The Dutch research programme FLOW (Far and Large Offshore Wind energy) shows that a well-coordinated approach between industry, knowledge institutes and government can achieve 40% cost reduction in ten years in the offshore wind sector. In about ten to fifteen years, offshore wind should be able to manage without subsidies.
On 15 June the final results of the Dutch FLOW programme on Far and Large Offshore Wind energy were officially presented to Minister Henk Kamp of Economic Affairs during the Dutch Wind Days. Perhaps the most important takeaway from the FLOW book is that cooperation between industry, knowledge institutes and government can achieve considerable cost reductions in offshore wind.
In fact, cost reductions are already happening, as was shown when Kamp revealed, at the end of May, that bid prices for two offshore wind energy concessions off the coast of Zeeland, 760 MW in total, came in âconsiderably lowerâ than the maximum price that had been set at 12.4 cts/kWh. He did not say how much lower â this will be revealed in mid-August â but they were âlower than expectedâ.
“What would happen to our business if policy makers decide to abolish the subsidies? The best way to counteract that uncertainty is to become subsidy-independent”
This was exactly the signal that the offshore wind energy industry in the Netherlands wanted to convey, and that authorities wanted to receive. It is the result of consistent efforts at cost reduction that have been made in the Dutch offshore wind sector, at least since 2010 when the FLOW programme was started. In 2013, when the Dutch government, energy industry and NGOâs signed an âAgreement for Sustainable Growthâ, a goal of 4450 MW of offshore wind capacity was set for 2023, with the condition that offshore wind farms would need to produce at 40% lower costs in 2024 compared to 2014. The Dutch subsidy programme has been largely adapted to that cost curve.
This cost reduction will not yet get offshore wind power to a competitive level with fossil fuels within the current market conditions (which do not include societal cost), but it would be a giant step. Moreover, if the same cost reduction pace is sustained, a competitive level could be reached between 2025 and 2030.
Strategic activity
The 40% cost reduction target originated from FLOW, a five-year R&D programme in which industry, research institutions and utilities participated. The participants set themselves this target because they realised that offshore wind could only grow significantly if costs are drastically cut. As one of the FLOW participants from industry said: âOffshore wind is a strategic activity for our company. But what would happen to our business if policy makers decide to abolish the subsidies? The best way to counteract that uncertainty is to become subsidy-independent.â
The strong input of business is an important characteristic of the FLOW consortium. Companies that were heavily involved in FLOW include the following:
- Maritime constructors like Van Oord and Ballast Nedam, by 2005-2010 already quite well positioned in offshore wind construction, wanted to preserve and increase their business in a sector that promises to double or triple in the next ten years.
- Utilities identified offshore wind as the main component in renewable energy in the Netherlands within the next decades.
- TSOs took up the challenge to develop offshore solutions for connections to the grid.
- Turbine manufacturers: entrepreneurs identified opportunities to develop new offshore turbines almost from scratch.
- Service suppliers and consultants recognised the potential for using new techniques in highly complicated turbine systems.
Small improvements
The FLOW cost models show that cost reduction in offshore wind energy is the result of a large number of relatively small improvements, often contributing just 1 to 2% of the total. The individual cost reductions cannot simply be added up, because they are often interrelated. For instance, an improved operation control that would individually contribute 2% of cost reduction cannot simply be added to a 5% rotor improvement resulting in a 7% improvement. Neither can you apply a new type of monopile (on which the turbine is built) and a new type of foundation at the same time.
“Parties which worked in the same field but never talked to each other, now work together. This has placed offshore wind high on the Dutch political agenda”
Some improvements have more potential than this typical 1 or 2% reduction. That applies for example to the turbine itself. The increasing size of turbines on the international market, presently reaching 8 MW. and even more importantly, larger rotors, up to 80 metres in length, is responsible for up to roughly 10% of the cost decrease over five years. The foundation and the design of a wind farm can also contribute substantially, up to roughly 5%. In addition, financing is an important factor. Low interest rates (such as we have now), but also increased confidence and a low risk premium, can reduce costs by up to 5% or more.
