Offshore Wind Mega-Project Wins Auction with Rates Below Coal

File image courtesy SSE Renewables

Published Sep 20, 2019 8:06 PM by The Maritime Executive

Offshore wind power is now cheaper than coal, at least in the UK. A record-breaking subsidy auction for ten new windfarms off Britain attracted bids as low as $49.45 per megawatt-hour, about $3 cheaper than current wholesale prices for power from UK coal and natural gas generating stations. The auction results mean that the wind farm operators will provide renewable power to the grid at "zero-subsidy" rates. 

Scale and site suitability have much to do with the cost-competitiveness of the bids. Norwegian state oil firm Equinor and wind power developer SSE Renewables won the rights to three blocks on the Dogger Bank area of the UK North Sea, a shallow site with strong wind potential. The consortium plans to build the world's largest wind farm on the site, with an installed capacity of 3.6 GW - about three percent of the UK's total generating capacity.

One of these three sites auctioned at $49.45 per megawatt-hour and the other two at $51.89, both below prevailing power rates. The winning bids are also dramatically cheaper than the award for Britain's new nuclear plant, Hinkley Point C, which won a license auction at $115.35 per megawatt-hour. 

"A full-scale development of Dogger Bank will constitute an industrial wind hub in the heart of the North Sea, playing a major role in the UK’s ambitions for offshore wind and supporting the net zero ambition. Excellent wind speeds, shallow waters and scale make Dogger Bank well positioned to deliver low cost renewable electricity to UK homes and businesses,” says Eldar Sætre, CEO of Equinor.

“It’s great news that millions more homes will be powered by clean energy at record low prices. Seizing the opportunities of clean energy not only helps to protect our planet, but will also back businesses and boost jobs across the UK," said UK Prime Minister Boris Johnson, the head of the Conservative Party.

The Equinor-SSE bids still might not be cost-competitive in the U.S., where average wholesale rates often hover in the $40 range, according to data from the Energy Information Administration. In the U.S. Midwest, the average wholesale peak rate was about $36 in 2018.