Offshore wind power is anticipated to make a major contribution to the UK's renewable energy targets but, contrary to expectations, costs have risen dramatically in recent years. This paper considers the context of these cost increases, and describes a disaggregated levelised cost model used by the authors to explore the effect of different assumptions about the direction and scale of the major cost drivers. The paper identifies the competing upward and downward pressures on costs in the medium term, and discusses the range of future costs that emerges from the analysis. The paper goes on to analyse the implications of these cost projections for the policy support levels that offshore wind may require. The paper suggests that there are good reasons why it is reasonable to expect a gradual fall in costs in the period to the mid-2020s, although it is unlikely that costs will fall as rapidly as they have risen, or that it will be a smooth downward trajectory. A key challenge is to reconcile the scale and pace of development desired for UK offshore wind with the potential growth rate that the supply chain can sustain without creating upward pressure on costs. (C) 2011 Elsevier Ltd. All rights reserved.