 A summary of cost reductions for nearshore, offshore and far offshore wind turbines in five years of FLOW
Cooperation
One of the most important conclusions that can be drawn from the FLOW programme is that achieving the cuts through innovations needs quite an extensive and sustained R&D effort. What counts even more is cooperation and information exchange within the sector. R&D needs input from industry and vice versa. Government too is an important partner in the process, to deliver long term market stability, R&D funds and efficient permitting and project tender procedures.
As RWEâs CEO Peter Terium, chairman of the FLOW board, concluded âThe cooperation at CEO level is special. Parties which worked in the same field but never talked to each other, now work together. This has placed offshore wind high on the Dutch political agenda.â
Editorâs Note
Rolf de Vos is journalist and author of âThe FLOW book: Competitive through cooperationâ, which was presented to the Dutch Minister of Economics Henk Kamp on 15 June at the Wind Energy Days in Rotterdam.
Ernst van Zuijlen is programme director FLOW and TKI WOZ (Top knowledge Consortium on Wind at Sea.)
[adrotate group=”9″]
Csaba says
Are the dutch aware of the danes are doing?
Jens says
Big question mark. 40% lower offshore will not get offshore in the netherlands anywhere near present day offshore electricity in Denmark.
Actually the latest bid for Hornsrev3 was won by Vattenfall using Vestas 164 at 77Ăre/kWh in the 8-10 year FIT periode. If you calculate the price per kWh over the entire 25 year design life and use average Nordpool kWh for the 15-17 years Hornsrev3 operate on pure market terms you get approximately âŹ60/MWh.
This is less than half the cost that the Flow report predict is feasible a few hundred kilometers away in the same waters in about 10 years time. Get real please.
The next auction for Kriegers Flak is expected to be won at a lower bid still.
Vestas has for years lowered their prices. In the last two year the annual decrease in turbine cost has been 9% annually and they have clearly stated that this trend is remarkably stable.
Vestas is not without competitors. The new Adwen 8MW turbine now being erected at Ăsterlid feature a 180 rotor that interestingly weighs the same as the Vestas 164 rotor despite having a swept area that is 25.500 squaremeter versus 21.000.
Our Lomborgian government has done everything possible to block renewables and to further fossil fuels. Among the strange things they did was to drop a standard permission to develop specific coastal near zones. The competing companies had already used millions to prepare they tender and they unanimously declared they would develop the hitherto cheapest offshore wind power which means offshore at âŹ40/MWh.
I doubt any new built fossil fuel power plant will be competitive at that price point.
The interest in offshore is that Europe in its entirety can be powered with electric power including electrifying all transportation just by developing the shallow parts of the North Sea. Lowering the price to a point where this is definitively economically attractive is not outside the scope of possibilities.
Rolf de Vos says
Dear Jens,
Thank you for your reaction. We donât think there is much difference between our cost calculations for the Dutch situation and the actual Danish figures. In your calculations you take a few short cuts, while LCoE cost calculations need proper definitions. For instance, you seem to translate the 103 Euro per MWh costs for 15 years of Horns Rev 3 into a 25 years lifetime, which explains the 60 Euro/MWh level. Also, in your calculations the grid connection costs are excluded (paid for by Energynet.dk).
The FLOW cost model compares apples with apples. The FLOW cost model regards technical and offshore wind specific progress only, as a result of R&D, competition and standardisation, assuming all other circumstances (like steel price, interest rates, 20 year lifetime) unchanged. FLOW shows that LCoE has gone down by 20% in 5 years, and a further 20% is achievable in the next 5 years. The follow-up programme of FLOW even expects costs to dive well below 70 Euro/MWh before 2030.
The actual decreasing costs of capital (mainly caused by the ECB politics), low steel prices, low costs of ships, grid costs paid for by TenneT and also longer lifetimes justify our optimism about very low bids for the 700MW Borssele tender.
