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What economic support is needed for Arctic offshore wind power?

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  • Salo, Olli
  • Syri, Sanna

Abstract

Wind power is increasingly being installed in cold climates and in offshore locations. It is generally recognised that installing wind power to offshore locations is more expensive than onshore. The additional challenges from Arctic conditions with annual sea icing are still poorly known. We reviewed the existing knowledge of offshore wind power costs and developed a calculation model for the economics of offshore wind turbines in Finland, including taxes and sea base rent, to obtain a base case for determining the required tariff support. The model was tested with different production and cost rates to obtain a tariff price, which would make offshore wind power on Finnish territory economically viable for the producer. The main developers of planned offshore projects in Finland were interviewed to obtain a comparison between the created model and industry expectations. The cost of erected turbines was estimated to be 2750€/kW. With this cost of capacity, it was clear that a higher than the current tariff price (83.5€/MWh) will be required for offshore developments. Our analysis indicated a price level of about 115€/MWh to be required. We found that even rather small changes in cost or production rates may lead to excess profits or economic losses and further research and pilot projects are required to define a more reliable tariff level.

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  • Salo, Olli & Syri, Sanna, 2014. "What economic support is needed for Arctic offshore wind power?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 31(C), pages 343-352.
    • Handle: RePEc:eee:rensus:v:31:y:2014:i:c:p:343-352
    DOI: 10.1016/j.rser.2013.11.051
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    References listed on IDEAS

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    3. Zakeri, Behnam & Syri, Sanna & Rinne, Samuli, 2015. "Higher renewable energy integration into the existing energy system of Finland – Is there any maximum limit?," Energy, Elsevier, vol. 92(P3), pages 244-259.
    4. Kaishan Wang & Di Wu & Kai Wu & Kun Yu & Chongwei Zheng, 2023. "Interdecadal Variation Trend of Arctic Wind Energy," Energies, MDPI, vol. 16(18), pages 1-19, September.
    5. Cross, Sam & Hast, Aira & Kuhi-Thalfeldt, Reeli & Syri, Sanna & Streimikiene, Dalia & Denina, Arta, 2015. "Progress in renewable electricity in Northern Europe towards EU 2020 targets," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1768-1780.
    6. Bains, Henna & Madariaga, Ander & Troffaes, Matthias C.M. & Kazemtabrizi, Behzad, 2020. "An economic model for offshore transmission asset planning under severe uncertainty," Renewable Energy, Elsevier, vol. 160(C), pages 1174-1184.
    7. Sadik Kucuksari & Nuh Erdogan & Umit Cali, 2019. "Impact of Electrical Topology, Capacity Factor and Line Length on Economic Performance of Offshore Wind Investments," Energies, MDPI, vol. 12(16), pages 1-21, August.

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