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Offshore wind turbine cost structure analysis

Article  in  High Technology Letters · October 2020

DOI: 10.37896/HTL26.10/1903

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High Technology Letters ISSN NO : 1006-6748

Offshore wind turbine cost structure analysis

Maximilian Meißner
PhD Student at Comenius University Bratislava
Doctoral supervisor: Assoc. Prof. RNDr. Michal Gregus, PhD

Abstract: Offshore wind electricity is booming, and turbines are growing in size in order to
reduce the levelized cost of energy (LCOE). To forecast the future offshore wind energy
generation costs, it is common sense to predict and calculate the future LCOE. With the
increasing size of the offshore turbines, the weighted share of the capital expenditure (CAPEX)
compared to the operational costs (OPEX) of LCOE is growing. And thus, the accuracy of the
calculations of CAPEX plays an increasing role. Previous research demonstrated an extensive
research gap for accurate scaling and calculation models for offshore wind turbine CAPEX.
Therefore, this paper provides the scientific foundation by presenting the offshore direct drive
turbine cost drivers. Aiming to use the presented results in future research in order to create
accurate cost calculation models for the turbine main components and with it the creation of
an overall turbine CAPEX scaling model.

Keywords: Renewable energy, climate change, wind energy, turbine cost, Offshore wind
turbine, CAPEX, cost breakdown,

JEL Codes: E27, E37, G11

Introduction
Scientists agree on one thing; climate change is real! The average temperature is rising and was never
higher than in the 20th century. Therefore, in December 2015 in Paris the United Nations Framework
Convention on Climate Change (UNFCCC) have signed the Paris Climate Agreement. The UNFCCC
is consisting out of 196 state parties. The goal of this agreement is to keep the global average temperature
well below 2°C compared to pre-industrial levels. To reach this goal, member states declared to reduce
greenhouse gas emissions by the end of the century. „Among all low-carbon technology options,
accelerated deployment of wind power when coupled with deep electrification would contribute to more
than one-quarter of the total emissions reductions needed (nearly 6.3 gigatons of carbon dioxide (Gt
CO₂) annually) in 2050“. (IRENA, 2019) Up to 25% in 2040 and 35% in 2050. (IRENA, 2019)
Especially offshore wind turbines, which have several advantages compared to onshore turbines, will
drive the development towards the low emission targets. As of September 2019 there is already around
25.000 MW of constructed offshore wind capacity available.(Alastair Dutton et al., 2019, p. 2) The
forecasts for offshore wind are extremely positive, as offshore wind can compete since 2018 in Europe
without subsidies with all conventional energy sources (Alastair Dutton et al., 2019, p. 4). Projections
suggest that offshore wind will add between 7 to 11 GW per year from 2019 to 2024 at which time it

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will accelerate, adding between 15 GW and 21 GW per year between 2025 and 2030. Altogether, annual
growth from 2019 to 2027 will average 11 GW per year, a fivefold increase over annual installations
from the preceding eight-year period.(Alastair Dutton et al., 2019, p. 6) Other sources go beyond and
predict for 2030 around 28 GW and 2050 even 45 GW per year. The overall installed offshore wind
capacity is predicted to reach 228 GW and up to 1000 GW in 2030 and 2050. This would mean a yearly
installation of around 45 GW in 2050 which would be an around ten-fold increase compared to the
4,5 GW added in 2018. (IRENA, 2019) The key enabler for the growing demand, next to the ambition
from countries to fulfill the Paris Agreement, is the fact that offshore wind energy is competitive against
other energy sources. In Europe it is since 2018 cheaper to build an offshore wind farm than a new
generation coal or gas power plant. Translated, this means that the levelized lifetime costs of a produced
MWh with an offshore wind turbine are lower than those of a coal-fired power plant. These costs are
the so-called levelized cost of electricity or LCoE. To lower the LCoE of offshore wind one measure by
the turbine OEM´s is to increase the turbine rating and size of the rotor. As larger offshore turbines have
several commercial advantages compared to smaller ones, the development of larger ones speeds up.
Compared to the year 2000 where the average dimension of an installed OWT had a rotor diameter of
73.52 meter and a hub height of 64.33 meter, the average in 2018 was 141.10 meter respectively 107.70
meter. The installed turbine rating increased in the same time from an average of 2.0 MW to 5.7 MW
(Fraunhofer IEE, 2018). In 2019 General Electric announced their turbine Haliade-X with a rating of 12
MW and a rotor diameter of 220 meter (General Electric, 2018). And in 2020 Siemens Gamesa
announced an 14 MW turbine with a 222m rotor diameter (Siemens Gamesa Renewable Energy, S.A.,
2020, 2020). But scientists and researchers predict that turbines will reach 20 MW with rotors of 300
meters in the next decade (Barla, 2019).

