Cost Performance and Risk in the Construction of Offshore and Onshore Wind Farms

Journal article, 2017

This article investigates the risk of cost overruns and underruns occurring in the construction of 51 onshore and offshore wind farms commissioned between 2000 and 2015 in 13 countries. In total, these projects required about $39 billion in investment and reached about 11 GW of installed capacity. We use this original dataset to test six hypotheses about construction cost overruns related to (i) technological learning, (ii) fiscal control, (iii) economies of scale, (iv) configuration, (v) regulation and markets and (vi) manufacturing experience. We find that across the entire dataset, the mean cost escalation per project is 6.5% or about $63 million per windfarm, although 20 projects within the sample (39%) did not exhibit cost overruns. The majority of onshore wind farms exhibit cost underruns while for offshore wind farms the results have a larger spread. Interestingly, no significant relationship exists between the size (in total MWor per individual turbine capacity) of a windfarm and the severity of a cost overrun. Nonetheless, there is an indication that the risk increases for larger wind farms at greater distances offshore using new types of turbines and foundations. Overall, the mean cost escalation for onshore projects is 1.7% and 9.6% for offshore projects, amounts much lower than those for other energy infrastructure.