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LBNL report examines value of Northeast offshore wind

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The potential market value of East Coast offshore wind is highest in New York, Connecticut, Rhode Island and Massachusetts, reflecting the energy, capacity and renewable energy credits in those states over a nine-year period starting in 2007, according to a report released Monday by the Lawrence Berkeley National Laboratory.

Unlike recent reports on the cost of offshore wind, the LBNL report looked at the estimated value of offshore wind using weather and market data from 2007 through 2016.

When averaged over the 2007 to 2016 period, the median marginal value for offshore sites interconnecting to ISO-New England is about $110 per megawatt-hour, compared to $100/MWh for sites interconnecting to the New York independent System Operator, $70/MWh for sites in the PJM Interconnection and about to $55/MWh for sites south of PJM, according to the Energy Department laboratory.

Offshore wind’s market value varies sharply from year to year depending on energy and REC prices, LBNL found. For 2016, LBNL estimated the value of offshore wind in ISO-NE at about $70/MWh, down from about $135/MWh two years earlier, partly on a sharp drop in energy prices.

When considering energy, capacity and RECs, offshore wind generally appears to be more valuable than land-based wind farms, according to LBNL.

Looking at 2016 data, LBNL found that the total marginal energy and capacity value of offshore wind would have exceeded the value of existing onshore wind by $6/MWh, or 21 percent, in ISO-NE, by $6/MWh, or 24 percent, in PJM and by more than $20/MWh, or 112 percent, in NYISO.

Also, the capacity value of offshore wind in those markets would have been about double onshore wind in 2016, according to LBNL.

The historical market value of offshore wind exceeds land-based wind because offshore wind sites can be closer to major population centers and tend to produce electricity that more closely matches electricity demand, LBNL said.

Although offshore wind tends to have relatively high capacity credits, especially in the winter, capacity value is a small part of a wind farm’s overall value compared with the value of its energy and RECs, according to LBNL.

While offshore wind farms appear to have more value than land-based facilities, they cost more to build. “Cost reductions that approximate those witnessed recently in Europe may be needed for U.S. offshore wind to offer a credible long-term economic value proposition on a widespread basis along the eastern seaboard,” LBNL said.

LBNL said offshore wind can cut air pollution emissions and wholesale electricity and natural gas prices by displacing higher cost power plants and natural gas-fired generation, although the effects vary over time and across regions.

Knowing how the historical value of offshore wind has varied and what has driven the differences can provide insights to stakeholders, including wind developers, purchasers and energy system decision-makers, LBNL said.

The United States has one offshore wind farm: the 30-megawatt Block Island wind farm off the Rhode Island coast.

Looking ahead, the value of offshore wind will largely depend on electricity prices, according to LBNL. The Long Island Power Authority has contracted for 90 MW of power from Deepwater Wind’s South Fork Wind Farm off the southern coast of Rhode Island and Massachusetts, east of Montauk.

“Several projections of electricity prices in the ISO-NE, NYISO, and PJM areas show significant variation across forecasts, but a general upward trend,” the LBNL said. “Increasing wind penetration over time could drive down wind’s energy value in the future, as the market becomes saturated with low marginal-cost wind power during windy times.”

Also, the value of RECs could drop as wind and solar costs decline, according to LBNL, which noted some states have established offshore wind obligations that could increase the value of offshore wind RECs.

LBNL said the National Renewable Energy Laboratory is preparing a study to be issued this year looking at offshore wind scenarios in 2024 and 2038 within the NYISO and ISO-NE markets, focusing on performance metrics including reliability, capacity value, transmission needs, production cost savings, wholesale price suppression, curtailment levels and system ramping needs.

BOEM eyes more offshore wind sites in the Atlantic

The Bureau of Ocean Energy Management recently said it plans to launch a high-level assessment of potential wind farm sites in the Atlantic.

BOEM has completed 13 offshore wind leases off the coasts of Massachusetts, Rhode Island, New York, New Jersey, Maryland, Virginia and North Carolina, the agency said in a recent Federal Register notice.