Offshore windfarm would cost twice as much, says utility

UNIONDALE, New York, USA, August 29, 2007. A proposed 140 MW offshore windfarm would cost US$811 million, according to a report prepared for the Long Island Power Authority.

When compared with the cost of a combined cycle gas-fired generating plant, the ‘levelized green premium’ for wind power would be $66 million per year when spread over a 20-year period, concludes Pace Global Energy Services. The project’s total cost of $811 million would include construction and financing costs, and a transmission cable to bring the power from the wind turbines to a land-based LIPA substation.

The premium for wind power was calculated by taking the difference between the cost of generating a MWh of electricity from the combined cycle natural gas facility ($137) and the 40 offshore turbines ($291). That premium of $153 per MWh, when annualised and spread over a 20-year power purchase agreement, is $66 million per year.

The costs for the proposed windfarm are in line with market expectations for North American offshore projects, given the early stage development of such a market and the overall lack of a well-defined national energy policy to support these kinds of projects, the study concludes. Costs for developing offshore windfarms in Europe are considerably lower due to the experience in building such projects and the government incentives offered for renewables.

LIPA requested the study after FPL Energy updated its cost estimate of $697 million at the end of last year. That estimate did not include financing and transmission costs.

“Obviously, there is a premium for building an offshore wind project when compared to conventional energy projects,” says LIPA president Richard Kessel. “Long Island must decide where it wants to go with its energy future. Should we continue on as we have in the past by adding more and more fossil fuel power plants, or do we give a large-scale renewable energy project a chance to help break the grip of oil and natural gas as the primary fuels used to keep our lights on?”

LIPA’s Board of Trustees will discuss the proposed offshore windfarm and alternatives at a meeting in late September.

The cost for turbines is $2,010 per kW, while EPC (Engineering, Procurement, Construction) will cost $4,841, finance charges add $390 and interconnection represents $403, for a total of $5,634 per kW. EPC costs for offshore windfarms “have been rising steadily in recent years due to elevated metals prices and increased wind turbine demand versus supply,” it notes. Estimates for European installations are expected to exceed $4,000 per kW within a few years.

“Although North America has seen tremendous growth in its land-based wind power developments, the offshore market still poses additional development obstacles,” the report cautions. “These include the lack of incentives to invest in high-cost offshore technologically, specialised infrastructure needed to develop large-scale offshore facilities, and the uncertain regulatory environment in the U.S. regarding siting and other aspects of this type of technology.”

LIPA is a municipal electric utility on Long Island, which provides electric service to 1.1 million customers. It is the third largest municipal utility in the U.S. in terms of customers and the sixth largest in terms of electricity delivered.

Click here for more info...

To receive news and features like this direct to your inbox sign-up for the Renewable Energy Focus E-News.

Simply register your details to receive a fortnightly roundup of the latest news from the renewables industries direct to your inbox.

If you would like to advertise in the enewsletter please contact our sales team.

If you have some news for the renewables industry or would like to comment on any of the articles on this site, contact our editorial team.

You can also access the full list of contacts here.