A Systematic Framework for Projecting the Future Cost of Offshore Wind Energy

Abstract

Offshore wind costs are expected to decline rapidly in the short and medium term future as the industry grows and gains experience in manufacturing, installing, and operating commercial scale projects. Estimating the future costs of offshore wind energy is critical for evaluating the technology's economic performance, how it can fit into a broader clean energy economy, and how R&D investment can be allocated to advance the technology. We present a newly developed approach for forecasting these costs which focuses on an empirically-derived learning rate for capital costs and prescribed cost and performance improvements for operational costs and capacity factor. We establish baseline costs for a series of reference fixed-bottom and floating projects in 2021 and project cost trajectories to 2035, presenting both an average cost trajectory as well as describing the range of potential future costs associated with site-specific cost variations and uncertainty in the estimate of the learning rate. We also conduct sensitivity analyses showing the impact of different global deployments by 2035 and variations in the prescribed operational costs and capacity factors. The results show that fixed-bottom and floating offshore wind capital costs could decrease to around $\$$2,400/kW and $\$$3,300/kW by 2035, respectively, with ranges of $\$$2,100/kW - $\$$2,750/kW for fixed-bottom projects and $\$$2,850/kW - $\$$5,500/kW for floating projects. The levelized cost of energy of fixed-bottom and floating wind projects could decrease to $\$$53.1/MWh and $\$$63.9/MWh by 2035, with ranges of $\$$48.4/MWh - $\$$59.7/MWh for fixed-bottom projects and $\$$46.5/MWh - $\$$99.9/MWh for floating projects. By presenting the uncertainty associated with the forecast we provide a transparent description of the spectrum of potential cost trajectories for offshore wind.