Feasibility of Offshore Wind in Australia
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! ! ! ! "#$%&'!()**+,-.-)/0! ! !"#$%&%'%()*+,*-,,$.+/"*0%12*%1*34$(/#'%#* ! ! ! ! ! ! ! ! 1234567!8#9!:13$4#;56! <=34!=>(2?36@!$5;;1:5613=5>7!#>416!"3@!;3(! >/A+BC+,!&DE& PEC624 DISSERTATION FEASIBILITY OF OFFSHORE WIND IN AUSTRALIA 1:?361$3! There is no offshore wind industry in Australia at present; however, offshore wind could have great potential. There is no published discussion of the economics of offshore wind on a national scale in Australia, so this paper offers analysis which may inform future policy and technology discussions. The main purpose of this study is to determine the economic viability of offshore wind in Australia, and consider the effect that policy has on the future viability of this technology in Australia. The analysis of the economic feasibility indicates that offshore wind is generally twice the cost of onshore wind but that there is a lot less certainty in offshore wind costs than for onshore wind. Offshore wind developments however are typically cheaper than large-scale solar PV and Thermal. The expected cost of offshore wind in Australia in 2012 is between $100-330/MWh in Australian 2012 dollars. This report finds that offshore wind is cheaper than some competing technologies including most large-scale solar PV and thermal developments. There are also a number of suitable locations for development of offshore wind in Australia. The policy framework at present is uncertain, but there exists a number of schemes that could be applicable to offshore wind, making it feasible to incorporate offshore wind into the renewable energy supply using the usual funding and finance models. This dissertation finds that while there are many uncertainties, offshore wind development is feasible in Australia given the existing conditions. ! Page 2 of 103 PEC624 DISSERTATION FEASIBILITY OF OFFSHORE WIND IN AUSTRALIA 1$F>5<;#(9#8#>3?! I would like to thank Enhar Pty Ltd for their assistance in developing the aim of this dissertation and their advice in forming an analysis. I would also like to thank Doctor Jonathan Whale for his guidance and advice, especially in the preparation of this final document. * Page 3 of 103 PEC624 DISSERTATION FEASIBILITY OF OFFSHORE WIND IN AUSTRALIA 53678*-!*9-:58:5;* !* "#$%&'()$*&# ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ ,* -* ./)01%&(#'++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ 2* 2.1* The State of the Industry.................................................................................................. 9* 2.2* Australia’s Position and Potential ................................................................................... 12* 2.3* Developments and Trends in Wind................................................................................. 13* &GHGE* Turbine and Installation Capacity.............................................................................. 13* &GHG&* Foundation Technology............................................................................................ 15* 2.4* Competition ................................................................................................................... 18* &G'GE* Onshore Wind .......................................................................................................... 18* &G'G&* Marine Technology................................................................................................... 19* &G'GH* Large Scale Solar..................................................................................................... 19* &G'G'* Geothermal .............................................................................................................. 21* 3* 4*$*#1567789&%:5;*#'5</%=8 +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++-!* 3.1* Factors Involved in Siting Offshore Wind Farms in Australia............................................ 22* 3.2* Comparison of Siting Issues between Australia, Europe and the USA ............................ 30* HG&GE* Wind Resources....................................................................................................... 30* HG&G&* Offshore Depths and Distance from Shore ............................................................... 31* >* ?&@*)A5"88(:85/77:)$*#15$9:5"=B@:=:#$/$*&7567789&%:5;*#'5*#5C(8$%/@*/+++++++++++++++++++++3-* 4.1* Funding, Finance and Incentives .................................................................................... 32* 'GEGE* Renewable Energy Generation Certificates and the Renewable Energy Target (RET) 35* 'GEG&* The Carbon Tax ....................................................................................................... 35* 'GEGH* Feed-in Tariffs .......................................................................................................... 36* 'GEG'* Financing ................................................................................................................. 37* 'GEGI* Grants and Other Schemes...................................................................................... 38* 4.2* Planning Approval and Regulations ................................................................................ 39* 'G&GE* Levels of Approval.................................................................................................... 40* 'G&G&* Marine Policy............................................................................................................ 42* 'G&GH* Land-based Policy ................................................................................................... 43* 'G&G'* Transmission............................................................................................................ 44* 'G&GI* Impact on the Public ................................................................................................ 45* D* E)&#&=*)5C#/@A8*85F9%&(195G:H:@*8:'5I&8$8++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++>,* 5.1* Cost Breakdown of Offshore Wind................................................................................. 48* IGEGE* Capital Costs ........................................................................................................... 50* IGEG&* Operation and Maintenance ..................................................................................... 54* 5.2* The Levelised Cost of Offshore Wind ............................................................................. 55* IG&GE* The Concept of Levelised Costs............................................................................... 55* IG&G&* Reports giving LCOE for Offshore Wind and Other Technologies in Recent Years .... 57* IG&GH* Relative Cost of Offshore Wind................................................................................. 61* IG&G'* Regional Differences – EU, UK or USA ..................................................................... 63* IG&GI* Real Vs Nominal Discount Rate ................................................................................ 65* IG&G%* Discount Rate .......................................................................................................... 66* IG&GJ* Year of Projection..................................................................................................... 67* IG&GK* Studies that are Directly Comparable with BREE ...................................................... 69* IG&GL* Ratio Method for Calculating the LCOE of Offshore Wind ......................................... 69* Page 4 of 103 PEC624 DISSERTATION FEASIBILITY OF OFFSHORE WIND IN AUSTRALIA IG&GED* Comparison of the Cost of Offshore Wind Using the Exchange Rate and Ratio Methods ..............................................................................................................................71* IG&GEE* Estimated Cost of Offshore Wind in Australia and Comparison to Other Technologies 71* 5.3* Uncertainty in the Estimate LCOE of Offshore Wind ........................................................74* IGHGE* Sensitivity Analysis ....................................................................................................74* IGHG&* Capacity Factor.........................................................................................................78* 5.4* Potential Effects of a Carbon Tax....................................................................................79* J* 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