the results of the update, which were drawn on those of past offshore wind tenders in the Netherlands and the trends in surrounding offshore wind energy markets.

Offshore wind tenders

The designated wind farm zones opened for tender in the upcoming 2019–2026 period, as outlined in the Netherlands’ Offshore Wind Energy Roadmap 2030, feature the following zones: Hollandse Kust (Zuid) sites III and IV, Hollandse Kust (Noord), Hollandse Kust (West), Boven de Wadden Eilanden and IJmuiden Ver.

Production costs for offshore wind energy

The production costs for offshore wind energy, calculated using the methodology of base amounts over a 25-year lifetime, average out at 0.047 EUR/kWh. In the analysis, the distribution of costs over the various sites comes to 0.007 EUR/kWh per site. These costs do not include grid connections. The most cost-effective zone is Hollandse Kust (Zuid) sites III and IV, while the highest costs are incurred in Boven de Wadden Eilanden and IJmuiden Ver.

The higher costs (excluding grid connection costs) in zones such as IJmuiden Ver come from the cost components that are linked to site characteristics, such as distance to the nearest harbour, water depth and soil conditions. In comparison with last year’s cost update, the cost differentiation between sites has increased as overall turbine costs declined. This development shows that the costs categories most impacted by site characteristics are turbine installation and maintenance. Examples are the 15% difference in investment costs and 35% difference in O&M costs between IJmuiden Ver and Hollandse Kust (Zuid) sites III and IV.

Cost disparities among offshore wind farms

There are large cost disparities among the designated offshore wind farms, with respect to their required electricity grid connection. Costs range between 0.017 EUR/kWh for Hollandse Kust (Zuid) sites III and IV, and 0.028 EUR/kWh for IJmuiden Ver. This cost component is influenced by two aspects; namely, the wind farm’s distance to the grid and the broader deployment strategy of a grid at sea, after 2023.

The broader deployment strategy of an electricity grid at sea after 2023 depends on various policy and design choices. This may include the set-up of artificial islands, the combination of wind farm connections, interconnector capacity between neighbouring electricity markets, the use of direct current to connect wind farms or, in a broader sense, the development of a North Sea grid. It is important to keep in mind that these types of policy and design choices will have a significant impact on the network costs of offshore wind farms.