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United States

Offshore wind more valuable than onshore in some areas

UNITED STATES: In densely populated regions such as the north-east, the proximity to major cities adds value to offshore wind projects, according to a new report.

Power-hungry… Proximity to major cities like New York makes offshore wind more valuable to the north-east US region than onshore, the report said (pic: wikimediacommons)
Power-hungry… Proximity to major cities like New York makes offshore wind more valuable to the north-east US region than onshore, the report said (pic: wikimediacommons)

Offshore wind is more valuable than its onshore equivalent in the north-east US, according to a new study by the Lawrence Berkeley National Laboratory (LBNL), funded by the US Department of Energy.

Offshore wind’s value along the east coast ranges from $40/MWh to more than $110/MWh. It is lowest in the south-east of the country.

The historical market value of offshore wind, using 2007-2016 data, would have exceeded onshore wind’s, said the researchers.

This is due to the proximity of offshore wind sites to major cities such as New York, and because the timing of power produced is more correlated with demand.

The researchers gauged offshore wind’s economic value by taking into account energy, capacity, and renewable energy certificates.

"It is the first research to quantify the value of offshore wind along the entire eastern seaboard rigorously and consistently," said one of the study’s authors, Ryan Wiser of LBNL.

The most promising region off the east coast is near New York, Connecticut, Rhode Island, and Massachusetts — the area where the US offshore development industry is now finally taking off.

But, not surprisingly, the cost of offshore wind remained higher than for onshore during the study period. "Cost reductions that approximate those witnessed recently in Europe may be needed for US offshore wind to offer a credible long-term economic value proposition on a widespread basis," said the researchers.

Specifically, the team looked at the economic value of offshore wind connecting to the various regional transmission operators in the eastern US.

They found that the median marginal value for sites interconnecting to ISO New England was roughly $110/MWh, compared with $100/MWh for sites connecting to New York ISO, $70/MWh for sites in PJM, located in the Mid-Atlantic, and closer to $55/MWh for sites south of PJM that are not served by a regional transmission operator.

Using estimates for the levelised cost of energy (LCOE) from offshore wind — affected by factors such as wind speed, ocean depth and distance from shore — rather than value estimates, the researchers found that the most attractive sites were close to the shore of south-eastern Massachusetts and Rhode Island, while the least attractive were far off Florida and Georgia.

The researchers explored how to enhance the value for offshore wind, including by interconnecting to onshore locations with higher electricity prices but constrained transmission, or by adding storage.

Interconnecting to a more-distant but higher-priced "node" can increase the value of offshore wind by as much as $25/MWh, particularly when switching from PJM or ISO-NE nodes to NYISO nodes around Long Island, according to the study.

Storage boosts value

Batteries with a capacity of around 25% of that of the offshore wind project’s can increase value by up to $3/MWh, with even greater incremental value as battery size increases, the study reported.

"We find that offshore wind can boost its value when paired with storage. With the declining cost of storage, it is no wonder that an increasing number of offshore projects are exploring this strategy," said Wiser.

So far, only one offshore project is operating in the US, Deepwater Wind’s 30MW Block Island project off Rhode Island.

However, large projects of up to 1GW are being developed off Massachusetts, Rhode Island, New York, New Jersey and Maryland, some with battery storage and one with a transmission backbone.

In Massachusetts, results for the US’s first competitive tender for offshore wind, for 400-800MW of capacity, had been due on 23 April.

However, the announcement is likely to be pushed back until May while utilities deal with the aftermath of several storms that hit the state in March. Massachusetts is requiring utilities to procure up to 1.6GW of offshore wind by 2027. "It will be really interesting to see the bids in Massachusetts," said Wiser.

Block Island’s cost is about $240/MWh, although the electricity is sold to an island that had previously relied on dirty and expensive diesel-generated power, he pointed out.

Bids in Maryland’s 2017 round for offshore-wind renewable energy credits came in at about $130/MWh. Recent bids in European auctions for offshore wind have been as low as $60-80/MWh.

In April, the government announced a proposed competitive lease sale for two more areas off Massachusetts, totalling nearly 1,580km2 and called for information and industry interest in developing offshore wind in the New York Bight region, between Long Island and the New Jersey coast.

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