M-RCBG Associate Working Paper No. 171
The Effects of Experience and Technological Innovation in the Offshore Wind Industry
Keshav Rastogi
2021 John Dunlop Undergraduate Thesis Prize Honorable Mention
2021
Abstract
Using data on completed offshore wind farms, I seek to identify the primary drivers behind falling capital expenditure (CAPEX) in the global offshore wind sector. I test two hypotheses. One is that offshore wind developers and turbine manufacturers have experienced learning-by-doing. The other is that the most notable technological innovation in the industry, which has been the shift to larger turbines, has driven down CAPEX. After controlling for market selection of low-cost firms, I find evidence of no statistically significant returns to experience among either developers or turbine makers. In contrast, the empirical analysis indicates that a doubling in average turbine capacity is associated with a 19 percent decrease in CAPEX per watt of installed capacity, suggesting that technological innovation may be a significant part of the story of contemporaneous and future cost reductions in offshore wind. Many of the demand-pull policies that seek to take advantage of the learning curve and are currently in place in offshore powerhouses like the United Kingdom and the European Union, such as future capacity targets, may thus require alternative justifications. Government research and development spending as related to turbines, on the other hand, may be prescient.