Cost Development and Cost Drivers in UK Offshore Wind Farms
ABSTRACT The offshore wind industry faces challenges of impairments, project abandonment, and no bids in auction rounds, following several years of cost increases and project delays. Both industry and government rely on cost reductions. Companies struggle with low business‐economic profitability, an...
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| Format: | Article |
| Language: | English |
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Wiley
2025-09-01
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| Series: | Wind Energy |
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| Online Access: | https://doi.org/10.1002/we.70048 |
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| author | Sindre Lorentzen Petter Osmundsen |
| author_facet | Sindre Lorentzen Petter Osmundsen |
| author_sort | Sindre Lorentzen |
| collection | DOAJ |
| description | ABSTRACT The offshore wind industry faces challenges of impairments, project abandonment, and no bids in auction rounds, following several years of cost increases and project delays. Both industry and government rely on cost reductions. Companies struggle with low business‐economic profitability, and taxpayers require a justification for government subsidies. At the same time, consumers and industry are concerned with high electricity prices. Industrialization and learning effects in the supply chain could potentially represent a path forward, as they have proven to be in the onshore wind industry. In the context of capacity unit costs (CAPEX/MW) of UK bottom‐fixed offshore wind farms, we study the prevalence of various drivers of cost developments: technological innovation, economies of scale, learning curves, and trends in cost drivers such as water depth and distance to shore. Compared with previous studies, we use a substantially larger dataset and investigate the drivers of cost development jointly. Our dataset consists of 39 wind farms commissioned between 2000 and 2023. Results show that both economies of scale and technological innovation tend to reduce costs. Nevertheless, the cost‐increasing effect of new wind farms being situated farther offshore and in deeper waters has dominated and thus increased the overall cost level—an 8.4% cost increase per doubling of installed capacity. The conditional learning rate is found to be −21%. An explanation for this “anti‐learning” could be a short‐run trade‐off between learning and technological innovation. |
| format | Article |
| id | doaj-art-215e6a918cb5452982ccda47bf8f7dd1 |
| institution | Kabale University |
| issn | 1095-4244 1099-1824 |
| language | English |
| publishDate | 2025-09-01 |
| publisher | Wiley |
| record_format | Article |
| series | Wind Energy |
| spelling | doaj-art-215e6a918cb5452982ccda47bf8f7dd12025-08-20T05:18:42ZengWileyWind Energy1095-42441099-18242025-09-01289n/an/a10.1002/we.70048Cost Development and Cost Drivers in UK Offshore Wind FarmsSindre Lorentzen0Petter Osmundsen1Section of Industrial Economics, Department of Safety, Economics and Planning, Faculty of Science and Technology University of Stavanger Stavanger NorwaySection of Industrial Economics, Department of Safety, Economics and Planning, Faculty of Science and Technology University of Stavanger Stavanger NorwayABSTRACT The offshore wind industry faces challenges of impairments, project abandonment, and no bids in auction rounds, following several years of cost increases and project delays. Both industry and government rely on cost reductions. Companies struggle with low business‐economic profitability, and taxpayers require a justification for government subsidies. At the same time, consumers and industry are concerned with high electricity prices. Industrialization and learning effects in the supply chain could potentially represent a path forward, as they have proven to be in the onshore wind industry. In the context of capacity unit costs (CAPEX/MW) of UK bottom‐fixed offshore wind farms, we study the prevalence of various drivers of cost developments: technological innovation, economies of scale, learning curves, and trends in cost drivers such as water depth and distance to shore. Compared with previous studies, we use a substantially larger dataset and investigate the drivers of cost development jointly. Our dataset consists of 39 wind farms commissioned between 2000 and 2023. Results show that both economies of scale and technological innovation tend to reduce costs. Nevertheless, the cost‐increasing effect of new wind farms being situated farther offshore and in deeper waters has dominated and thus increased the overall cost level—an 8.4% cost increase per doubling of installed capacity. The conditional learning rate is found to be −21%. An explanation for this “anti‐learning” could be a short‐run trade‐off between learning and technological innovation.https://doi.org/10.1002/we.70048cost developmenteconomics of scalelearning curveoffshore windtechnological innovationunit cost |
| spellingShingle | Sindre Lorentzen Petter Osmundsen Cost Development and Cost Drivers in UK Offshore Wind Farms Wind Energy cost development economics of scale learning curve offshore wind technological innovation unit cost |
| title | Cost Development and Cost Drivers in UK Offshore Wind Farms |
| title_full | Cost Development and Cost Drivers in UK Offshore Wind Farms |
| title_fullStr | Cost Development and Cost Drivers in UK Offshore Wind Farms |
| title_full_unstemmed | Cost Development and Cost Drivers in UK Offshore Wind Farms |
| title_short | Cost Development and Cost Drivers in UK Offshore Wind Farms |
| title_sort | cost development and cost drivers in uk offshore wind farms |
| topic | cost development economics of scale learning curve offshore wind technological innovation unit cost |
| url | https://doi.org/10.1002/we.70048 |
| work_keys_str_mv | AT sindrelorentzen costdevelopmentandcostdriversinukoffshorewindfarms AT petterosmundsen costdevelopmentandcostdriversinukoffshorewindfarms |