IEA Report Launch: Cost Reduction for Onshore Wind – Status
and Perspectives
Copenhagen - 15 June 2015
The Future of Wind Energy in
Denmark - Reducing the Cost
and Increasing the Value of
Wind
Martin Risum Bøndergaard
Policy Advisor – Energy and Economy
Danish Wind Industry Association
Every wind power project is unique
•
When communicating about LCOE it’s
important to keep in mind that each wind
power project is unique
•
Significant variation in LCOE between
projects within as well as between
countries
•
Important that framework conditions also
in the future allow for utilization of the
wind energy resources on relative low
wind sites.
•
That said it is cost effective to prioritize
deployment on low cost locations
•
Denmark has some of Europe’s best and
cheapest wind energy locations.
Onshore Wind is competitive
 Average European Onshore
Wind is competitive with
other technologies in terms
of LCOE
 Onshore wind can compete
with coal – before taking
environmental
exsternalities into account!
Denmark has the
cheapest Wind
Power in Europe
Report by ECOFYS
for the EC in 2014
This is confirmed
by todays IEA Wind
report with respect
to the included
countries
Source: IEA Wind Task 26 – Wind Technology, Cost, and performance
Trends in Denmark, Germany, Ireland, Norway, the European Union, and
the United States: 2007-2012
Decreasing LCOE and subsidy
• The new report identifies LCOEreductions of 18 % from 2008-2012
for typical Danish onshore projects
• Caused in particular by reduced
investment costs (from 1.48 to 1.27
million €/MW) and increased
production (from 2,700 to 3,000 Fullload hours).
• The policy impact is reduced in
roughly the same pace with 17 %
from 2008-2012.
• Caused primarily by
• the fixed Danish premium not
indexed to inflation causing
ongoing yearly reductions in the
subsidy level
• higher production resulting in a
subsidy period covering a
smaller part of the life time.
Source: IEA Wind Task 26 – Wind Technology, Cost, and performance Trends in
Denmark, Germany, Ireland, Norway, the European Union, and the United States: 20072012
5
Current subsidy scheme is
well functioning
As of January 2014 the Danish subsidy
scheme was reformed:
• Maintaining the nominal premium level
at 250 DKK/MWh (33.5 Euro/MWh) –
not indexed to inflation
• FIP period now primarily depending on
rotor size - incentivizing lower specific
power (W/m2) and thus contributing to
reducing the system integration cost
• Introduction of nominal price cap on
the sum of the market price and
premium of 580 DKK/MWh (77.8
€/MWh) – If electricity prices increase
to above 44.2 €/MWh consumers get
the up side.
• Overall the current Danish subsidy
scheme is well functioning.
High exposure to electricity market prices
 What we have seen since 2008 is a 4050% decrease in electricity prices in
Denmark (DK1 and DK2)
 Only thanks to the cost reductions the
Danish onshore market still holds a sound
climate for investment
 If electricity prices hadn’t plummeted it
would have been possible to reduce the
subsidy level also in nominal terms.
 Onshore wind in Denmark is highly
exposed to variations in the power market
price:
 Fixed premium resulting in variable
revenue streams fluctuating with
the market price
 Short subsidy period of 6-8 years –
2/3 of lifetime only receiving the
market price
Increasing price gap
•
When controlling for potential subsidy scheme overcompensation (Financial Gap) you can not
simply use the same method across countries and electricity markets.
•
In markets with high wind penetration it is important to take into account that the realized
power price for wind turbines is below the average market price.
•
We are seeing tendencies to increased price gap
•
System modelling suggests that the price gap will increase (In Denmark from around 10 %
today to between 15-30% in 2030).
Increasing the Value of Wind
If we want to phase out the support for onshore wind we need to succeed in increasing the value of
wind.
Two steps are needed:
1) Domestic electrification – Creating an intelligent energy system
• We need to improve our domestic utilization of the wind energy
• Especially electrifying the heating sector by using heat pumps – individual as well as in district
heating systems. Heat pumps in relation to existing gas CHP plants create both flexible power
plants and flexible demand.
• Electric vehicles etc.
2) Integrating European electricity markets is the cheapest way to a sustainable and
secure energy supply
• The continued deployment of wind has to be followed by better market integration – Both in
terms of hardware (Interconnectors) and software (Market design)
• It is always windy somewhere. Connecting wind power across geographical distances allowing
for cross-border balancing is the obvious way to minimize needs for expensive back-up capacity.
• Therefore market integration is a precondition for a cost-effective maximization of the possible
and adequate wind energy share in the future energy system.