This present study is based on an extensive literature review to the topic of OWT cost scaling which
goes hand in hand with the scaling of the turbine size. The study concluded that there is a scientific
knowledge gap in the CAPEX cost scaling of OWT´s. The accurate future CAPEX is needed to calculate
and predict the future LCOE of offshore wind. And in addition, for OEM´s in order to be profitable.

Error! Reference source not found. shows an indicative plot of LCoE and illustrates how the
relationship between LCoE, turbine CAPEX and the CAPEX of installation (BoP) is related to each
other. To mention is that this plot is highly dependent on the site conditions, like water depth and
distance from shore and should be taken as an indication. But it demonstrates that with an increased
turbine size the turbine CAPEX is faster increasing as the CAPEX for BoP is decreasing (Ioannou,
Angus, & Brennan, 2018). From this the importance of the accuracy of the turbine CAPEX can be
deduced.

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High Technology Letters ISSN NO : 1006-6748

Figure 1: LCoE indicative plot with the dependence of turbine and BoP CAPEX (Peter Hjuler Jensen, Takis
Chaviaropoulos, & Anand Natarajan, 2017)

The present study attempts to provide a partial part of the necessary research for a more accurate OWT
CAPEX cost scaling model. The aim of this study is to scientifically examine which components are
responsible for the main turbine costs. Or in other words, how the cost of an OWT is broken down to its
main cost drivers and how have these cost drivers developed over the past years and different turbine
models. With these results the drivers of the turbine CAPEX part of LCOE are known and the results
serve as the baseline for further research for cost scaling equations for OWT main components. For this
purpose, data of a leading offshore wind OEM have been collected, analyzed and evaluated.

Theory, research question and hypotheses

2.1 Definition of offshore wind turbine component

A cost breakdown divides the total cost into the different parts that make up the total amount. In the case
of a breakdown of the total turbine cost, into its costs of the subcomponents. In order to understand the
purpose and expressions of the main components of an offshore direct drive wind turbine, this chapter
will give an overview and explanation for each of the components. A direct drive wind turbine has five
main components which consists out of several sub-components. The nacelle on top of the tower consist
out of the hub, which connects the three blades, the generator and the backend. Figure 2 illustrates all
main components. The London-based Crown Estate company published in 2019 a detailed guide to an
offshore wind farm which includes a detailed description about all components related to an offshore
wind farm (The Crown Estate, 2019).

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Figure 2: Main components of an Offshore Direct Drive Wind Turbine from Siemens Gamesa
Renewable Energy (The Crown Estate, 2019)

The hub module is the heart of the rotor, as it carries all loads from the three blades which capture the
energy out of the wind. The hub module consists mainly out of a cast iron component, three blade
bearings, the pitch system and the spinner. Last protects the hub module components from harsh offshore
environment like salty air, rain and humidity. The pitch system is a hydraulic system which can change
the angle of the blades through the help of the blade bearings. This is necessary to control the wind loads
at the rotor and with this extend the lifetime of the structural components.

The generator converts with the help of permanent magnets and cupper segments, the mechanical into
electrical energy. The rotorhouse is a large steel component which covers the generator and have slots
for the permanent magnets on the inside. The cupper segments are mounted to a fixed shaft in the middle
of the generator which consists out of cast iron. The shaft and the main bearing are connected through
large steel components which together transmit the forces from the rotor into the bedframe.

