Focus on the cost of offshore wind energy
It has been claimed that the cost of energy generated by offshore wind turbines is about to fall spectacularly. According to a report issued by the Court of Audit, Focus on the Cost of Offshore Wind Energy, however, unsubsidised offshore wind farms are unlikely in the near future.
Unsubsidised wind farms unlikely in near future, despite sharp fall in costs
The Court of Audit’s study found that the ambition of reducing the cost of offshore wind energy by 40% between 2013 and 2023 is within reach. The cost quoted in the winning tender for the Hollandse Kust (zuid) wind farm, which was awarded this year and is due to come on stream in 2022, is 70% lower than estimated in 2013.
This sharp fall in the cost quoted in the winning tender is due in all probability to innovation, economies of scale, lower raw material costs, better financing arrangements and firmer government assurances.
The government decides where, when and how new offshore wind farms will be built. Private parties then build and operate them. Their income is derived from the sale of the energy they generate and the subsidies they receive from the government. Four wind farms are currently being operated in the North Sea: Egmond, Amalia, Gemini and Luchterduinen. Licences have already been awarded for three new farms: Borssele I-II, Borssele III-IV and Hollandse Kust (zuid) I-II.
Without subsidies, however, offshore wind farms cannot supply energy to the national transmission grid. The Court of Audit refers in its report to the subsidy awarded to the Net op Zee grid, which feeds the energy generated offshore into the onshore electricity grid. The national grid operator, TenneT, a state owned enterprise, receives a subsidy for installing and maintaining Net op Zee. A subsidy of €4 billion has been set aside for it to connect the wind farms that will be built up to 2023. The subsidy will be awarded from the Sustainable Energy Storage (ODE) programme, which is funded by private individuals and companies through their energy bills. The wind farms off the Dutch coast that will come on stream in 2022 will therefore not be the ‘first wind farms in the world to be built without subsidy’, as the Minister of Economic Affairs and Climate Policy wrote to the House of Representatives in March this year.
Why did we audit the cost of offshore wind energy?
This audit was prompted by claims made by the Minister of Economic Affairs and Climate Policy that the cost of offshore wind energy would fall faster and further than expected and that the first wind farms in the world to be built without a subsidy would be erected off the coast of the Netherlands. The Court of Audit investigated whether these claims were true.