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Offshore wind getting cheaper?

A recent news story in the UK claims that offshore wind power has halved in price from a few years ago:

offshore wind news story

"Energy from offshore wind in the UK will be cheaper than electricity from new nuclear power for the first time.

The cost of subsidies for new offshore wind farms has halved since the last 2015 auction for clean energy projects

Two firms said they were willing to build offshore wind farms for a guaranteed price of £57.50 per megawatt hour for 2022-23."

I've linked to the BBC's article on the story written by Roger Harrabin, but virtually all the UK news media has reported the story in the same non-sceptical way as Harrabin.

Harrabin seems to be a bit confused, he's comparing an intermittently available electricity source (wind) with a continuously available one (nuclear), and giving the impression that the sources are completely interchangeable. There is already a continuously available form of renewable energy that is quite heavily used in the UK (thanks to the Lib Dems), the burning of wood pellets, and I suspect that is actually cheaper than new nuclear (burning wood is technically classified as low carbon, but it is of course taking massive liberties with the whole idea of something being low carbon).

The lone sceptical voice in the UK news media is GWPF, who have investigated whether offshore wind is getting cheaper (which the journalists should have been doing), and found no evidence:

GWPF reaction

"Forget The Spin: Offshore Wind Costs Are Not Falling

Spin put on the government’s recently announced strike prices to three large offshore wind farms has misled many into thinking that the costs of offshore wind are falling.

However, no actual capital cost figures have been provided for the three windfarms (Hornsea, Moray East, or Triton Knoll), and the strike prices are a poor guide to underlying costs.

In fact, empirical CAPEX data collated for the first time in a new statistical study published today by GWPF shows that the capital costs for offshore wind remain high. Moreover, as the wind industry moves into deeper water, costs are actually rising offsetting any reduction in costs due to technical progress.

The study’s authors conclude that wind farm companies are probably willing to offer economically non-viable CfD prices because they regard the CfD contract as low cost, no penalty “option” for future development. At the same time, they are securing a market position and inhibiting competition, with actual wind farm construction conditional on obtaining more generous terms in the future.

Should the market price rise above the contracted price, because of rising fossil fuel costs or a further rise in the UK’s carbon tax, companies would simply cancel the CfD contract and go with the higher price. However, if there is no significant probability of that elevated market price, these sites are very unlikely to be built."

I think this idea, very widely held by anybody who is Green-leaning, that products get cheaper with the passage of time, is based on the somewhat misleading experience provided by domestic electronic consumer goods. In electronic engineering, everything does seem to get cheaper, for example a 333MHz Pentium II PC in 1998 cost $2K and ran 5.5 times quicker than the world's first supercomputer, the $10 million Cray-1 of 1974.

But in other fields of engineering, like mechanical engineering and civil engineering, cost escalation is regarded as absolutely normal. Nothing ever seems to get cheaper with time. To give an example of this, consider this figure:

cost escalation figure

The figure compares four mechanical engineering products in the USA, two types of warship, a Ford F-150 pick-up truck and a Beachcraft Bonanza light aircraft showing the inflation-adjusted price in the first decade of the 21st Century. The figure comes from a document which is trying to argue that the cost escalation for building warships is unacceptable, and they should try to reduce it to the more modest levels of cost escalation that are seen in the car industry and commercial aircraft industry.

If the offshore wind industry is so good at controlling and even reducing its costs, somebody should be asking them to start manufacturing defence equipment. There is also a specific cost escalation which would affect the offshore wind industry, in that it is more expensive to build an offshore wind turbine the deeper its surrounding water is. I would imagine that the shallower water sites would be snapped up first, and the industry then has to move into progressively deeper (on average) water sites, putting the industry's costs up.