The New York Power Authority (NYPA), which solicited bids for a 120-500MW project in Lake Erie and Lake Ontario, cited high costs as the main reason for pulling out of the race to plant the first water-based turbines in the US. NYPA staff estimated that a 150MW project would require a present-value subsidy of $650 million to $1.2 billion over its 20-year life.
While real-time spot power prices on the western side of New York State near Lake Erie average roughly $30/MWh, prices on the eastern side near New York City often top $100/MWh - giving potential projects in the Atlantic Ocean a clear advantage, according to Jesse Broehl, a US adviser for Make Consulting.
The cancelled project, dubbed Great Lakes Offshore Wind, also faced opposition from six of eight counties along the shorelines of the two lakes. Opponents cited marred views, bird and bat kills, diminished tourism and declining property values.
NYPA determined that the project would ultimately cost two to four times more than similar-sized onshore developments.
"For a state like New York to back out - that's a key sign," said Peter Asmus, a senior analyst at Pike Research. "It's probably one of the more progressive states in terms of renewables. It shows that everyone is really focused on costs and taking a second look."
NYPA has not given up on offshore wind. It has decided to revive a dormant plan for a 350-700MW project off Long Island in the Atlantic Ocean.
The project's big advantage is its proximity to the New York metro area, meaning it could take advantage of higher power prices. Also, NYPA is partnering with the Long Island Power Authority and energy company Con Edison, which allows it to share the risk - something the Great Lakes project was lacking.
Meanwhile, the construction target for another high-profile Great Lakes offshore plan, a 20MW pilot project developed by Lake Erie Energy Development Corporation, has been pushed back from 2012 to 2014.