September 14, 2008
Delaware Offshore Wind Farm Pattern For Future?

A New York Times article on the politics of wind power looks at the long fight for political approval for an offshore wind power project off the coast of Delaware. The Mid-Atlantic Bight region has large quantities of fairly stable wind power.

The amount of power Dhanju was describing, Mandelstam knew from Kempton, was but a small fraction of an even larger resource along what’s known as the Mid-Atlantic Bight. This coastal region running from Massachusetts to North Carolina contained up to 330,000 megawatts of average electrical capacity. This was, in other words, an amount of guaranteed, bankable power that was larger, in terms of energy equivalence, than the entire mid-Atlantic coast’s total energy demand — not just for electricity but for heating, for gasoline, for diesel and for natural gas. Indeed the wind off the mid-Atlantic represented a full third of the Department of Energy’s estimate of the total American offshore resource of 900,000 megawatts.

Wind projects do not usually operate at nameplate (i.e. max) capacity for most of the time. An onshore wind project might average one third of max output. But wind offshore blows more consistently. I would like to know what average capacity utilization is expected for this Delaware project. I would also like to know how vulnerable a project like this is to a category 3 or 4 hurricane.

Wind still accounts for a pretty small amount of total electric generation capacity. The construction of new projects is subsidized by a production tax credit of about 2 cents per kwh. However, in defense of this subsidy coal generates half of the electric power used in the US and coal plants produce a lot of pollution (particulates, mercury, etc) that wind farms do not produce.

Last year, onshore wind power added more than 5,200 megawatts of new electrical capacity to the grid — or nearly a third of America’s new generating capacity, surpassing all other forms of new generation except natural gas and amounting to enough electric capacity to power one and a half million homes.

Was that 5,200 megawatts peak capacity or average capacity? Frequently news reports exaggerate the size of new wind and solar installations by quoting their capacity when the wind blows the hardest and sun shines the brightest. Whereas the average output is usually third or less of the peak for wind and an even lower average output for solar power.

Wind offshore costs more than onshore because the onshore facilities require less capital and are easier to construct and maintain. Some saw the 10 cents/kwh cost of offshore wind electric as too high.

Within Delaware itself, opponents of Bluewater focused on the economics of the project. One report financed by Delmarva Power argued that Bluewater would raise the average electric bill by $20 or more a month. If natural-gas prices flattened or decreased, the company could pass those savings on to its customers — but not if it were stuck in a long-term contract at the Bluewater price of 10 cents per kilowatt hour for the next 25 years.

That's with the production tax credit. So the real cost is probably around 12 cents/kwh. But to put that 10 cents/kwh wholesale electric cost in perspective in April 2008 Delaware residential customers were paying an average of 12.92 cents per kwh as a retail price with the costs of distribution included. That 10 cents for wind does not include distribution costs and billing costs. Plus, intermittent wind requires backup natural gas-fired electric power generation stations that further add to the average cost of electricity. So it seems fair to say that this deal will raise the price of electricity in Delaware in the short term. But in the long term as natural gas and coal prices rise the Bluewater project puts a partial ceiling on electric power costs and probably will reduce long term electric cost inflation in Delaware.

Given the recent increases in electric power prices that April 2008 price table for US state-level electric power costs understates current near future residential electric prices. The Atlantic Bight offshore wind is probably a better deal further north along the US Atlantic coast where as of April 2008 New Jersey residential customers were paying 14.16 cents/kwh while New Yorkers were paying 17.19 cents/kwh, and Connecticut residents were paying 18.56. But the US Middle Atlantic and New England states pay high prices for electricity as compared to most of the rest of the US. Heavy coal burning Kentucky paid only 7.19 cents/kwh and another big coal user Wyoming paid only 7.58 cents/kwh with the US average at 10.44 cents/kwh. Note that higher coal prices have pushed up electric prices since April and effectively coal's cost advantage is shrinking. California is listed at 13.92 cents/kwh. But that is going up substantially.

Key to the Delaware project's approval has been the recent pattern of rapid electric utility rate increases. The Tennessee Valley Authority is boosting electric rates 20%.

News came late last week that Tennessee Valley Authority’s electric rates are going up a total of 20 percent across the Tennessee Valley area, and, according to Fayetteville Public Utilities management, this is the largest total rate hike in nearly 30 years.

...

From December 2007 until July 2008, fuel prices climbed 50 percent for crude oil, 66 percent for natural gas and 128 percent for coal.

Pennsylvanians might be hit by as much as 34% higher electric bills by 2010.

