Mass. puts wind power in gear
Vineyard Wind’s low price due to synergies
TWO MAJOR EVENTS LAST WEEK have augured a new era for offshore wind in Massachusetts. The Legislature passed the Clean Energy Future Act on July 31, officially laying out a path to doubling Massachusetts’ procurement of offshore wind to 3,200 MW. The next day, Gov. Charlie Baker’s Department of Energy Resources publicly released the pricing for the first 800 megawatts of offshore wind energy. Vineyard Wind will provide 800 megawatts of electricity with an average price of $89 per megawatt hour over the 20-year life of the contract.
Taken together, these two events put Massachusetts firmly in the lead in the development of offshore wind and provide the framework for building a major industry at very competitive prices. The framework’s three critical pieces: scale, fully utilizing transmission infrastructure, and competition. Applying this approach going forward will catalyze the growth of Massachusetts’ offshore wind industry and the many jobs that will come with it. And it will provide prices for consumers even lower than Vineyard Wind’s $89 per megawatt hour.
Scale was a key driver in Vineyard Wind’s pricing. At 800 megawatts, Vineyard Wind is multiple times larger than any US project to date. Rhode Island’s Block Island wind farm, with a price that started at $244 per megawatt hour, is 30 megawatts. Deepwater Wind’s project into south fork Long Island, priced starting at about $160 per megawatt hour, is 90 megawatts. And Maryland’s Skipjack and US Wind projects are to start at $171 per megawatt hour for 120 megawatts and $167 per megawatt hour for 248 megawatts respectively. Clearly, larger-scale projects yield better prices.
The second factor —shared transmission — is a point that Vineyard made in its original proposal to win the RFP.
The benefit of sharing the transmission system from the first 400 megawatts with the second 400 megawatts is reflected directly in the pricing. For the first 400 megawatt project, the nominal cost is $74 per megawatt hour in year one, then drops to $65 per megawatt hour in year one of the second 400 megawatts, which benefits from the “shared 800 megawatt transmission system.”
Another important pricing trend, as I mentioned in a CommonWealth op-ed in April of this year, is a version of Moore’s Law gaining traction in offshore wind, much to the benefit of the states that are pushing ahead with procurements at scale with shared transmission: in Europe, with this framework, zero-subsidy bids have become commonplace and prices continue to drop.
But scale and efficient use of technology alone won’t bring down prices — competition is the final critical piece in the framework. An “open access” transmission system will intensify competition among generators. Open access means the transmission system is not owned by any generator, but instead is made available to generators according to rules prescribed by federal and state regulators. This gives all generators an equal chance to get valuable access to the Massachusetts market. Such access to transmission has been the key ingredient to the reduction in offshore wind prices elsewhere, and will be in the Commonwealth as well.
That is why the timing of the Clean Energy Future Act is impeccable, for it, in essence, provides a roadmap for doubling Massachusetts’ offshore wind resources from 1,600 megawatt to 3,200 megawatts and wisely allows the Department of Energy Resources to solicit open access transmission. The Clean Energy Future Act recognizes that transmission infrastructure matters. In fact, it may prove to be the linchpin in the process for its role in enabling scale and competition.Vineyard Wind’s successful bid provides a lesson for moving ahead as the state embarks on bringing forward even lower prices for the next 2,400 megawatts of offshore wind. Together they point to how Massachusetts can continue to lead the growth of the offshore wind industry in the United States.
Edward N. Krapels is the CEO of Anbaric Development Partners, an energy transmission developer.