Brattle Testimony AWC 400 403

7/31/2019 Brattle Testimony AWC 400 403

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UNITED STATES OF AMERICABEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Atlantic Grid Operations A LLC

Atlantic Grid Operations B LLC

Atlantic Grid Operations C LLC

Atlantic Grid Operations D LLC

Atlantic Grid Operations E LLC

Docket Nos. EL11-____-000ER11-____-000

DIRECT TESTIMONY OF

JOHANNES P. PFEIFENBERGER AND

SAMUEL A. NEWELL

ON BEHALF OF

THE AWC COMPANIES


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TABLE OF CONTENTS(Exhibit AWC-400)

I. INTRODUCTION ................................................................................

II. PURPOSE AND SUMMARY OF TESTIMONY..............................

III. BACKGROUND: STATE RPS REQUIREMENTS AND ECONOBENEFITS OF OFFSHORE RENEWABLE POWER DEVELOP

1. State Renewable Energy Policy Requirements ......................

2. Production Cost, Energy Price, and Emissions Benefits ......

3. Employment and Economic Stimulus Benefits .....................

IV. AWC PROJECT CONFIGURATION AND COSTS .......................

V. PUBLIC POLICY BENEFITS ASSOCIATED WITH THE AWC

VI. RELIABILITY AND OPERATIONAL BENEFITS ........................

VII. CONGESTION RELIEF AND OTHER ECONOMIC BENEFITSAWC PROJECT RELATIVE TO A RADIAL ALTERNATIVE ...

1. Congestion Relief and Related Benefits .................................

2. Capacity Value ........................................................................

3. Reduced System Operating Costs ...........................................

4. Emission Reduction Benefits..................................................

Qualifications of Johannes Pfeifenberger (Exhibit AWC

Qualifications of Samuel Newell (Exhibit AWC


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Direct Testimony of Johannes Pfeifenberger and SamExhibi

P

UNITED STATES OF AMERICABEFORE THE

FEDERAL ENERGY REGULATORY COMMISSION

Atlantic Grid Operations A LLC

Atlantic Grid Operations B LLC

Atlantic Grid Operations C LLC

Atlantic Grid Operations D LLC

Atlantic Grid Operations E LLC

Docket Nos. EL11-____-000ER11-____-00

DIRECT TESTIMONY OFJOHANNES P. PFEIFENBERGER and SAMUEL A. NEWELL

I. INTRODUCTIONQ. PLEASE STATE YOUR NAMES, EMPLOYER, TITLE, AND BU1

ADDRESS.2

A. My name is Johannes P. Pfeifenberger and my name is Dr. Samuel A3

We are both Principals ofThe Brattle Group, an economic consulting 4

offices in Cambridge, Massachusetts; Washington, D.C.; San Francisco5

Brussels; and Madrid. Our business address is 44 Brattle Street, C6

Massachusetts 02138.7

Q. ON WHOSE BEHALF ARE YOU TESTIFYING?8


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A. I am an economist with a background in power engineering and over 21

work experience in the areas of regulated industries, energy policy, and 2

received a M.A. in Economics and Finance from Brandeis University a3

in Electrical Engineering with a specialization in Power Engineering an4

Economics from the University of Technology, Vienna, Austria. I 5

Brattle Groups utilities practice area and am the author and co-6

numerous articles, reports, and presentations on subject areas relat7

economic benefits of transmission investment, planning, market design8

allocation.9

I have filed testimony before the Federal Energy Regulatory Co10

(the Commission or FERC) and numerous state regulatory commis11

range of subject areas, including the economic benefits of tra12

investments. For example, I filed testimony with the Public Service Co13

of Wisconsin on behalf of American Transmission Company LLC 14

Management Inc. in Docket No. 137-CE-149 discussing the economic b15

the Paddock-Rockdale Transmission Project, which was the first e16

transmission project evaluated by the Wisconsin commission. On 17

Southern California Edison Company, I testified before the Arizona Po18

and Transmission Line Siting Committee in Docket No. L-00000A19


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analysis of the economic stimulus benefits associated with the const1

