Tur­bines go full cir­cle – from ob­ject of de­ri­sion to pow­er­ing ev­ery home

The Daily Telegraph - Business - - Business - RACHEL MILLARDLLA­RD ANAL­Y­SIS

Plans to of­fer off­shore wind de­vel­op­ers guar­an­teed prices of more than £100 per MWh to try to en­cour­age the in­dus­try were met with de­ri­sion less than a decade ago.

Among the scep­tics was Boris Johnson, Lon­don mayor at the time, who in­sisted wind farms couldn’t “pull the skin off a rice pud­ding” – as he wryly re­minded ob­servers this week.

How times have changed. The elec­tric­ity price guar­an­teed to UK off­shore wind de­vel­op­ers has fallen by 70pc and Johnson, now Prime Min­is­ter, is hang­ing his hat on them to help the coun­try cut car­bon emis­sions to net zero and power “ev­ery home” within the decade.

In 2014, the gov­ern­ment was dish­ing out con­tracts guar­an­tee­ing de­vel­op­ers elec­tric­ity prices of above £140 per MWh. Last year, de­vel­op­ers ac­cepted guar­an­tees as low as £40 per MWh, fu­elling ex­cite­ment that no ac­tual pay­ments will be re­quired. Such gains are re­flected in fall­ing costs to pro­duce off­shore wind around the world, as com­mit­ments to cut car­bon emis­sions leads to poli­cies that en­cour­age com­pe­ti­tion.

Sub­si­dies such as the guar­an­teed elec­tric­ity prices in the UK have been key, giv­ing cer­tainty to in­vestors about re­turns and there­fore low­er­ing the cost of fi­nance. Fi­nanc­ing costs ac­count for 35pc to 50pc of over­all gen­er­a­tion cost, ac­cord­ing to the In­ter­na­tional En­ergy Agency (IEA).

Ef­fi­ciency has also been fu­elled by huge ad­vances on tur­bine height. De­vel­op­ers have com­peted to build taller, wider tur­bines that can cap­ture more wind per ro­ta­tion and bet­ter wind speeds.

From the first wind tur­bine in the US in the late 19th cen­tury, which re­port­edly had a 12kW ca­pac­ity and a 17m ro­tor span, Siemens Gamesa ear­lier this year un­veiled a tur­bine with 14MW ca­pac­ity and ro­tor blades span­ning 222m. Now de­vel­op­ers are com­pet­ing to build tur­bines on float­ing plat­forms far out in the ocean. Devel­op­ment has cre­ated bet­ter sup­ply chains and low­ered costs for mak­ing and in­stalling tur­bines. The IEA says that the av­er­age up­front cost to build a 1GW off­shore wind project, in­clud­ing trans­mis­sion costs, was $4bn (£3bn) in 2018, but is set to drop by 40pc over the decade.

But it is worth re­mem­ber­ing that there are other costs to wind power. Wind is, of course, in­ter­mit­tent, and there­fore, like so­lar power, needs care­ful man­ag­ing to bal­ance sup­ply and de­mand. It also does not pro­vide the grid with the sta­bil­is­ing ef­fects of gas and nu­clear power sta­tions. In the UK, the costs of man­ag­ing these ef­fects is cur­rently spread be­tween in­dus­try, rather than added to gen­er­a­tors’ costs.

It’s also worth not­ing that costs are not nec­es­sar­ily on a per­ma­nent down­wards path. In the UK power mar­ket, the whole­sale price of elec­tric­ity is pushed down by re­new­able en­ergy such as wind, as there is no fuel to pay for.

Lower whole­sale prices could end up re­duc­ing re­turns to de­vel­op­ers, po­ten­tially push­ing back up the costs of fi­nanc­ing, low­er­ing the al­lure of in­vest­ing, and de­creas­ing com­pe­ti­tion.

Af­ter the gains, wind must be care­ful not to be vic­tim of its own suc­cess.

‘Siemens Gamesa ear­lier this year un­veiled a tur­bine with 14MW ca­pac­ity and ro­tor blades span­ning 222m’

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