The bedframe is a part of the backend and consist out of cast iron. It transmits the forces and loads from
the rotor into the tower. In addition, it carries the yaw system which enables the turbine to turn in and
out the wind. The yaw system consists out of a yaw ring out of forged iron, gears and motors. The control
and power units in combination with the transformer convert the energy received from the generator and
adjusts the voltage and frequency to grid compliant needs. The canopy is the shell of the backend and
consists out of composite materials. Like the spinner, the canopy protects the backend components from

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the harsh offshore environment. In addition, it carries the cooling system and gives space for a helihoist
where service technicians can be let down from the helicopter.

The tower is usually a tubular steel structure that carries the nacelle and transmit all forces from the rotor
and weight into the foundation. Via a lift, the tower provides also access to the nacelle components.
(The Crown Estate, 2019)

2.2 Capital costs and cost breakdown of offshore wind turbines

The capital costs or also called capital expenditures (CAPEX) and the operational costs also called
operational expenditures (OPEX) can be further broken down. Among others Ioannou et al. (Ioannou et
al., 2018), Bosch et al. (Bosch, Staffell, & Hawkes, 2019), Valpy et al. (Bruce Valpy, Giles Hundleby,
Kate Freeman, Alun Roberts, & Andy Logan, 2017) and Crabtree et al. (Crabtree, Zappalá, & Hogg,
2015) show detailed breakdowns of offshore wind farms OPEX and CAPEX. For last, the turbine costs
which include the nacelles, towers and blades represent between 30 % and 45 % of whole wind farm
investment (IRENA, 2019); (Crabtree et al., 2015)(Crabtree et al., 2015); (Brian Snyder & Mark J.
Kaiser, 2008, p. 1570); (Ove Arup & Partners Ltd). Reasons for this deviation occur from different data
sources for costs and different water depths or distances from shore for the presented offshore wind
farms. But CAPEX remains the biggest portion of the investment. Derived from that, Bosch et al. (Bosch
et al., 2019) state that the “reduction in CAPEX has the highest impact” to reduce offshore wind LCoE.
This reduction equals a reduction for the turbine investments which includes tower and blade expenses.

In order to understand how the cost of an OWT scale, it is necessary to know how the costs of the it´s
subcomponents develop. For this the overall turbine CAPEX must be broken down. But the breakdown
of this OWT CAPEX in the literature is very limited and with it the cost development over time for its
subcomponents during the turbine scaling.

Fingersh et al. (L. Fingersh, M. Hand, & A. Laxson, 2006) provided in the year 2006 a calculated cost
breakdown of a 3MW geared offshore wind turbine. The calculated sample turbine had a rotor diameter
of 90 and hub height of 80 meters. Diagram shows percentual cost breakdown of the calculated offshore
6 MW turbine with rotor, nacelle and tower but without costs of the monopile, cabling and offshore
construction.

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Marinization
Blades
12%
12%

Hub Pitch mechanism and

3% bearings
3%
Spinner, Nose Cone
0%
Tower Low speed shaft
15% 2%
Main Bearing
1%

Control Saftey System,

Condition Monitoring Gearbox
2% 15%
Nacelle Cover
1%
Hydraulic, Cooling system
2%
Electronic connectioins Mechanical brake, HS
6% cupling
0%
Generator
Main frame 8%
Yaw drive and bearings Variable-speed electronics
6%
2% 10%
Figure 3: Cost breakdown of an offshore 3MW geared turbine (L. Fingersh et al., 2006)

Without installation or marinization called, Fingersh et al. presented that the four biggest cost drivers of
OWT´s the tower, the blades, the gearbox and electronic parts are. In 2019, 69 percent of the installed
OWT´s had no gearbox as they have been direct drive turbines which don´t need a gearbox and besides
this the breakdown from Fingersh et al. seems outdated as the average installed offshore wind turbine
in 2019 in Europe had a capacity of 7.8 MW. (Ramirez, Fraile, & Brindley, 2020)

Semken et al. (Scott Semken et al., 2012) published in the year 2012 a cost breakdown of a 6 MW direct
drive wind turbine. But his calculations for wind turbine components where based on the published
scaling equations from Fingersh et al. (L. Fingersh et al., 2006).