proposed SPP transmission and wind generation, which SPP filed 2

Docket No. ER10-1069 in support of the proposed Highway/Byway tra3

cost allocation methodology. I also filed with the Commission (co-auth4

colleagues on behalf of ourselves) comments in Docket Nos. AD5

RM10-23 on regional transmission planning and cost allocation, and 6

testimonies on transmission tariff design, the costs and benefits of a7

transmission access charge methodologies, and regional transmission org8

(RTO) scope and configuration issues on behalf of variou9

Exhibit AWC-401 to our testimony contains a more complete descript10

qualifications and expert witness experience.11

Q. DR. NEWELL, PLEASE DESCRIBE YOUR BACKG12

EDUCATION, AND PROFESSIONAL EXPERIENCE AS IT R13

TO THIS DIRECT TESTIMONY.14

A. I am an economist and engineer with 12 years of work experience in the15

and analysis of electricity markets and their relationship to the tra16

system. I received a Ph.D. in technology management and policy 17

Massachusetts Institute of Technology, a M.S. in materials sci18

engineering from Stanford University, and a B.A. in chemistry and phy19


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author or co-author of numerous articles, reports, and presentations o1

range of subject areas related to wholesale electricity markets and transm2

I have submitted testimony with FERC in RTO-related cases and3

expert reports for PJM, other RTOs, and transmission clients that have 4

with both state regulatory commissions and the FERC. For example, I w5

the co-authors of a report filed by American Transmission Company 6

the Public Service Commission of Wisconsin in Docket No. 137

discussing the economic benefits of the Paddock-Rockdale Transmissio8

My role was to advise staff at American Transmission Company LLC 9

of PROMOD IV simulations, to compute customer benefits, and to10

several categories of benefits outside the scope of the model. Recen11

testified on behalf of Connecticut Light & Power and The United Illu12

Company in their Integrated Resource Planning proceeding be13

Connecticut Department of Public Utility Control. My role, as the lea14

Brattle team in that assignment, was to analyze customer impacts a15

implications of various resource strategies regarding renewables develop16

energy efficiency. Exhibit AWC-402 to our testimony contains a more17

description of my qualifications and expert witness experience.18

19


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II. PURPOSE AND SUMMARY OF TESTIMONY1Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?2

A. The purpose of our testimony is to describe and quantify some of t3

policy, reliability, congestion relief, and other economic benefits assoc4

the Atlantic Wind Connection Project (AWC Project or Project).5

Q. WHAT IS THE AWC PROJECT?6

A. The AWC Project is a double-circuit, high-voltage direct current (7

offshore transmission backbone with twelve offshore AC-DC converte8

capable of integrating at least 6,000 MW of offshore wind gene9

geographic locations ranging from northern New Jersey to southern Virg10

Project will also have onshore DC-AC converter stations at seven lo11

New Jersey, Maryland, Delaware, and Virginia, where renewable pow12

injected into the existing transmission grid in controlled proportions. Th13

which will be built in five phases, can also be used to transmit up to 2,0014

energy and capacity between interconnection points along the coast, pro15

offshore reinforcement to the existing onshore grid in the congested Mi16

power market.17

Q. WHAT ARE THE AWC PROJECTS MAIN BENEFITS?18

A. The AWC Project provides a platform on which offshore wind devel19


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Offshore wind generation facilitated by the AWC Project will lo1

emissions by reducing coal, gas, and oil usage, and it will reduce ener2

across the PJM footprint. The Project will also enhance reliability a3

congestion in what the Department of Energy (DOE) has designated 4

the most congested National Interest Electric Transmission C5

Importantly, this is true of the AWC Project whether viewed without w6

out, full wind build-out, or simply in comparison to a scenario in which7

wind is interconnected by radial transmission lines.8

The Mid-Atlantic region offers the most abundant and most 9

offshore wind resources in the country. The AWC Project can help10

Atlantic and other PJM states take advantage of this resource to achieve 11

requirements. In doing so, the Project offers significant economi12

compared to individual radial interconnections for each offshore wind 13

reducing siting, permitting, and interconnection barriers to wind develop14

Project will expedite the installation of offshore wind on a scale that v15

spurs the development of local industry to provide equipment and servic16

will substantially lower the cost of offshore wind development.17

Of particular importance, the AWC Projects HVDC back18

AC-DC converters are controllable which, unlike the typical radial tra19


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more effective solution for developing Mid-Atlantic offshore wind reso1

