Expensive Offshore Wind Farm Becomes Operational

The Block Island Wind Farm, a 30 megawatt facility off the Rhode Island coast, went into operation on Monday, December 12. The project consists of five large offshore turbines supplied by GE Renewable Energy and operated by Deepwater Wind.[i] Electricity generated by the turbines is routed via submarine cables to the 1,000 full-time residents of Block Island. It took years of state and federal policy-making, environmental impact assessments and town hall meetings for the Block Island Wind Farm to come to fruition due to its cost and the damage to the view. It cost $300 million[ii]–$10,000 per kilowatt–over 10 times more than the cost of a new natural gas combined cycle unit. Further, it is 58 percent more costly than what the Energy Information Administration (EIA) expects a first-of-a-kind offshore wind unit to cost–$6,331 per kilowatt. In fact, EIA’s offshore wind costs are even higher than its advanced nuclear costs—by about 4 percent.[iii]

Despite the high cost of the project, Deepwater Wind is working on a second offshore wind farm—a 90-megawatt project to be located off the east end of Long Island, New York, that they indicate could become operational in about five years. The company is also one of the bidders that proposed an offshore wind project about 17 miles off the coast of Ocean City, Maryland. If either of these projects actually moves to fruition, it will take years since an array of state and federal permitting approvals are needed.

Unlike offshore wind, onshore wind in the United States generates almost 5 percent of the nation’s electricity, and according to EIA, is 74 percent less expensive than offshore wind.

Obama Administration Supports High Cost Offshore Wind

The Obama administration recently published a national strategy to advance the offshore wind industry–developed jointly by the Departments of Energy and Interior. The document notes that it is particularly important to ensure “efficiency, consistency and clarity in the regulatory process” for offshore wind, which is managed by the Bureau of Ocean Energy Management at the Interior Department. The report suggests establishing more predictable review timelines and maintaining a reasonable level of flexibility given the early stage of the industry’s development.[iv]

According to the report, there are 10 other “active commercial leases” for U.S. offshore wind projects. In an optimistic scenario, the Obama Administration’s Energy Department predicts that by 2050, the United States could see 86 gigawatts of offshore wind capacity installed in a vision where 35 percent of the electricity in the United States is generated by wind. In contrast, the EIA sees all wind (onshore and offshore) providing just 9 percent of electricity generation in 2040, even with the benefit of the EPA’s Clean Power Plan.[v]

Offshore Wind Is Found in Countries with Steep Electricity Prices

Other countries, especially in northern Europe where wind resources are strong, have provided a home for offshore wind. Denmark has installed a large number of offshore wind turbines and exports the excess power to Norway and Sweden—countries that can use their hydroelectric facilities to store the power, much of which is produced at night.

The largest offshore wind farm in the world is the 630 megawatt London Array Offshore Wind Farm, completed in 2014. This wind farm will be surpassed in 2018, when DONG Energy plans to build the largest offshore wind farm in the world–19 kilometers off the west coast of Britain in the Irish Sea–an 87-turbine site with a capacity of 660 megawatts.[vi]

But, electricity prices in these European countries, particularly Denmark and Germany are very steep—residential electricity prices are 3 times that of the United States. These high prices place more of their citizens into fuel poverty, where energy costs are above 10 percent of their income. Even in these countries, however, the wind industry is heavily subsidized.

As a result, it is more economical for the United States to build onshore wind turbines than offshore wind turbines. Unlike northern Europe, the United States has vast open areas where onshore wind farms can be constructed much more economically than offshore wind farms. In fact, the large expense of offshore wind and lack of potential U.S. customers put the kibosh on Cape Wind–a wind farm proposed off Nantucket Sound.

Block Island Wind Farm Was Built Under Unique Circumstances

The Block Island Offshore Wind Farm will be selling its electricity starting at 24 cents per kilowatt hour under a 20-year power purchase agreement with National Grid—about twice the average residential electricity price in the United States. Block Island had relied on electricity generated by diesel generators getting the diesel from floating tankers ferried across 18 miles of water. During the summer, the Block Island Power Company charged 24 cents per kilowatt hour for its generation fees as diesel is an expensive form of generating electricity, whose costs tend to be very pricey on islands due to the logistics of obtaining the fuel and siting the generators.[vii]

The Block Island Offshore Wind Farm will displace the diesel generators because new infrastructure was also constructed that feeds into Rhode Island’s electricity grid. Power from the wind turbines will feed into a cable buried under the seabed that will connect to a newly constructed substation on Block Island. Because the power produced will exceed Block Island’s peak demand of about 5 megawatts, the company is building a cable that will connect Block Island to the mainland. The cable will tie into the infrastructure of National Grid and allow electricity to move in both directions, providing back-up energy to the island when the wind does not blow.

Another reason why the Block Island Offshore Wind Farm was able to be developed while Cape Wind stagnated, is its location. The wind farm’s location was chosen by the state of Rhode Island (not the developer) and is sited 3 miles off the southeast coast of Block Island, which is effectively in the middle of the Atlantic Ocean. Several years ago, Rhode Island zoned the ocean waters under its control and designated this area as a renewable energy zone.

Conclusion

Offshore wind is a very expensive proposition that finds a home only where electricity is expensive—in northern European countries or off the coast of islands where electricity prices are already high. Consumers that have other alternatives, such as low cost natural gas, should not be lulled into accepting it as an alternate means of generation.


[i] Washington Post, Offshore wind, which Trump fought in Scotland, is finally up and running in the U.S., December 12, 2016, https://www.washingtonpost.com/news/energy-environment/wp/2016/12/12/trump-fought-offshore-wind-in-scotland-now-the-u-s-has-its-first-farm-in-operation/?utm_term=.c75117b3319b

[ii] Gizmo, America’s First (And Perhaps Last) Offshore Wind Farm Is Finally Online, December 12, 2016, http://gizmodo.com/americas-first-and-perhaps-last-offshore-wind-farm-is-1790012552

[iii] Energy Information Administration, Cost and Performance Characteristics of New Generating Technologies, Annual Energy Outlook 2016, June 2016, http://www.eia.gov/outlooks/aeo/assumptions/pdf/table_8.2.pdf

[iv] National Offshore Wind Strategy, http://www.energy.gov/sites/prod/files/2016/09/f33/National-Offshore-Wind-Strategy-report-09082016.pdf

[v] EIA, Annual Energy Outlook 2016, http://www.eia.gov/outlooks/aeo/tables_ref.cfm

[vi] North American Wind Power, World’s Largest Offshore Wind Farm To Be Built By DONG Energy, October 28, 2015, http://nawindpower.com/worlds-largest-offshore-wind-farm-to-be-built-by-dong-energy

[vii] Slate, Meet America’s First Offshore Wind Farm, October 30, 2015, http://www.slate.com/articles/business/the_juice/2015/10/block_island_wind_farm_off_rhode_island_finally_brings_wind_power_to_america.html

The post Expensive Offshore Wind Farm Becomes Operational appeared first on IER.

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