Vineyard Wind will generate electricity for a levelised cost of energy (LCOE) of $65/MWh over its 20-year lifetime, with a 400MW first phase coming in at $74/MWh.
The creation of local engineering, procurement, construction (EPC) industry and supply chains to build Vineyard means a project of this scale being completed will help other developers develop business cases and drive down future prices off the coast of the United States.
But the role of the ITC appears to have been crucial, according to Vineyard Wind CEO Lars Thaaning Pedersen and Anthony Logan, North America wind power research analyst at WMPR (formerly Make).
Pedersen said using federal tax investment credits (ITCs) and a long-term PPA enabled the developer to reach a price Logan has described as "stunningly low".
Logan, meanwhile, suggested that by demonstrating continuous construction, the developer could qualify Vineyard’s second phase at the same ITC rate as the first phase.
In doing so, Vineyard Wind could reach a "sweet spot" in phase two, whereby it "maximises year-over-year LCOE reductions while also getting a high ITC value".
Without such scheduling, however, it would have been a "very aggressive bet on natural cost reductions", the WMPR analyst added.
In 2015, the ITC — as well as the US production tax credit (PTC) — was extended for a further five years, with a gradual phase-out planned by 2020.
Projects that started in 2015 and 2016 were eligible for 30% of the ITC. But this amount has declined annually. Projects will receive 24% of the ITC if construction started in 2017, 18% if in 2018, and 12% if in 2019.
At the time analysts were bullish about the impact such certainty would give industry, arguing it would encourage build-out before the end of the decade.
However, with construction of no other new projects in US waters to begin prior to 2020, Logan argues that the impending loss of the ITC limits the capability for other projects to achieve the "stunningly low prices" secured for Vineyard Wind for "a little while".
Logan added that the Vineyard site 22.5km from the Massachusetts coast had some of the best average wind speeds of all the BOEM (Bureau of Ocean Management) lease areas awarded so far, including off the coasts of Maryland, New Jersey and New York.
This helped it secure the price it did, he said, but others will not have this advantage.
