U.S. offshore wind project costs have fallen 75% since 2014, across contracts for 1.2 gigawatts (GW) of projects that will be built over the next five years. The 9 GW capacity target recently announced by Governor Cuomo in New York pushed U.S. targets to a combined 18 GW of offshore wind capacity in six Atlantic states. With all this momentum, did we vastly underestimate the potential contribution of offshore wind to our clean energy future?
Offshore wind power is following a similar, but faster learning curve to onshore wind and solar over the past decade. Since 2010, onshore wind’s levelized cost of energy (LCOE) fell 66%, and solar’s LCOE fell 86%. The glut of upcoming auctions and capacity targets in Northeast and Mid-Atlantic states mean the coming years will determine how fast offshore wind’s cost will fall, and the National Renewable Energy Laboratory’s Annual Technology Baseline suggests plenty of room for improvement over the current LCOE.
Still, only 30 megawatts of offshore wind have actually been built in the United States to date, and consumers paid a heavy price for it at $244/megawatt hours (MWh), roughly four times what utilities pay for wholesale electricity. But recent auctions in Maryland and Massachusetts revealed fast-falling prices for new, larger projects. Maryland utilities recently executed long-term offshore wind contracts for $132/MWh over 20 years. Massachusetts utilities then cut those prices in half with contracts at an average price of $70/MWh for 800 MW of offshore wind in the Vineyard Wind project—implying roughly $90/MWh without the federal tax credit. Though there are still risks associated with siting and permitting, such as satisfying environmental, viewshed, shipping, and other local concerns, these prices make offshore wind cost-effective in the Northeast.
None of this remarkable progress would be possible without thoughtful policy design. De-risking early projects through stakeholder engagement, federal and state permitting cooperation, and robust competitive auctions has already helped the nascent offshore industry climb the learning curve without placing undue risk on customers.
However, even those policies won’t be enough. Complementary policies like reforming utility business models, increasing grid flexibility to complement variable renewables, and reforming wholesale energy markets will be key to a carbon-free, affordable energy future.
It is good news, and a bit of a surprise to me, that offshore wind people are offering power at costs down around 7 cents per kwh, a very rapid… Read more »
Paul … “giving FERC the authority to approve interstate/interregional transmisson lines, so that low cost electricity from good sites can be used everywhere.” Don’t know what you mean by this,… Read more »
Hi Paul, Thanks for these thoughts. With regard to concentrating solar with storage vs. offshore wind, I don’t think it’s a matter of one or the other. Not many sites… Read more »
Betting on off-shore wind is a high-risk game. Unlike the North Sea, U.S. wind turbines are in Hurricane alley—single event failure mode with climate models predicting more large storms. The… Read more »
The north sea has plenty of vigorous winter storms, and the number of really powerful hurricanes that pass over the coastal waters of the mid-Atlantic and north-east states is small. … Read more »
Charles … “Unlike the North Sea, U.S. wind turbines are in Hurricane alley” Not exactly …. A recent technical study has concluded that the waters off North Carolina have adequate… Read more »
Based on my limited experience, to have a truly de-regulated market, policy changes should be looked at to migrate PPAs towards interconnecting transmission authorities, independent system operator. Every generating station… Read more »
Farangmeher, I want to take a closer look at your suggestion that “the onus should be on the generator to meet the capacity that they bid into the market for… Read more »
Mike, thank you for your response, sorry it took me a while to get back to you. PJM defines capacity as a commitment of a resource to provide energy during… Read more »
Offshore wind will play a large role in the future and I have been so glad to see the industry growth you describe. The floating turbines are not quite ready… Read more »
Jane, thanks for expanding so much on the benefits of offshore wind. I have a question for you (and for the discussion here) – what do you think states should… Read more »
I think the states should look to MA. The consultant report the VA Governor had done last fall essentially said the same thing … Develop the onshore pieces of the… Read more »