Study prices out offshore wind
Lower prices come from big 2,000-megawatt commitment
A UNIVERSITY OF DELAWARE STUDY suggests offshore wind off the coast of Massachusetts can yield electricity at much lower prices than previously forecast, but only if policymakers green-light the development of at least 2,000 megawatts.
The 2,000-megawatt number happens to be the exact number that some House lawmakers are pushing for in the omnibus energy bill expected to be unveiled in April. House leaders say they favor a special carveout for offshore wind, meaning they would require the purchase of offshore wind power by the state’s utilities and rely on competition among a small pool of potential suppliers to keep costs down.
The University of Delaware study took as its starting point the proposed Cape Wind project in Nantucket Sound and a small wind farm currently being built off the coast of Rhode Island by Deepwater Wind. The study said the levelized cost of energy from those two projects was 24 cents a kilowatt hour and 30 cents a kilowatt hour, respectively.By contracting for 2,000 megawatts of offshore wind power, built in three stages, the study said the levelized price of electricity would start out at 16.2 cents a kilowatt hour, fall to 12.8 cents, and then drop to 10.8 cents over the 10-year period from 2020 to 2030. The levelized price is akin to an average price, but it is characterized in 2016 dollars and does not reflect any inflation adjustments. It also doesn’t take into account any government incentives for offshore wind production.
“Market visibility reduces cost by generating competition among developers and their suppliers and by creating a community of experienced project investors who see less risk and thus expect lower rates of return,” said the University of Delaware study. “Market visibility is achieved by government policy that commits to the buildout of a sequence of projects, as opposed to a policy for one single project, which has been previously seen in Massachusetts and other East Coast states. Also, building a series of projects leads to an experienced workforce for subsequent projects, which becomes more efficient as they learn by doing.”