provides significantly higher economic, reliability, congestion relief, 2

and environmental benefits to the PJM grid and to the region. Our 3

explains these public policy, reliability, congestion relief, and other 4

benefits in detail.5

Q. PLEASE SUMMARIZE THE EXTENT TO WHICH THE AWC P6

WILL ENABLE STATES TO MEET THEIR RPS.7

A. The AWC Project helps meet states RPS policies, which require loa8

entities to buy increasing amounts of energy from renewable resources,9

offshore wind. PJM projects that meeting these state RPS requireme10

footprint would require up to 25,000 MW of wind by 2015 and 50,0011

2025. Of the states directly interconnected by the AWC Project, N12

requires 22.5% renewables by 2020, Delaware 25% by 2025, Marylan13

2022, and Virginia has a goal of 15% by 2025.14

Offshore wind power has received an increasing amount of pub15

attention as a key resource for the eastern U.S. because it is abundant an16

close to load centers. In contrast, other local renewable resources are s17

remote resources (such as onshore wind in the Midwest) would requ18

transmission investments without much local economic development 19


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Delaware, Maryland and Virginia, and providing nearly 65% of the re1

by 2025before considering the potential demand for offshore wind f2

states. Moreover, since wind conditions rarely allow entire wind 3

simultaneously generate at their maximum rated capacity, it is more cost4

to install wind capacity in excess of the transmission capacity to max5

value of the overall investment. In our analysis of benefits, we have ass6

6,600 MW of nameplate wind generation would be interconnected to 7

Project, which will result in 10% additional wind energy generated 8

0.2% in curtailments.9

Q. PLEASE SUMMARIZE SOME OF THE COSTS AND BE10

ASSOCIATED WITH THE SCALE OF OFFSHORE 11

DEVELOPMENT SUPPORTED BY THE AWC PROJECT.12

A. Developing this amount of offshore wind generation will require a13

investment of approximately $30 billion. This investment has to be con14

the context of associated benefits. As shown in Table 1, integrati15

6,600 MW of offshore wind generation facilitated by the AWC Pr16

reduce customer locational marginal prices (LMPs) by appr17

$1.6 billion per year (net of offsetting impacts on capacity market pri18

analysis shows that this benefit is widespread: load-weighted annua19


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In addition, the development of offshore wind will create 1

economic stimulus for the local economy, as shown in Table 2. Ther2

other benefits and costs, including the capacity value of wind, wind in3

costs, and the AWC Project-specific benefits discussed in Sections IV th4

of our testimony.5

Table 16Electricity Market and Emissions Benefits of Integrating 6,600 M7

Offshore Wind Generation in New Jersey, Delaware, Maryland, and8(relative to a Base Case without offshore wind)9

Type of Benefit Annual Value

(in 2016 $s)

20-yea

(in 20

Emission reductions 16 million tons CO225,000 tons SO211,000 tons NOx

Value of CO2 emission reductions(assuming $30/ton CO2)

$500 million $5.2 b

Reduction in fossil fuel productioncosts in Eastern Interconnection

Customer value of LMP reductions inPJM (net of $480 million/yearoffsetting impact on capacity prices)

$1.1 billion

$1.6 billion

$12 b

$17 b

Table 210Economic Stimulus Benefit of 6,600 MW of Offshore Wind Gen11

and Related Offshore Transmission12(relative to a Base Case without offshore wind)13

Economic ActivityJobs Earnings

Ec


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Q. PLEASE EXPLAIN THE DIFFERENCE BETWEEN LOW IN-R1

AND HIGH IN-REGION MANUFACTURING IN TABLE 22

A. As Table 2 shows, the overall magnitude of the economic stimulus b3

offshore wind investments to the local economies is significant. How4

magnitude of this economic benefit also strongly depends on the extent5

wind turbines and other plant and equipment are manufactured within6

Atlantic region (rather than being imported) and the extent to which co7

services and logistical support are provided by companies and employe8

the region. Achieving a high in-region provision of these equipment an9

will require a scale of offshore wind power development that jus10

investment in manufacturing and logistical facilities.11

Q. DOES YOUR TESTIMONY EVALUATE THE ECONOMICS 12

REQUIREMENTS AND OFFSHORE WIND GENERATION RE13

TO OTHER POLICY OPTIONS?14

A. No. While we recognize the above benefits and costs of offsh15

generation, the focus of our testimony is to identify the public policy, r16

congestion relief, and other economic benefits of the AWC Project itse17

so primarily by comparing the Project to more conventional ways to int18

offshore wind through radial transmission lines. The rest of this summ19


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A. The AWC Project is able to reliably deliver 6,000 MW of offshore wi1

