Offshore economics ‘are now improving fast’ abroad — report

Source: Saqib Rahim, E&E repor • Posted: Thursday, November 3, 2016

Offshore wind costs are plummeting in Europe and approaching “striking distance” of other power sources, Bloomberg New Energy Finance said yesterday.

The average cost of electrons from offshore wind has fallen 28 percent since this time last year, BNEF said in a report.

Offshore wind, long regarded as the Cadillac option of clean energy, remains one of the world’s priciest resources at roughly $126 per megawatt-hour.

But recent auctions in Denmark and the Netherlands suggest it is getting cheaper as suppliers claw at each other to win projects.

“The economics of offshore wind are now improving fast, with the best sites getting closer to striking distance of more mature technologies,” said Seb Henbest, BNEF’s head of Europe, the Middle East and Africa, in a statement.

Cost will be a central point of debate as offshore wind arrives to the United States.

While the offshore-wind industry has reached scale in Europe with hundreds of turbines per project, the United States has one offshore wind farm with five turbines.

Lower prices in Europe have Northeast states hoping to build more.

In August, Massachusetts Gov. Charlie Baker (R) signed a bill requiring utilities to buy 1,600 MW of offshore wind energy by 2027. The state will take its first project proposals next June.

New York’s top energy official, Richard Kauffman, has said the state needs offshore wind to meet its goal of 50 percent renewable power by 2030.

But the state has not set a target number. John Rhodes, president of the New York State Energy Research and Development Authority, or NYSERDA, said last month they are working on a “comprehensive plan for how we’re going to acquire how much offshore wind at what set of economics.”

Asked if offshore wind is too expensive, he said, “It is not. It doesn’t have to be.”

Supporters say the Northeast is ripe for it, with its strong offshore winds, high power prices and retiring power plants.

But they have also said that if offshore wind is to get cheaper, it needs to be built at scale in the United States. In June, environmental groups asked New York Gov. Andrew Cuomo (D) to commit to at least 5,000 MW of offshore wind by 2025.

Massachusetts has the sixth-highest average retail price for power in America, according to the U.S. Energy Information Administration. New York ranks fourth.

To build offshore wind, they are counting on a key aspect of the policy design in Europe: competition.

For any offshore wind farm, two of the most serious hurdles are getting a lease for the acreage and getting a contract for the power.

Europe’s auction programs “have simplified development by providing transmission and a permitted site, and have led to fierce competition between bidders,” Tom Harries, an offshore wind analyst at BNEF, said in a statement.

Developers are expecting a “cage match” in Massachusetts, which has said that each successive offshore-wind project has to be cheaper than the last.

In New York, NYSERDA’s strategy is to win a federal auction in December for waters off Long Island.

If it does, NYSERDA will then ask developers to compete for the rights to build a wind farm there. In return, NYSERDA will guarantee that they get a contract to sell the power to a utility (EnergyWire, Oct. 28).