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The future bill for decommissioning the UK’s fleet of offshore wind farms has been estimated in a new study at between £1.28 billion and £3.64 billion.
Figures exclude the costs of decommissioning associated offshore transmission assets, which are expected to add another £158 million to the total, as well as potential revenues from waste recovery.
The report was produced at the request of the Department for Business, Energy and Industrial Strategy (BEIS) by the engineering and consultancy firm Arup.
Under the Energy Act 2004, BEIS, the Crown Estate and the Scottish government share responsibility for ensuring the decommissioning of offshore wind farms. They may be required to act “decommissioner of last resort” if an owner or developer is unable to carry out the work.
The legislation also grants BEIS the power to require developers and owners to produce decommissioning plans or provide financial securities to prevent taxpayers from footing the clean-up bill.
The new study looked at the 37 offshore wind farms in the UK which were operating or under construction at the time of its undertaking. Its findings are partly based on developers’ own estimates of the cost of decommissioning 17 of the projects, which totalled £822 million, including £85 million of contingency funding.
Arup’s modelling suggested a higher total of £920 million for the 17 projects, and £1.82 billion for the entire fleet. To account for various uncertainties, Arup both doubled the baseline figure and subtracted 30 per cent to give a range of £1.28 billion to £3.64 billion.
Of this, BEIS is potentially liable for between £1.03 billion and £2.94 billion. The Crown Estate and the Scottish government bear responsibility for the rest.
The report also assessed the potential financial securities which BEIS could request from developers and owners – including upfront payments, regulator contributions and insurance – as well as the impact these would have on offshore wind costs.
The study said they would add just £0.86/MWh (2014 prices) to the levelised cost of energy (LCOE) for offshore wind. In a 2016 report, BEIS estimated the LCOE for offshore wind projects competing in a third contracts for difference (CfD) auction at £106/MWh (2014 prices).
Two projects secured an agreement at a strike price of £57.50/MWh (2012 prices) in the second and most recent CfD auction in September 2017.
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