and additionally provide a fully controllable 2,000 MW HVDC transmi2

between southern Virginia and northern New Jersey at a total constructi3

approximately $5 billion. In comparison, we estimate that delivering 64

of wind power with radial transmission lines from individual wind plant5

would incur construction costs of $3.4 billion to $5.3 billion without of6

substantial additional public policy, reliability, congestion relief, a7

economic benefits we have identified and partially quantified for t8

Project. We estimate that interconnecting offshore wind with the AW9

provides $9-15 billion of benefits over a radial approach (including th10

costs of radial transmission lines), in addition to reliability and operatin11

we have not quantified.12

Q. PLEASE SUMMARIZE HOW THE AWC PROJECT WOULD S13

STATE POLICY OBJECTIVES.14

A. The AWC Project will support meeting the states renewable energy15

reducing permitting and planning barriers and achieving significant eco16

scale for offshore wind development. The Project creates a one-stop p17

landing-point selection, state environmental siting, and PJM tra18

planning. Compared to a plant-by-plant permitting and transmission19


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locations independently of these landing points and with a greatly 1

permitting process.2

Q. HAVE YOU QUANTIFIED THE VALUE OF SOME OF THESE 3

POLICY BENEFITS THAT THE AWC PROJECT WOULD PROV4

A. Yes. Increased scale and predictability of offshore wind development 5

by the AWC Project offers the prospect of significant cost savings f6

every aspect of offshore wind development. It will facilitate investmen7

manufacturing of wind turbines and related components and the develo8

more cost-effective construction and logistical infrastructure. We est9

streamlined permitting and increased scale that allows local manufact10

sourcing will reduce total offshore costs by approximately 20 percent. 11

$30 billion of offshore wind generation investment supported by t12

Project, this results in total cost reductions of approximately $6.0 b13

addition, promoting in-region manufacturing and sourcing results in sig14

greater employment and economic development benefits, as indicate15

difference between low and high in-region manufacturing benefits in16

Q. PLEASE SUMMARIZE HOW THE AWC PROJECT PR17

RELIABILITY AND OPERATIONAL BENEFITS.18

A. The AWC Project will provide significant reliability and operational19


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2,000 MW transfer capability between landing points in Virginia, M1

Delaware, and New Jersey reinforces the onshore grid in the constrai2

Atlantic region, reducing the need for future onshore reinforcements; a3

Projects controllable HVDC technology provides PJM with additional 4

to address reliability challenges whenever they arise.5

The capabilities of the Projects advanced HVDC technology als6

operating benefits that enhance reliability and reduce the cost o7

operations. These include: (a) the ability to redirect power flows instan8

to address system contingencies; (b) improved system stability; (c9

support and improved reactive performance; and (d) blackstart capabi10

Project further provides for more reliable delivery of offshore wind po11

individual radial connections by being able to redirect power away fro12

points with temporary reliability-related transmission constraints.13

We have not quantified the economic value of these reliab14

operational benefits, nor have we quantified the value of the Project15

reliability benefits. However, if the AWC Project avoids the need for16

major onshore transmission project, the savings would likely exceed $1 b17

Q. HOW DOES THE AWC PROJECT PROVIDE CONGESTION RE18

A. The Projects offshore backbone and controllability allows energy from19


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We analyzed the economic value of this benefit using Ventyxs P1

simulation model. Working with Ventyx staff, we simulated market 2

for 2016 with the addition of 6,600 MW of nameplate offshore wind g3

added in two ways: one case with the AWC Project and an alternative 4

radial interconnections. These simulations showed that the AW5

significantly reduces congestion. Instead of simply injecting wind po6

closest onshore location, the AWC Project transfers power to the best7

along the backbone, where the LMP is the highest. It also transfers po8

low-priced onshore interconnection points to higher-priced locations. T9

benefits reduce system-wide congestion costs by $196 million annually 10

to radial interconnections of individual wind plants. Most of the relief 11

constraints near the wind power injection points and also on constra12

western Pennsylvania into eastern PJM. Compared to the radial interc13

of individual wind plants, the congestion relief provided by the AW14

helps to reduce system-wide production costs by $33 million per y15

approximately $350 million over the initial 20 years of the Project.16

Q. WHAT IMPACT WOULD THE AWC PROJECT HAVE ON LM17

CUSTOMER PAYMENTS RELATIVE TO A RADIAL ALTERNA18

A. The LMP benefits from the AWC Project with full wind build-out (com19


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impacts would save PJM customers approximately $126 million per1

