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The price of rapid offshore wind expansion in the UK: Implications of a profitability assessment

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  • Ederer, Nikolaus

Abstract

With a total installed capacity of 5.1 GW and an expansion pipeline of 11.9 GW, offshore wind constitutes a story of success in the UK. The necessary foundation for this outstanding attainment is an energy policy that offered entities enough incentive in the form of profit and certainty so that investing in a rather immature technology became attractive. In this article, the profitability of 14 early-stage offshore wind farms (1.7 GW) is assessed with the objective to review at what price this rapid expansion occurred. Within the framework of a developed standardised financial model, the data from the offshore wind farms' original annual reports were extrapolated, which made it possible to simulate their profitability individually. The results reveal a return on capital in the range of more than 15% and a decreasing trend. This implies that the levelised cost of electricity from the first offshore wind farms were underestimated in the past. In addition, a stress test revealed that the operation of some farms might become unprofitable towards the end of their planned lifetimes. The particular reliable data basis and novel modelling approach presented in this article ensure that this study is of high interest for offshore wind stakeholders.

Suggested Citation

  • Ederer, Nikolaus, 2016. "The price of rapid offshore wind expansion in the UK: Implications of a profitability assessment," Renewable Energy, Elsevier, vol. 92(C), pages 357-365.
    • Handle: RePEc:eee:renene:v:92:y:2016:i:c:p:357-365
    DOI: 10.1016/j.renene.2016.02.007
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    Cited by:

    1. García-Álvarez, María Teresa & Cabeza-García, Laura & Soares, Isabel, 2018. "Assessment of energy policies to promote photovoltaic generation in the European Union," Energy, Elsevier, vol. 151(C), pages 864-874.
    2. Satir, Mert & Murphy, Fionnuala & McDonnell, Kevin, 2018. "Feasibility study of an offshore wind farm in the Aegean Sea, Turkey," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2552-2562.
    3. Schweizer, Joerg & Antonini, Alessandro & Govoni, Laura & Gottardi, Guido & Archetti, Renata & Supino, Enrico & Berretta, Claudia & Casadei, Carlo & Ozzi, Claudia, 2016. "Investigating the potential and feasibility of an offshore wind farm in the Northern Adriatic Sea," Applied Energy, Elsevier, vol. 177(C), pages 449-463.
    4. García-Álvarez, María Teresa & Cabeza-García, Laura & Soares, Isabel, 2017. "Analysis of the promotion of onshore wind energy in the EU: Feed-in tariff or renewable portfolio standard?," Renewable Energy, Elsevier, vol. 111(C), pages 256-264.
    5. Takvor H. Soukissian & Dimitra Denaxa & Flora Karathanasi & Aristides Prospathopoulos & Konstantinos Sarantakos & Athanasia Iona & Konstantinos Georgantas & Spyridon Mavrakos, 2017. "Marine Renewable Energy in the Mediterranean Sea: Status and Perspectives," Energies, MDPI, vol. 10(10), pages 1-56, September.
    6. Geissmann, Thomas, 2017. "A probabilistic approach to the computation of the levelized cost of electricity," Energy, Elsevier, vol. 124(C), pages 372-381.

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