A new study published this week by Lawrence Berkeley National Laboratory has shown that the value created by offshore wind varies significantly depending on location, ranging from $110 per megawatt-hour (MWh) to as low as $40/MWh.
Offshore wind has become one of the leading forms of new electricity generation in parts of Europe and is expanding into other markets, such as Asia, as well. There is currently almost 17 gigawatts (GW) worth of offshore wind in operation, and at least another 7.9 GW in the pipeline. Europe leads the way with 15.8 GW, but there are new markets cropping up.
However, one region which has, until recently, mostly eschewed the potential of offshore wind is North America, specifically the United States. There is currently only one offshore wind farm in operation, the 30 MW Block Island Wind Farm located off the coast of Rhode Island, which began generating electricity in December of 2016. In recent months the Bay State Wind consortium has begun making significant headway on its eponymous 800 MW project off the coast of Massachusetts, and a smaller 200 MW project located in the same lease area but intended to provide electricity to Connecticut.
New research published Monday by Lawrence Berkeley National Laboratory (Berkeley Lab) might serve to increase the interest in offshore wind, however, showcasing the technology’s potential “market value” — or, more accurately, the financial benefit.
The new study, Estimating the Value of Offshore Wind Along the United States’ Eastern Coast, sought to assess the market value of offshore wind energy down the east coast of the United States. It is important at this point to note that the researchers from Berkeley Lab are not using the term “market value” as it is normally used — as in, the average market value of a house, where ‘higher’ means it costs more and ‘lower’ the opposite. Rather, Berkeley Lab is using the term “market value” to describe the financial benefit that offshore wind creates — looking specifically at the energy it generates, capacity, and renewable energy certificates (RECs), as well as reducing air pollution and suppressing natural gas prices.
According to the authors of the study, their work is based on “historical (2007-2016) weather data at thousands of potential offshore wind sites, combined with historical wholesale electricity market outcomes and renewable energy certificate (REC) prices at hundreds of possible transmission interconnection points.” Their findings show that the historical market value of offshore wind in the timeframe they studied varied significantly depending on location, ranging from as low as $40/MWh towards the south of the country, and as high as $110/MWh off the coast of states like New York, Connecticut, Rhode Island, and Massachusetts.
Again, just to clarify, the higher the “market value” the better, in this particular case, where an offshore wind project would provide $110/MWh in areas such as the northeast coast — locations which are already seeing intense offshore wind development.
What is possibly most interesting about the study is the discovery that, over the time period covered, the “market value” of offshore wind often exceeded the value of onshore wind. This might be a very typically US-centric result, considering just how much of the population is centered along the coasts (much as in Australia), because the researchers highlighted offshore wind’s close proximity to major population centers as one of the major contributing factors to offshore wind’s increased market value over onshore wind.
Of course, at the moment, the cost of offshore wind is higher than that of onshore wind, but given enough support within the industry and increased interest, it is possible that the US offshore wind industry may benefit from the same massive cost reductions that have seen offshore wind become so popular and cost-effective in Europe.