Dong Energy Targets 40% Cut in Wind Energy Costs to Compete With Gas-Fed Power

Dong Energy A/S, the world’s biggest offshore wind power developer, plans to cut the cost of generation by almost 40 percent to compete with gas-fired power plants.

Dong may reduce costs at new U.K. offshore wind farm projects to less than 100 euros ($130) a megawatt-hour by 2020 from 160 euros.

That compares with estimates for a 22 percent drop from London-based researcher Bloomberg New Energy Finance.

Nations including Britain, the world’s largest market for offshore wind power, are seeking to cut the cost of the technology that’s as much as double the expense of coal-fired generation.

The U.K. government, aiming to curb subsidies for offshore wind energy, has a cost target of 100 pounds ($150) a megawatt-hour by 2020.

“Both these levelized cost-of-energy targets are very optimistic,” said Sophia Von Waldow, a BNEF analyst. Offshore wind-power costs will probably increase in the short term as projects move farther from shore, before falling by 2020, she said by e-mail.

BNEF estimates industry costs at 128 euros a megawatt-hour by 2020 compared with 164.50 euros last year.

A reduction of about 35 percent to 40 percent is “achievable, although difficult,” Dong Chief Executive Officer Henrik Poulsen said Feb. 27.

The Danish company, which has built 38 percent of Europe’s offshore wind, plans to expand marine capacity to 6.5 gigawatts of wind turbines by 2020 from 1.7 gigawatts.

The Fredericia-based utility has favored sea-based wind over gas-fired plants to curb exposure to energy-market volatility and reduce emissions.

“As the U.K. moves towards a more sustainable and renewable electricity mix, the costs of the new technologies must come into line with existing power generation to minimize the impact on consumer bills,” Benj Sykes, U.K. manager for Dong Energy Wind Power, said in today’s statement.