In sum, Denmark and the Netherlands donât differ that much in offshore wind costs. Borssele may have some less wind, deeper water and is a bit further offshore than Horns Rev 3. But the perspective of 1400 MW in the same area and a very good concession scheme (largely similar to the
Danish) explains why we expect very competitive bids, that hopefully will be published by the Dutch government in July.
Ernst van Zuijlen
Rolf de Vos
Timo van Druten says
I understand the report itself doesn’t mention the measures leading to the cost reduction, but in Dutch newspapers reference is made to informal statements of one of the scientists of ECN that the turbines will increase in height, i.e. up to 300 meters for onshore turbines and 350 meters for offshore turbines. Especially, the increase in height for onshore turbines is worrisome in a country as densely populated like the Netherlands. The erection of 200 meter onshore turbines in Drente has lead and will continue to lead to be a fission fungus between locals in the area.
An article in newspaper Trouw revealed the tensions between the proponents and opponents, the people who have decided to leave the area and take their losses, the ones who are not able to leave and have to face the consequences and the distrust in the decision-making by the Dutch Federal government.
Joris van Dorp, MSc says
The Dutch federal government is enforcing the building of these turbines as part of a package of measures contained in the Crisis and Repair Law enacted after the 2008 GFC. This law allows the government to build wind turbines onshore without the need to consult the local population. In the proces, vast amounts of environmental capital are destroyed in the form of breaking up landscape beauty and rural peace and quiet by erecting wind towers and billing households for their subsidy.
Cost reductions achieved by this program are illusory. As soon as the Crisis and Repair Law is finished, the cost of breaking up the countryside will have to be included again in the cost of wind energy.
Hans says
The article is about OFF-shore.
Mike Parr says
Echoing the comments of the other posters it might be good to start a line of questioning with respect to Dutch off-shore with the following.
Observation: The Danes offer “shovel ready projects for auction – all permits have been obtained.
Question: is this the case in NL?
Observation: The current Danish round has max price of 9.4ecents/kWh & 50k full load hours, giving an LCOE that is probably going to be sub 6ecents/kWh
Question: what time frame does the Nl subsidy cover? is it indexed? (the Danes do not index).
Question: if the Danes can set the limit at 9.4ecents (current auction round) – why not NL?
There may be very good reasons why NL off-shore costs are higher than Danish costs. However, given subsidies are involved perhaps these differences need to be “ventilated” as our French cousins would say. This is particularly the case, given that the Danes seem to be on a off-shore cost trajectory which is pointing towards price parity at wholesale (certainly if it is vs UK wholesale prices) within 5 years.
Karel Beckman says
Joris and Timo, this article is about offshore wind. You’re talking about onshore.
Jon van Diepen says
I’ve done almost the same cost reduction research in my thesis. However my results hardly could find a (internal) reduction potentials. In this thesis (page 78) I’ve also compared the cost price reduction potentials to FLOW calculation. The main differences are i) including internal and external wake effects ii) Including new technology risk and support scheme risk iii) excluding flexibility in park configuration. However there are some external reduction potentials like historicly low interest rates which do have an impact. Also I suggested in my thesis to include profile and balance costs into the cost price calculation as these are included in the Dutch support scheme as well. The standard LCOE cost price calculation will not fully work for intermitted sources like wind energy.
Mike Parr says
I took a look at your thesis – quite interesting. Is there a reason why you did not look at Danish sites? I only ask because it is quite easy to obtain daily output data per wind turbine – which is quite good for things like capacity factors. I don’t argue with your choice of sites – but some of the Danish sites are doing much more like 50% +/- and not 44%. Something else to consider is asymmetry – far more wind in winter (& less in summer) – not important when in a regime that give subsidies – but important when you are (as is the case after 50k hours in Denmark) and when wholesale prices are higher in winter than summer. Just some thoughts – I’ll take a closer look at the thesis a bit later.