Floating offshore wind and tidal stream energy research reviews: cover note
Published 16 November 2023
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Cost and technical assumptions for floating offshore wind and tidal stream energy
The Generation Costs Report 2023 (Section 2, p15), published August 2023, referred to subsequent research reviews on floating offshore wind (FOW) and tidal stream energy (TSE). The report stated the research will be published in an Annex.
This cover note describes 2 research reviews by Frazer-Nash Consultancy (FNC) on FOW and TSE, with a corresponding update to the Generation Report 2023 (Section 2) and Annex A.
Frazer-Nash Consultancy was selected by the former Department for Business, Energy and Industrial Strategy (now the Department for Energy Security and Net Zero, DESNZ) to update FOW and TSE costs and technical assumptions.
These studies inform our levelised cost of electricity (LCOE) estimates and subsequently DESNZ power sector modelling and feed into Contract for Difference (CfD) administrative strike price (ASP) analysis for Allocation Round 6 (AR6). The reports include pre-development, construction, operating and decommissioning cost assumptions and a forward look at how these costs could change from now to 2050.
Updates reflect renewable energy policy, market, and technological changes since previous studies. This summary focuses on their use, and limitations within DESNZ. Full details can be found within the reports.
Methodological summary and limitations
Due to the nascent nature of these technologies, DESNZ acknowledged the evidence base for both technologies needed updating. However, commercial sensitivities meant that developers were wary about sharing their costs data with Frazer-Nash Consultancy. Therefore, we are aware that the outputs from the research may not be representative of all the current and future pipelines of these technologies. The department would welcome subsequent engagement with industry and developers to understand any limitations to this research and provide future lessons.
For TSE, the literature review formed the starting point for cost assumptions. Representatives from industry, developers, and suppliers were then iteratively engaged for comment and ‘ground truthing’. This enabled cost estimates to be provided for 2020 and 2023 market conditions, considering impacts of recent macroeconomic uncertainties for costs.
For FOW, interviews occurred in 2023 and therefore are likely to consider some of the recent macroeconomic uncertainties and the impact that this will have on costs. However, different developers may be at different stages in the development process, with prices locked in at different points reflecting the current high costs differently. The industry data was supplemented by data from literature reviews.
The research covers a range of plant sizes and development stages of technologies, from demonstration (Demo), to first of a kind (FOAK) and Nth of a kind (NOAK), each with different cost assumptions and uncertainties. Users should note these differences and the uncertainties defined above when using the figures published in the report.
LCOE represents a single figure used to describe a generic plant of each technology. Costs for specific projects could vary significantly from this figure.
How the updated data is used to inform departmental modelling
The FOW and TSE LCOE estimates published in this research and in the Generation Costs Report 2023 do not provide an indication of potential future ASPs for these technologies eligible for CfD AR6. Generation cost assumptions are one set of inputs into setting ASPs. There is an explanation of this within the Generation Costs Report 2023 (Section 3). The AR6 parameter methodology note describes how the FOW and TSE research informs ASPs for AR6.
We present illustrative LCOEs in the Generation Costs Report 2023 for FOW and TSE projects commissioning between 2025 and 2040. The costs use:
- Demo project cost assumptions for 2025
- FOAK assumptions for 2030
- NOAK for 2035 and 2040
However, for these nascent technologies we recognise that this trajectory is uncertain with the likelihood of a mix in project phases across years while the technology develops.
2023 costs are assumed for FOW and TSE to calculate the LCOE reflecting the most up-to-date data, whilst recognising the macroeconomic uncertainty, as described within the Generation Costs Report 2023 (Introduction).
The cost and technical assumptions adopted are described in detail within the Frazer-Nash reports. This deviates for FOW where turbine sizes are assumed to increase over time with gross load factors informed by DESNZ internal modelling. This modelling calculates gross load factors by combining a theoretical power turbine curve with historic site-specific wind speed data. For Demo projects, a 12 MW turbine size is assumed, smaller than for offshore wind (OFW), but as the industry develops turbine sizes are assumed to align with the projected trajectory for OFW. This is described in the Generation Costs Report (Section 2) and within the OFW section of the ASP parameter methodology note.
The updated data cannot be directly compared with previous cost estimates for these technologies because different categories of project categories have been defined during this research.