Drax commissions study on relative cost of biomass, offshore wind

By Erin Voegele | November 25, 2014

Drax Power Ltd. recently commissioned a study from Frontier Economics that addresses the relative system cost of biomass and offshore wind in the U.K. The study determined the relative cost of offshore wind is significantly higher than biomass.

Within the report, Frontier Economics explains that it was asked to assess the total cost of replacing a proportion of biomass conversion with an equivalent level of offshore wind investment in the overall generation mix. The scenario addressed by the report reduces the expected installed capacity of biomass in 2020 by 500 MW and assesses the increment of offshore wind that would be required to deliver the same level of renewable generation. Due to differences in load factor, the report explains 500 MW of biomass would need to be replaced by nearly 855 MW of offshore wind.

To complete its analysis, Frontier Economics considered four cost categories to determine the total system costs of displacing biomass with offshore wind. This includes the levelized cost of the technologies, transmission system costs, back-up costs and reserve costs. Overall, the report determined that replacing a single biomass generating unit with the equivalent investment in offshore wind would cost consumers £650 million ($10.2 billion) to £900 million in terms of net present value (NPV). That equates to approximately £25 to £33 per household.

In the report, Frontier Economics explains the upfront capital costs of offshore wind are significantly higher than than the upfront capital costs associated with biomass. The onshore and offshore transmission costs are also higher for offshore wind. In addition, back-up costs for offshore wind are significantly higher due to the need to develop additional dispatchable capacity in order to meet demand when incremental offshore wind sites were not generating power. The reserve costs for offshore wind is also higher because it requires greater levels of system balancing reserves in order to manage balancing issues that arise from wind forecast errors.

Drax currently plans to convert three units to biomass, accounting for 1,935 MW of converted capacity. Based on its assumptions and findings, assuming they are scalable, Frontier Economics indicates Drax’s existing biomass conversions represent a total savings to the U.K. of £2.5 billion to £3.4 billion compared to the cost of equivalent generation from offshore wind.