The impacts of climate change on offshore wind park projects: from changes in resource to project profitability

Abstract

Offshore wind power generation is projected to increase 15-fold over the next two decades. This generation is, however, weather dependent. The compounding of the anthropogenic climate change signal with high spatial and temporal wind variability can lead to large uncertainties in the projected impacts of climate change on wind resources, and further down the line in the economics of a project. In this study, we showcase a methodology to analyze the impact of climate change on the economic indicators of an offshore wind farm project. Projections of changes in wind resources are obtained using an ensemble of statistically downscaled Coupled Model Intercomparison Project 6 (CMIP6) for different emission scenarios and time periods. A series of assumptions about the features of a representative wind farm and its key economic parameters are made to compute two economic indicators: the Internal Rate of Return (IRR) and the Levelized Cost of Energy (LCOE). The IRR is an estimate of the profitability of potential investments and the LCOE is the cost over the lifetime of an investment compared to the expected energy production. We find that the effect of changes of resource on IRR and LCOE depends on the region, emissions scenario, and projection period. In general, and conditioned on the assumptions underlying this study, impacts on IRR are more significant -i.e., with differences between -0.5% and -1% in Brazil- than on LCOE. We conclude that it is especially important to take into account climate change when making investment decisions based on a project’s expected profitability.