U.S. Offshore Wind Power at 16 Cents per Kilowatt-Hour
- Posted on January 25, 2017
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Offshore wind power costs have dropped sharply in recent years, fueled largely by ongoing technological innovation and investment by governments and world industry leaders in Western Europe.
Commissioning of the 30-MW Block Island Wind Farm off the Rhode Island coast – the nation’s first commercial, utility-scale installation – has galvanized the nascent U.S. offshore wind power industry. Fresh off the Block Island offshore wind farm’s commissioning, Deepwater Wind and the Long Island Power Authority (LIPA) this past week reached an agreement that will result in construction of another, much larger one off New York’s Long Island coast.
Greater support on the part of state governments will provide sustained momentum that enhances U.S. offshore wind power prospects. Integral to their “green” energy development and climate change action strategies, Massachusetts Gov. Rick Baker and New York Gov. Andrew Cuomo have set ambitious offshore wind power targets.
Offshore New York
The terms of Deepwater Wind’s LIPA power purchase agreement (PPA) highlights just how far and how fast U.S. offshore wind has come in terms of being cost-competitive with existing utility power generation.
Per the terms of the PPA, LIPA, a non-profit municipal utility, will take up all the electrical energy the offshore wind farm will produce (estimated to be enough to power 50,000 average homes) at a price not very far from that for utility-scale onshore wind and solar power generation – around $0.16/kWh, according to a New York Times’ report.
European power-energy industry leaders are also keen to play a role in U.S. offshore wind power development. Along with Deepwater Wind, Statoil, Norway’s multinational oil & gas corporation, recently won a highly competitive federal auction that required 33 bidding rounds before that state-owned oil and gas major walked away with an offshore Long Island wind energy lease that spans 79,000 acres.
Statoil won the auction with a bid of $42.5 million – far more than the total pledged to the U.S. Treasury for all previous federal offshore wind energy auctions combined, the New York Times’ Diane Cardwell points out in her Jan. 21 news report.
All this said, substantial hurdles stand in the way of further U.S. offshore wind power industry development and growth. Perhaps most significant is heightened uncertainty regarding federal energy policy and support from new President Donald J. Trump and his administration.
Which Way Political Winds?
More than three years in the making, project developer Deepwater Wind commissioned the 30-MW Block Island Wind Farm in December. The high quality, emissions-free energy being generated will meet the electricity needs of the island community, eliminating the need for diesel fuel power generation, as well as utility customers on the mainland via a 21-mile long underground, submarine transmission line, a substation and infrastructure hardened to withstand Category 3 storms per the terms of Deepwater Wind’s PPA with National Grid.
More broadly, at least 54-gigawatts (GW) of U.S. offshore wind energy generation capacity could be deployed by 2030, according to a new study funded by the Department of Energy (DOE). The “National Offshore Wind Energy Grid Interconnection Study” (NOWEGIS) focused on helping DOE achieve two goals: reducing the cost of offshore wind energy and shortening the time required to deploy offshore wind generation capacity.
Adding to offshore wind’s attractiveness is the proximity of promising sites to large urban centers, particularly along the Atlantic coast, where the continental shelf is much more expansive that it is along the Pacific edge of the continent.
Motivated by President Barack Obama’s strategic clean energy, climate change and “green” economic development plans, federal and state government authorities have been able to craft an inclusive, integrated institutional framework for national offshore wind power development that serves as the keystone and a launch pad for the nascent industry.
Institution of lasting public-private market frameworks are prerequisites for growth and development of any industry. The Obama administration did just that for U.S. offshore wind, and took a balanaced, inclusive, holistic and rigorously systematic approach in doing so. Whether or not Pres. Trump and his administration will, or is even capable of following suit remains to be seen.