Comparison of the Financial Attractiveness Among Prospective Offshore Wind Parks in Selected European Countries
Potsdam-Institut für Klimafolgenforschung (PIK)
EBS Universität für Wirtschaft und Recht
December 5, 2011
Offshore wind power is regarded as a crucial renewable energy technology to achieve the ambitious CO2 reduction targets of the EU. However, offshore wind power is not yet competitive with traditional electricity generation technologies, so its sustained development depends on national support policies.
Employing a DCF model, this paper scrutinizes how national regulations and geographic conditions of designated national offshore wind development areas affect profitability. The focus of the analysis is on a set of hypothetical offshore wind park scenarios from five countries (Belgium, Denmark, Germany, France, and the UK). The inclusion of geographic conditions is significant, since water depth and distance to shore influence costs and because available wind resources determine the amount of electricity produced.
The paper’s findings are threefold: Firstly, profitability results indicate that currently relevant scenarios in the UK and Germany are most attractive, but that the upcoming UK Round III projects are least attractive. Belgium, France, and Denmark follow in the rankings successively. Secondly, there is high variation among scenarios with respect to capital costs – differences amount up to 67%. Lastly, a future scenario assuming technology improvements and learning effects suggests that remuneration levels could be lowered by ~25% by 2020.
Number of Pages in PDF File: 29
Keywords: offshore wind power, profitability analysis, renewable energy policy
JEL Classification: Q42, Q48working papers series
Date posted: October 7, 2011 ; Last revised: December 6, 2011
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