THE ISSUE: Statewide, caps on electric rates have been expiring for the last few years, with PPL Corp. customers facing rate spikes of as much 34 percent in 2010.

Tampa Bay Florida area residents will pay 31% more.

While utilities push to raise electric rates 31 percent on both sides of Tampa Bay, millions of South Florida residents will see their bills increase by only 7 percent.

Virginia and Ohio will also see double digit percentage electric rate increases.

In West Virginia, the state’s largest natural gas utility is asking for a 42 percent rate increase. In Virginia, millions of Dominion Virginia Power customers are seeing their bills rise an average of 18 percent, the largest one-time rate hike there in three decades. And Ohio’s largest electric utility is seeking a 15 percent rate increase annually for the next three years because of high coal prices and a new state environmental law governing emissions that will cost the company money, a spokesman says.

These price increases are narrowing the price gap between wind and existing electric power sources. But this is happening in a way that suggests our medium term prices for electric power will be higher than what we are paying now. But I see a bright side to this. As world oil production declines and the push to substitute natural gas and coal for oil intensifies the ability to use wind electric power will put ceilings on future electric power prices that will leave electric power cheap enough to run modern industrial economies.

Electric power can partially substitute for liquid hydrocarbon fuels in many ways. For example, train lines can be electrified and pluggable hybrid cars can be (and will be) built. Also, electricity can power air-based and ground-based heat pumps for winter heating. So when oil production plummets we will be able to use electric power to keep many elements of our current lifestyles, albeit with considerable transition costs.

Update: In the comments be sure to read the comments by Willett Kempton, a UDel prof who did much of the research on the relative cost competitiveness of the offshore wind choice. He answers questions I raised above and provides additional information as well as links to more details on the study.

Share |      Randall Parker, 2008 September 14 02:39 PM  Energy Wind


Comments
Thai said at September 14, 2008 5:38 PM:

While I like these ideas, I do often wonder about the 'hypothetical' environmental impact of taking a significant amount of wind energy out of the system. And while I realize we are no where near considering this issue, assuming global warming is real for a moment (and I understand not everyone agrees on this point) is the real concern in global warming JUST greenhouse gas emitions? Or is it really the % energy consumption humans take vs. the entire energy hitting our planet daily from external sources.

Sometime the issue is human simply represent a very significant % of the biological biomass energy consumption.

If you know I am curious

Randall Parker said at September 14, 2008 6:16 PM:

Thai, I wonder about the effects of slowing down the wind as well. I can see a couple of impacts:

- Wind moves energy just as ocean currents do. If that flow slows up then the poles will get colder and the equator warmer. My guess is that winds carry a lot less energy than oceans. But I'm not sure.

- Wind moves water. Water is needed for precipitation. If water doesn't move as far over land before coming down that changes precipitation patterns. For better or worse for farming production? Dunno.

There are probably other important impacts.

th said at September 14, 2008 6:19 PM:

The EU's obsession with renewables is catching up with them, they are setting up for one power disruption after another. Years of neglect are now being replaced with misjudgement, nice tradeoff, the results are the same. The huge subsidies and spotty results are forcing them to return to coal. The US gets barely 2% of its power generation now from all sources denoted as renewable. I suspect those behind the renewable drive know there's little hope of reaching even a fraction of their goals, but like ethanol, its damn the torpedoes, whether it works or not we're sticking with it. If the solar cycle follows the forecasts, temperatures will fall, the argument that coal is a poison will have as much chance as a possum in rush hour traffic. The whole global warming concept and its auxiliary nonsense gets the boot.. solving the problems we face will be freed from one of the biggest scaremongering hysterical diversions in world history.

Randall Parker said at September 14, 2008 6:27 PM:

th, Britain is headed into a power generation crisis. They are going to shut down a lot of old coal plants due to EU CO2 emissions regulations even as they shut down lots of older nukes. The Labour government bet on renewables that just haven't been able to ramp up all that fast. In Britain renewables pretty much means wind and there's not enough easily accessible wind.

Germany's in a similar predicament with their planned phase-out of nukes and the Germans are building new coal electric plants. So much for CO2 emissions reduction. Germany's big solar build was unwise because they are so far north that their average insolation is low and PV is still pretty expensive.

The US is in a much better position to tap both wind and solar than Europe is.

France's technocrats did a pretty competent job building a large nuclear fleet. Now their renewables come on top of that firm nuclear base.

