UK offshore wind costs fall nearly a third in four years – report

LONDON (Reuters) - The cost of producing electricity from wind farms off the coast of Britain has fallen 32 percent in the past four years, meeting a government target four years early, an industry report released on Tuesday said.

Britain plans to increase its offshore wind capacity to help bridge a looming electricity supply gap as old nuclear plants and coal-fired power stations close.

Offshore wind farm costs fell to an average of 97 pounds ($120.82) per megawatt-hour (MWh) in the 2015-2016 financial year, from 142 pounds/MWh four years earlier, the report commissioned by the Offshore Wind Programme Board said.

This means the industry has met ahead of schedule a government target to cut costs to below 100 pounds/MWh by 2020.

It also puts the cost of offshore wind close to that of new nuclear plants, with the government contract awarded to France's EDF for its Hinkley C reactor project in southwest England at 92.50 pounds/MWh.

"Thanks to the efforts of developers, the UK's vigorous supply chain and support from government, renewables costs are continuing to fall," Britain's energy minister Jesse Norman said in a statement with the report.

"Offshore wind will continue to help the UK to meet its climate change commitments, as well as delivering jobs and growth across the country," he said.

Britain has a legally binding target to cut emissions of harmful greenhouse gases, such as those produced by fossil-fuel-based power plants, by 80 percent from 1990 levels by 2050.

Developers of offshore wind projects, such as DONG Energy, have driven down costs rapidly over the past few years by increasing the size of turbines.

However, critics say that even with recent cost reductions, offshore wind remains much more expensive than traditional fossil-fuel electricity generation, while some environmental groups say the huge structures could harm marine life.

Norman said offshore wind would be an important part of the government's new industrial strategy, which was unveiled on Monday and includes delivering affordable, low-carbon energy growth.

More than 9.5 billion pounds ($11.8 billion) has been invested in offshore wind in the United Kingdom since 2010, the report said, with another 18 billion pounds due by 2021.

($1 = 0.8028 pounds)

(Reporting by Susanna Twidale; Editing by Dale Hudson)