When Will US Offshore Wind Be Cost-Competitive?

Editor’s Note: EarthTechling is proud to repost this article courtesy of Greentech Media. Author credit goes to Herman Trabish.

The real question isn’t offshore wind’s potential.

A University of Delaware study estimated Eastern seaboard wind from Massachusetts to North Carolina to be big enough to build 330 gigawatts of installed generating capacity.

Offshore wind power

image via Shutterstock

The U.S. may have, according to an NREL study, as much as 4,000 gigawatts. That would meet present U.S. electricity demand even if average capacity factor is only 25 percent — and offshore wind’s average capacity factor is likely 40 percent.

The real question — and it is being asked repeatedly at the American Wind Energy Association (AWEA) Offshore WindPower 2012 conference — is how soon and how cost-competitively that potential can be developed.

Denmark built the first offshore project in 1991, and Europe now has a 4,000-plus-megawatt installed capacity, thirteen projects under construction (including the 1,000-megawatt London Array), and an estimated 150 gigawatts being planned. In 2010, Norway’s Statoil (NYSE:STO) launched its Hywind 2.3-megawatt floating turbine, and earlier this year Portugal christened a pair of two-megawatt floating turbines built by Seattle-based Principle Power.

China has 260 gigawatts of offshore capacity and wants to have 5,000 megawatts installed by 2015 and 30,000 megawatts by 2020. South Korea’s goal is to build a 2,500-megawatt installed offshore capacity by 2019. In the wake of the Fukushima disaster, Japan began making plans to ramp up its offshore capacity and recently launched a prototype floating turbine.

The U.S. has no offshore wind built and no official goal. There are about fifteen research, pilot and utility-scale projects planned or proposed, with a cumulative potential capacity of five to ten gigawatts.

Deepwater Wind may get the first turbines into Rhode Island’s seabed at its 30-megawatt Block Island Wind Farm. The first phases of the 468-megawatt Cape Wind project will not be far behind. But 500 megawatts by 2020 is a hollow achievement in light of what is possible.

Neither of those projects will have a practical levelized cost of electricity (LCOE). Only their benefits in meeting peak demand and state mandates justified state regulators’ approval of Block Island’s $0.24 per kilowatt-hour power purchase agreement (PPA) and Cape Wind’s $0.187 per kilowatt-hour PPA.

Creating a new industry is not quick, easy or inexpensive, said Offshore Wind Development Coalition President Jim Lanard. “But do policymakers want to create a new industry, support it initially with ratepayer subsidies, and create tens to hundreds of thousands of jobs?”

It would be a gamble, Lanard admitted. If policymakers choose to support offshore wind, the price could become competitive with economies of scale, and “if it doesn’t,” Lanard said, “shut it down. But if the price comes down, we have an industry.”

On display at the AWEA conclave were emerging innovations across the sector that, when given the opportunity to scale up, are expected to bring costs down.

Turbine manufacturers are building bigger turbines because that cuts installation costs by eliminating foundation and transmission infrastructure. Siemens (NYSE:SI) just put a six-megawatt turbine with the longest blades ever used into service. Vestas (CPH:VWS) recently announced it would scrap plans for a seven-megawatt turbine and focus instead on its eight-megawatt model.

Major turbine makers like GE (NYSE:GE) in the U.S. and Goldwind (HKG:2208) in China are streamlining their machines with more efficient drivetrains and better power electronics, because lower maintenance needs reduce O&M costs.

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