Jake said at September 14, 2008 9:39 PM:

Denmark has the most consistent wind in Europe. They found that the turbines ran at max rated capacity only one day a month. Between too much wind and two little wind, they achieved only 30% of the expected output. Denmark has given up on wind power and is not building any more wind farms.

The big problem in the US is that environmentalists block construction of all transmission lines to rural wind farms. As a consequence, wind power is dead in the USA.

Brett Bellmore said at September 15, 2008 4:33 AM:

Forget heat pumps, in rural areas where they're using propane, electric *resistance* heating is competitive. Especially if you can get time of day pricing.

Randall Parker said at September 15, 2008 7:03 PM:

Jake,

It is my impression that cost is the major obstacle in the way of more transmission lines. Wind turbines already cost more than coal or nuclear. Add in the cost of moving wind electric power from low population density plains states to where the people live and that makes the wind cost problem even bigger.

Brett Bellmore,

Whether electricity is cheaper depends on the cost of electricity. This comparative heating energy cost calculator shows electricity is substantially cheaper at 11 cents per kwh than heating oil at $4 per gallon or propane at $3.1 per gallon. For a lot of plains states then electricity is cheaper. But in Connecticut or other high cost New England states electricity for resistance heating will cost more than heating oil. Plug in 18 cents per kwh at that page and see.

But a geothermal heat pump costs less than half as much as heating oil or propane even in New England.

Willett Kempton said at September 15, 2008 7:11 PM:

We did most of the studies cited in the NYTM article. I am a university professor, no business interest in the proposed project (nor in the wind industry). To answer questions posed here,
The capacity factor in the area being built would be 39%, based on 20 years of records from NOAA buoys. Land value would more typically be 30%. A 29% CF means a turbine with 5 MW capacity would, on average, produce just under 2 MW. My 330,000 MWa is average ouptput, considering capacity factor (e.g. considering how much wind there is). One main reason the Mid-Atlantic Bight is a good place to start the US industry is that it is protected from hurricanes (they hit Cape Hatteris, then veer to the NE up to Long Island or Cape Cod). Current wind turbines are certified to Cat 3 or Cat 4 hurricanes. We have a > 500 year return rate for Cat 5 hurricanes. Much of this can be found in the cited article; free proof copy at: http://www.ocean.udel.edu/windpower/docs/KemptonEtAl-MAB-PROOF.pdf

Don't worry, we thought about retail versus wholesale rates for electricity. This contract for wind power came in at 9.9 cents/kWh, with a 2.5% escalation for inflation. The last two purchases of power wholesale by the same power buyer were about 11 cents/kWh. Add to the wind contract about a half cent each for capacity charge and a charge for firming to make it more comparable to the existing charges, and you get nearly-exact parity with current cost of dirty electricity. That comparison assumes modest increases in natural gas, low costs of CO2 over the 25 year contract for wind, no value given for the health benefits of displacing hundreds of MW of dirty power, and no value given to taking 17% of Delaware's power sector off carbon. Yes it needs the Federal PTC to make the economics work out to be cost parity.

IF you install wind turbines over much of the Northern hemisphere, they will slightly slow down transfer of heat from the equator to the poles. A model by Keith and deCarolis, published in Proceedings of the National Academy of Sciences, estimates a 1 degree cooling of the North polar region from this effect. Given global warming, this may be a benefit rather than an environmental cost. But at any rate, yes it has been modelled and the effect is present but not large.

For more information on all these topics, see www.ocean.udel.edu/windpower and www.carbonfree.udel.edu

Willett Kempton
Associate Professor, College of Marine and Earth Studies
Director, Center for Carbon-free Power Integration
University of Delaware

Randall Parker said at September 15, 2008 8:20 PM:

Dr. Kempton,

Thanks very much for your comments.

I am surprised and pleased that the cost of offshore wind is so competitive off the Delaware coastline. Do you expect this cost advantage to hold for the rest of the Mid-Atlantic Bight? Or perhaps does the wind blow less regularly or does the ocean floor depth get deeper much faster off of New Jersey or Virginia?

Also, will these wind turbine towers float with anchor lines? Or will the towers reach up all the way from the ocean floor?

The lobbyists for coal electric have managed to delay regulations to cut back on mercury, particulates, and other emissions. If coal electric was required to put out no other emissions besides CO2 I wonder what the comparative cost would be of coal electric versus this Mid-Atlantic Bight wind electric.

The way I see it the turning on of new nuclear plants is many years off and solar is still too expensive (though looking hopeful). So wind is the only cleaner energy source that can go into battle with coal electric in the short term in most parts of the US.

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