Published on August 2nd, 2018 | by Joshua S Hill0
1st Big US Offshore Wind Farm Scores Record-Low Price
August 2nd, 2018 by Joshua S Hill
The United States’ first large offshore wind farm, the 800 megawatt (MW) Vineyard Wind project, has scored pricing well below analyst expectations, starting at $74 per MW-hour (MWh) for the first phase of the project and an even more impressive $65/MWh for the project’s second phase.
The US offshore wind energy is still only getting its feet wet, so to speak, with only one completed project in operation — the 30 MW Block Island Wind Farm off the coast of Rhode Island, which was completed towards the end of 2016. However, since then, there has been increasing and significant interest in the technology and, just a couple of months ago, a trio of announcements in the country’s northeast dramatically scaled up the near-term pipeline to at least 5 gigawatts (GW).
Among these announcements was the successful contract awarded to Avangrid and Copenhagen Infrastructure Partners (CIP) by the Massachusetts Electric Distribution for the 800 MW Vineyard Wind offshore wind project. Set to be located just south of Martha’s Vineyard, Vineyard Wind beat out two other potential projects for the contract with construction set to begin later next year and operation beginning in 2021.
A letter filed with the Massachusetts Department of Energy Resources this week brings the project another step closer to fruition, revealing pricing for the two phases of the project (both 400 MW) which fell well below analyst expectations and created a new US record for offshore wind (not difficult, mind you, considering there’s only one other project).
The two phases will receive different pricing over their lifetimes. Phase 1 will produce power and renewable energy credits (REC) at 7.4 cents per kilowatt-hour (or $74/MWh), escalating at 2.5% per year over a 20-year period (thus topping out at $118.30/MWh). The second phase will provide clean energy and RECs beginning at $65/MWh with a similar 2.5% increase, making the 20-year average cost for the project $84.23/MWh.
“Today’s historic filing represents the start of an industry, one that will assure access to abundant clean energy resources for decades to come, and Vineyard Wind is pleased to offer a competitive price to energy consumers in the Commonwealth of Massachusetts while continuing to advance the clear environmental and economic benefits associated with offshore wind,” said Lars Thaaning Pedersen, CEO of Vineyard Wind. “By utilizing Federal Investment Tax Credits within the structure of a long-term power purchase agreement, Vineyard Wind was able to offer an attractive price to the benefit of consumers while creating value for its shareholders. This long-term investment and commitment to Massachusetts will stimulate job growth, economic development and acceleration of an emerging offshore wind industry in the United States.”
And while Vineyard Wind is understandably pleased with this next step, analysts were caught somewhat unawares. Tom Harries, a wind analyst with Bloomberg New Energy Finance (BNEF), described the news as “shocking” and added that “the wider industry expected much higher prices. The repercussions of this are it will probably awaken a lot of other coastal states to the value of offshore wind.”
Speaking to me via email, Harries added that he imagines that these record-low prices “will set a precedent,” but a precedent “with caveats. Not all offshore wind projects are alike. Natural characteristics like wind speed, water depth, and distance from shore impact the cost.” So we won’t necessarily see continually record-low offshore wind prices moving forward, but as Harries said, this will certainly open the eyes of other coastal states, especially along the country’s eastern seaboard.
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