Back in January, I wrote a blog titled Emerging Renewable Risks of 2012, where I discussed the uncertainty of renewable energy globally. I’m happy to report that a recently published Crown Estate study shines some light on the subject of offshore wind. Thus it would seem that the renewable energy future is far from uncertain, at least in the UK.
James Lawley (a Willis graduate) and I recently took part in a series of interviews and discussions with renewable industry leaders for the purposes of the Crown Estate commissioned report titled Offshore Wind Cost Reduction Pathways Study.
With PWC as lead consultants, assembled were the renewable industry titans, from the manufacturers, to the financiers, to the civil servants and to us, the insurance representative.
Renewable Energy is Here to Stay
The findings of the report make for an interesting read. The esteemed Crown Estate puts into picture the certainty, not uncertainty, of renewable energy and in this particular instance the importance of it at a government policy level in securing the UK’s energy future. The study affirms that renewable energy is here to stay:
For the UK, offshore wind is the story of many successes. We have the world’s biggest offshore wind market, the world’s most attractive investment environment, and an unparalleled record of deployment. Five of the ten largest offshore wind farms – including the top two – are in British seas.
We believe that the offshore wind industry can and must evolve to be more competitive and forward looking. That in turn will boost the security of our energy supplies, create jobs, and attract further inward investment.
Offshore Wind Pricing Can be Lower
The study, at nearly 90 pages, is not a quick read. However, distilling the essence, it is clear that the current pricing of offshore wind energy can be reduced significantly. The proposed target is to reduce it from £140 MW/h to £100 MW/h. Through various discussions with professionals in the industry, four possible pathways are identified which I leave you to read to your heart’s content. Graphically, the paths would look like this chart.
Interestingly, the Levelised Cost of Energy (LCOE) compares favourably to other low carbon capital costs of generation and will only improve over the pathways. I’ve mentioned it before but today when I looked, Coal was spotting around $100 per metric ton, Natural Gas was spotting at circa $2.3 per million Spark Spread and Wind? Let me see… we giving it away!”
Price is always an interesting factor in low carbon energy. Michael Liebreich, the boss at Bloomberg New Energy Finance, made this video which illustrates the point perfectly. He says that, “The cost of renewable energy is already much lower than most people think, and coming down all the time. The world is shifting to abundant, secure, cheap, clean energy. It will take many decades, but the shift is inevitable.”
We’re on Track to a Renewable Future
Naturally, as with all these studies, a whole host of factors are assumed and the modeled variables can change as quickly as the England squad for Euro 2012! There is always detail in the appendices and these variables aren’t withstanding the possibility of a Euro collapse and its potential contagion effects upon finance for years to come, which will effect more then just offshore wind financing.
However, what this study offers is hope and a clear framework of certainty for the future of renewable energy. This report is affirmation that the DECC’s benchmark of £100 MW/h for 2020 is absolutely possible. In this regard, renewable energy has a strong future indeed!