Component % Share of total cost

Nacelle 30 - 35
Rotor 8 - 10
Blades 5-6
Pitch mechanism and bearings 1.5
Drivetrain 22 -25
Bearings 1
Generator 10 -12
Variable-speed electronics 4
Yaw drive and bearings 1
Main frame 1
Electronic connections 2
At least he calculated his breakdown for a direct drive wind turbine which are the preferred solution
offshore. Taking these two examples, the accuracy of the published cost breakdowns is questionable.

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The same accounts for other published LCoE assessments which only estimates or calculate the CAPEX
portion for offshore wind turbine. In the calculated versions it was discovered that the accuracy is very
low as they baseline costs for the calculations are outdated or just scaled.

The CAPEX cost data for the LCoE cost models originate from different sources and are outdated or
just estimations (BEIS, 2019). For example, the CAPEX cost data which was used by Ioannou et al.
“was estimated as a function of wind turbine capacity”(Ioannou et al., 2018) or from Bosch et al. in 2019
the costs originating from a publication of the Renewable Advisory Board from 2010 called “Value
breakdown for the offshore wind sector” and are outdated. This is in line with the conclusion of Bosch
et al. who states that “annual energy production, CAPEX and WACC all have a significant impact on
LCOE, and therefore improvements in data in those areas should be a priority in future work” (Bosch et
al., 2019). A detailed analyze have for LCoE cost models and his accuracy of data have been performed
in.

2.3 Research question and hypotheses

In order to increase the accuracy of cost scaling and forecast LCoE models, the baseline data must be
improved. For this an accurate cost breakdown of OWT´s CAPEX must be created. As an OWT consist
out of more than 20.000 single components this research is focusing on the top cost drivers which stand
for 80 percent of the cost. This leads to the research question of this paper:

Which direct drive offshore wind turbine components cause 80 percent of the cost of offshore wind
turbine CAPEX and have they changed over recent turbine models?

H1: Just a few parts cause 80 percent of the overall CAPEX turbine cost.

H2: This detected components have not changed over the past development.

Research design, data collection and variables

3.1 Research design and strategy

This study conducted an explanatory research as the study intends to show an updated cost breakdown
of offshore wind turbines. The explanatory research design involved formulating the hypothesis and
collecting the data that leads to the achievement of the objectives of the intended research. In Addition,
the research design demands that the researcher needs to elaborate on the results to understand how the
results impact the overall research. The outlined research design is most efficient in analyzing the
received data statistically and demonstrate the possible impact of the published cost data.

3.2 Data collection

Data from a leading offshore wind turbine OEM have been collected and analyzed (Error! Reference
source not found.). The challenge of data collection in a global wind turbine OEM is, that there are
several data sources available. These sources are various systems which are used to store different

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information’s which are all relevant for this research. E.g. an Enterprise-Resource-Planning System
(ERP) is used to store information about the used materials. Like cost and supplier data, weights and
planned delivery times of materials and much more. The ERP-system which is the source of price
information for this study is SAP.

Figure 4: Data collection and analysis

In a global manufacturing company, it´s key to reduce supply chain risks, therefore purchased materials
come from several sources. As most of the wind turbine materials have several sources, a system is used
to keep track on all purchase information for all parts from different suppliers out of all regions in the
world. In addition, suppliers have different costs for their manufactured components in different regions,
e.g. through different manufacturing and labor costs in different regions or through different transport
costs as the manufacturing plants are on different locations. To keep track about the different price
information and to track the split of used suppliers in different regions a system Modaly is used for the
present study. Modaly tracks also the forecasted purchase volume which is dependent on the
manufacturing plan of each plant.

Another challenge is, that turbine manufacturing is a project business. Consequence of this fact is, that
there are different requirements for each project or region. This could be local obligations like colors for
wind turbines or different light systems to warn ships or planes. But especially offshore, the tower height
variates, depending on the water dept. This and much more leads to the fact that for each project and

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sometimes for each turbine the bill of material (BOM) is different. The BOM is the material list of all
parts used to manufacture and install the offshore wind turbines. To keep track of the different BOM´s,
the product-lifecycle-management (PLM) system Teamcenter is used.