Significant steps in this direction can and should be taken within the next 5 years
Danish Wind Power Perspectives – Current Energy
agreement
MW
Danish wind capacity and wind power share 1990-2021
%
7000
70
6000
60
60 pct.
50
What about post-2020?
wind by
40
Do4000
we really believe
that we can run an entire society on wind
2021
5000
energy alone? – No, of course not!
3000
30
2000
20
1000
10
0
0
Onshore
Offshore
Wind power share of total electricity consumption
The Danish Energy Transition has only just begun
In 2020 Wind power
is expected to
provide about 8%
af the entire energy
consumption.
Further wind energy
deployment is
needed post-2020!
DWIA’s vision: At
least 20% by 2030
Which path to choose post-2020?
•
100% RES can be reached in different ways – 2 main
scenarios are the biomass-based and the wind energy
based.
•
Denmark is a small country with high interconnectivity.
•
No matter what Danish politicians prefer – Denmark is
already in a high wind penetration area. This will only
increase in the coming years.
•
As shown in the ‘Energy Concept 2030’:
• It’s a ‘no regrets option’ for Denmark to design an
energy system that is capable of utilizing the huge
volume of wind energy in the Nordic system.
• To optimize the value of these investments it’s a
rational choice for Danish politicians to continue
along the wind energy path post-2020
•
Denmark should continue to go for both on- and offshore wind energy.
•
Onshore wind can not cover the needed volume in the long term so development of
offshore wind should be prioritized in order to bring down cost.
•
Onshore is cheapest -> potential should be utilized as much as publicly acceptable.
•
We welcome the analysis carried out by Energinet.dk finding a technical potential of
12.000 MW – but the question is what is the publicly acceptable volume ?
•
Size of the potential is determined by the planning regulation.
Planning regulation can constrain onshore potential and
LCOE-reductions
Minimum distance to the nearest neighbour is 4 times the total height of the turbine
If the distance should be increased then the onshore potential is reduced and the expenses to
acquisition of houses and thus the LCOE will increase.
If noise regulation is tightened e.g. with requirements leading to constrained production at
night time then the LCOE will go up.
Due to current environmental and civil aviation regulations wind turbines in Denmark are
limited to a maximum total height of 150m.
Elsewhere in Europe there is a trend towards taller turbines. If the Danish regulation is not
adapted to this trend, it will put constraints on the future cost reduction potential
LCOE will continue to drop as a result of technology improvements and increased
industrialization and economics of scale – but the planning regulation can constrain this
Thank you for your attention
Martin Risum Bøndergaard
Policy Advisor – Energy and Economy
[email protected]
Back up slides
Energistyrelsen juli 2014: Vind er billigst!
LCOE resultat og sammenligning
LCOE estimater for landvind 2008-2020
45
40
øre/kWh (2014)
35
30
25
20
15
10
5
0
IEA 2008*
IEA 2012*
EA energianalyse Energistyrelsen
2014
teknologikatalog
2015
*IEA 2008 og IEA 2012 er opgjort i 2012-priser
Energistyrelsen
teknologikatalog
2020
Hvorfor faldende pris i DK og hvorfor DK billigst?
DK
1.
2.
3.
have experienced decreasing investment cost because of:
Technology improvements / more effective tyrbines
Improved competition between OEM’s and in the value chain
Trend towards larger projects with more turbines
Om hvorfor DK har lavere investeringsomkostninger end andre lande:
1. One possible reason is that Denmark have very easy locations in terms of
logistics and geotechnical conditions (no need for high towers in forrest and
easy transportation)
2. Could also be due to differences in national subsidy schemes
High RES and High Transmission
High RES deployment creates
low prices to the benefit of
consumers
High Transmission scenarios
lead to price convergence /
Higher prices in the Nordics. The
advantage is a better utilization
of RES and that wind energy in
the nordics will need less support
Resource sharing across
regions for back-up and ancillary
services – the possible need for
capacity mecanisms / support to
thermal power plants to act as
back-up will be reduced.
High RE
Prices
ModTrans xx €/MWh
HighTrans xx €/MWh
25
30
42
46
51
51
28
30
31
31
The Wind Industry is bringen down cost
We need stable political frameworks
• Stady hand on the weel – avoid sudden disruptive policy changes – ‘stop-go’ policies
• A market size allowing for economies of scale as well as healty competition – especially
important for offshore wind energy
• A level playing field – fase out fossil fuel subsidies and implement the poluter pays
principle (CO2-emisions, general airpolution etc. But also water consumption, land use
and biodiversity loss etc.)
• In many markets wind energy is already competitive
• Integrated energy markets …