U.S. offshore wind moves closer to commercial viability — report
There is currently just one offshore wind turbine spinning in American waters, a 20-kilowatt pilot deployed by the University of Maine in June. But over the last year, analysts believe the United States made significant headway in making the wind industry’s offshore dreams a reality.
In a report prepared for the Department of Energy, Navigant consultants concluded that “the U.S. offshore wind industry is transitioning from early development to demonstration of commercial viability.”
The report also states that since last year, “several potential U.S. offshore wind projects have achieved notable advancements,” citing 11 projects that “now lie in advanced stages of development.”
This means the projects have either been approved for leases in state or federal waters, signed a power purchase agreement, or are in the process of significant data collection studies at the proposed site. If completed, these 11 projects would add up to 3,824 megawatts of capacity.
However, not all are guaranteed to reach completion — several projects cited in the report as “advanced” saw major setbacks this year.
Among the 11 projects referenced is Fishermen’s Energy I, or the Atlantic City Wind Farm in New Jersey, which was denied its proposal to qualify for ratepayer-funded subsidies by the state’s Board of Public Utilities in July (Greenwire, July 22).
Additionally, Statoil ASA of Norway last week opted to no longer support the proposed Hywind project in Maine, citing political uncertainty that “made the project outlook too uncertain to proceed” (Greenwire, Oct. 16).
But according to Bruce Hamilton, director of energy at Navigant and the report’s principal investigator, this year’s advances in U.S. offshore wind development were, “in net, in the right direction.”
“Those 11 are not necessarily the first 11 that will be started, but a subset of them will be the first few that will get started,” Hamilton said. “More projects have advanced than have retreated.”
Hamilton cited the Department of Energy’s decision last December to provide an initial $4 million in funding for seven offshore wind projects in U.S. waters. Up to three of these projects may be chosen to receive an additional $47 million, with the aim to begin operating in 2017 (ClimateWire, Dec. 17, 2012).
Another promising development in the sector was the Bureau of Ocean Energy Management’s successful completion of two offshore wind lease auctions this year. Yesterday, Interior Secretary Sally Jewell said three more auctions for ocean acreage near Maryland, New Jersey and Massachusetts are expected to take place in 2014 (ClimateWire, Oct. 23).
Hamilton said Maryland’s passage of a bill to promote offshore wind power this spring was also a significant step in the right direction. The bill requires the state’s electricity suppliers to get up to 2.5 percent of their power from offshore wind by 2017 and will provide up to $1.7 billion in ratepayer-funded subsidies to a developer willing to move forward on the project (Greenwire, April 10).
Long-term trends look competitive
But significant barriers remain before offshore wind becomes truly competitive with other parts of the U.S. power sector, the report cautions.
It states that 2013 saw “few tangible milestones” in the area of infrastructure development, although transmission projects like the Atlantic Wind Connection, a 350-mile underwater transmission line planned in New Jersey, “progressed steadily.”
The key factor needed to move the technology forward in the U.S. is well-known to offshore wind industry insiders: stable, supportive government policy. Offshore wind is still far from being cost-competitive with coal and natural gas. Several projects, including Cape Wind in Massachusetts, are scrambling to begin construction by the end of the year to qualify for a federal production tax credit that provides $23 per megawatt-hour of power produced over the course of 10 years.
“The only real reason people put in offshore wind now is that they’re required to by policy,” Hamilton said. “That’s why the Maryland legislation is so important.”
Global costs of offshore wind have only gone up in recent years, with the average capital cost currently at $5,384 per kilowatt for projects installed in 2012, according to Navigant. (A conventional natural gas power plant cost only about $917 per kilowatt in overnight capital costs in 2012, according to Energy Information Administration data.) Trends toward installing offshore wind in deeper waters and sites that are otherwise more difficult to access contributed to this cost increase, the report states.
However, Hamilton noted that the long-term trends point in favor of offshore wind, especially as turbine manufacturers and developers work to “reduce the costs every step along the way.”
“The long-term trend for wind is costs will go down, and the long-term trend for gas and coal is that the costs are going to go up,” Hamilton said. And although the intersection will likely happen first in Europe, Hamilton was upbeat about offshore wind’s future, saying, “Grid parity will ultimately come to this country.”