SCMCoRe contains amongst others supplier information like name, identification number, address and
country, the purchasing volume for each supplier and the commodity code what they supply to. The
commodity code is a classification key for all purchased goods and services. (Roscher, 2018)

3.3 Data analysis

As described, in order to analyze the average paid price (Table 1) for a turbine over a year the
information from the different systems must be extracted, build together (chapter 3.2) and analyzed. The
average paid price has been calculated for this analysis as over a year several projects are executed which
can have several specific needs for subcomponents, colors or technical requirements of the wind
turbines. As well as the supplier purchasing volume split and location of origin have an impact on the
average paid price. In the investigated company the blade cost data are handled separated as the blades
are inhouse-manufactured and just the raw materials are purchased. Figure 4 illustrates how the data
have been collected and further processed. Finally, wrong, double and empty data sets have been filtered
and removed.

For this research the tower costs are out of scope. Simply due to the reason that in offshore wind farms
each tower is a unique project in terms of height, wall-thickness, surface protection, internals,
transportation and ownership. The last point means that in some projects the transition pieces, which
connects the foundation and the tower, are in scope of the turbine OEM´s and in some not. Furthermore,
the tower height for a 6 MW offshore turbine vary between 79 and 95 meters. Concluding from this, the
influence on the results of the nacelle parts and cost drivers is too huge and disqualify the tower costs
for this study. The tower cost share of the overall turbine CAPEX variates between around 15 and 25
percent.

In order to analyze the cost of one full turbine a reference BoM was used. This is a standard list of
components which the offshore wind turbine consists of. This standard BoM was provided by the PLM
and Sales department and consisted of the list of components which have been in the standard
configuration of the wind turbine without project specific components or without costumer specific
requirements for the financial year 2017.

For the cost breakdown of the 6 MW turbine, purchasing data from October 2016 until September 2017
have been analyzed. This time period corresponds to the financial year of the OEM. The result is shown
in Figure 5. The average paid costs for each single component per each supplier have been calculated in
Danish crowns (DKK) as the main manufacturing plant has been in Denmark. The exchange rates
between DKK and for example EURO or USD were set in the ERP-system and updated daily. During

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the data download the conversion in DKK for all single components is automized. With this the prices
in DKK per each component and per supplier have been available.

Table 1 demonstrates a simplified calculation of the average paid price per component. In the present
research all yearly price influencing factors have been considered so the average price considered factors
like rush order prices, price changes for purchase orders below minimum order quantity or below agreed
volume share, payment terms and conditions changes, price changes due to raw material clauses and
many more.

Table 1: Simplified calculation of average paid price results in an average paid price of 107 DKK per component A.

Figure 5: 2017 cost breakdown of a six MW offshore direct drive wind turbine in percent. The result divides the
wind turbine in its main modules and cost drivers.

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Figure 5 shows the result of the analysis of an offshore direct drive six MW in the year 2017. The
breakdown divides the turbine, excluding the tower, into its five sub-modules. The Generator, the
Backend, the Hub, the Blades and all Side Parts. Furthermore, it presents the components with the
highest costs per module. The result shows that the cupper segments, the main bearing, the rotor house,
the magnets and the fixed shaft are the main cost drivers in the Generator. The category “Large steel
components” consists out of several large steel plate parts which are needed for the structure of the
generator. The category “Rest” represents, as in all modules, all other components from the stated
module.

The Backends’, or machine-houses, main cost driver is the Control & Power category which consist out
of the converters, cables and other control panels. Further, the four other main cost drivers are the
canopy, the transformer, the bed frame and the yaw system. Last consists out of the yaw ring, yaw
motors and gears. The Hub module´s main cost driver is the bearings & lubrication category. This
category includes the three blade bearings and its lubrication system. Further cost drivers are the casted
hub and the spinner cover. The modules Blades and Side Parts have not been broken down. First, consist
of a whole set of three blades. The category Side Parts include parts for the assembly or so-called
marriage of the four other main modules.

After the research for the main cost drivers of an offshore direct drive six MW wind turbine from 2017,
the question arises if these identified cost drivers are just a one-off effect or consistent over the
development of a turbine and time. To answer this question the exercise was repeated for an offshore
direct drive seven MW wind turbine for the year 2017 and 2019 and an eight MW for the year 2020.
The results are shown in Figure 6. The results from the eight MW are only for internal usage.

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Cost in % 2017 6 MW Cost in % 2017 7 MW Cost in % 2019 7 MW

Figure 6: Breakdown of cost drivers of a direct drive six MW offshore wind turbine in the year 2017 and seven MW
turbine in year 2017 and 2019.

The data analysis proved that the main cost drivers per offshore wind turbine are the same over the
observed time and development from six to seven MW turbine. It can be seen in Figure 6 that the
proportion of cost for the components have changed. E.g. the blades and the transformer increased
proportionally to the other components in costs. There can be various reasons for this. Price decreases
of other components or price increases for the blades and transformer could lead to the proportional
increase. As the blades have not changed in length and weight in the observed period a cost increase
could come from a raw material price increase.

In case of the transformer it is different. The performance of the generator has increased from six to
seven MW and with it the transformer had to be upgraded. This upgrade was done through an increase
of the amount of core materials like copper and aluminum. In addition to this, the prices for cupper
increased in the observed time. With both, the proportional price increase of the transformer can be
explained. The material price raise explains also the slight percentual growth for the segments which
mainly consists out of copper. The magnets percentual increased slightly in proportion as well, simply
due to an upgrade in material composition which led to a price increase per magnet.

With the increases of the above-mentioned components the decrease of others goes hand in hand. As the
main components like the casted hub, canopy and rotor house have not changed design vise over the
observed period a learning curve and with it a cost reduction could be assumed.

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Conclusion and Limitations

4.1 Conclusion

Refer to the formulated hypotheses: H1: “Just a few parts cause 80 percent of the overall CAPEX turbine
cost.” and H2: “These detected components have not changed over the past development.”

The following can be stated: Hypothesis 1 can be considered confirmed. The analysis proves that
excluding the tower cost just 15 component groups make 78 % (6MW;2016), 80 % (7MW; 2016) and
83 % (7MW; 2019) of the overall turbine CAPEX turbine cost. The remaining portions include all side
parts and all rest parts out of the three modules Hub, Generator and Backend. A component group mainly
consist out of one component but can consist also out of more parts which are representing one technical
function. One example is the yaw component group. Here the system costs are presented, as well as in
bearing and lubrication, control and power and large steel components. Figure 5 and Figure 6 presenting
the percentual breakdown of the turbine CAPEX cost over different turbines and years. Hypothesis 2
can be considered confirmed too, as Figure 6 proves that the component groups have not changed over
the development and the overserved time period of two years. The present study thus provides a
scientifically sound insight into the percentual cost weighting of offshore direct drive wind turbines
main components. The results have changed slightly which is caused next to other reasons by technical
variations, learning curve price decreases and material price increases. As this research have presented
the main cost drivers of offshore direct drive wind turbines, future research can concentrate on these
detected component groups. As this component groups cover around 80% of the turbine CAPEX, cost
scaling equations for each of the groups can be researched, build together and used for LCOE estimations
for future offshore wind turbines. As well internal price estimations at turbine OEMs could benefit from
cost scaling formulas for these component groups as with these, accurate price forecasts for future
designs can be made.

4.2 Limitations

Some limitations must be mentioned which could have had influences on the research results. As this
study is performed at one specific wind turbine OEM, including the data collection, the results should
not be generalized for the whole Offshore wind industry. But as the OEM covers over 65% of the market
share the results are still very relevant and valid. Another limitation is that the research was focusing on
just one, the direct drive, technology. Not all turbine OEM´s use this technology, they offer geared
turbines where the cost structure could look different. But even with different technologies, the main
portion of components in both turbine types are the same. The third limitation is the number variance of
turbine types used for this research. As the latest direct drive technology in the offshore wind industry
is just existing since the year 2014 and the latest turbine models are confidential, the number of turbine
variants for this research was limited to two models. Nevertheless, it is to expect that the future turbine
types are equipped with the same cost driving component groups. Last limitation is the time frame from

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2016 to 2019 which the data is used from. Future data collection must be performed in order to confirm
the in this study published results.

Acknowledgment
This paper is an output of the science project at the leading offshore wind turbine OEM. It received no
funding’s from external parties. The author is grateful to the anonymous reviewers for their insightful
and detailed comments, which have significantly improved this paper.

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