$1.35 billion over 20 years. However, the lower LMPs will increase2

prices, which offsets $110 million annually ($1.2 billion over 20 years3

LMP reductions.4

Q. ARE THERE ANY SIGNIFICANT FACTORS THAT AR5

INCLUDED IN THE ABOVE ESTIMATES OF CONGESTION-RE6

BENEFITS?7

A. Yes. The above estimates significantly understate the value that the AW8

will provide under real-time system operations. This is because a n9

operational factors that cause price volatility in the real-time marke10

captured in PROMOD simulations, including wind generation uncert11

forecasting errors, load forecasting errors, sudden outages of generat12

transmission outages, unexpected loop flows from neighboring regions, a13

rate limitations on generators.14

Analysis of historical hourly day-ahead and real-time LMP di15

among the AWC Projects interconnection points shows that the ability 16

power flows in real time is worth approximately twice as much as in17

ahead market. Since PROMOD simulations are more comparable to18

ahead market than the real-time market, we estimate that the Projects19


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A. We simulated the effects of the AWC Project without any offsh1

generation. Compared to a 2016 Base Case that includes only2

transmission and generation additions, adding the AWC Project reduce3

congestion by transmitting power from less congested, lower-priced lo4

more congested, higher-priced locations. The results of this analysis 5

congestion costs would decrease by $147 million and production 6

$51 million per year.7

Q. WHAT OTHER CONGESTION-RELATED ECONOMIC BE8

DOES THE AWC PROJECT PROVIDE?9

A. In addition to transmitting the capacity value of 6,000 MW of offshor10

which PJM is likely to count as less than 2,000 MW for resource 11

purposesthe AWC Project will be able to transmit 2,000 MW of capa12

unconstrained southern Virginia northward into the constrained EMAA13

of PJM. The Project also allows transmission of capacity betw14

constrained subareas within EMAAC if capacity prices were to differ ac15

subareas again in the future.16

We have not forecasted future capacity market conditions and t17

impact of the Project on such future prices. However, using a scenari18

PJM recently conducted to assess the impact of added transfer cap19


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without considering the capacity price benefits to all retail customers, th1

transmitting up to 2,000 MW of capacity from southern Virginia to EM2

five years would be worth $180 million.3

Q. WHAT EFFECTS DOES THE AWC PROJECT HAVE ON EMISS4

A. By facilitating the development of offshore wind more quickly and 5

scale than if individual wind developers had to plan, permit, and build 6

interconnections, the AWC Project will give rise to major emissions r7

As shown in Table 1, the 6,600 MW of offshore wind interconnected by 8

Project would eliminate 16 million tons of CO2 emissions from fossil9

generation per year. That is equivalent to taking 3 million cars off the ro10

Q. PLEASE SUMMARIZE YOUR MAIN CONCLUSIONS ABOU11

AWC PROJECTS BENEFITS.12

A. Table 3 summarizes the benefits discussed and quantified in our testim13

Table 3 shows, the approximately $5 billion construction cost of the AW14

is more than offset by a number of economic benefits that the Project off15

plant-by-plant development of offshore wind generation and the interc16

of individual wind power plants through radial HVAC transmission li17

onshore grid. Interconnecting offshore wind with the AWC Project18

$9-15 billion of benefits over a radial approach (including the avoided19


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Table 31Types and Approximate Magnitude of AWC Project-Related2Economic Benefits Over Individual Radial Interconnections3

of 6,600 MW Offshore Wind Generation4

Type of AWC Project BenefitEstimat

Economic

Avoided cost of radial HVAC transmission links to shore Economic value of ability to access better wind locations

$3.4-5.3 bnot quant

Scale-related benefits (streamlined planning and permitting): Reduced cost from higher in-region turbine manufacturing Scale-related savings for other equipment and installation Reduced planning, permitting, and siting costs/uncertainties Shoreline siting-related environmental benefits

$3.2 bil$1.2-3.0 b

$0.6 bilnot quant

Reliability benefits: Avoided cost of on-shore reliability upgrades

Reinforced existing grid through offshore backbone HVDC operational benefits (voltage support,improved reactive performance, stability, and control ofAC power flows, blackstart capability)

not quant

not quant

not quant

Congestion relief benefits: NPV of reduced production costs measured in PROMOD NPV of additional production cost savings in real-time

or, alternatively:

NPV of additional reduction in PJM Load LMP NPV of capacity price offset to LMP decreases

Related (locational) capacity market benefit: Capacity value of 2,000 MW EMAAC import capability:

NPV of resource cost savings*or, alternatively:NPV of reduced customer payments due to price impact*

* these are order-of-magnitude estimates that are not

included in the low end of total benefits below

$350 mil$310 mil

$1.35 bil-$1.2 bil

$180 mil$2.7 bil

Approximate overall magnitude of AWC Projectbenefits over radial interconnection of individualwind plants (compared to approximately$5 billion in AWC Project cost)

> $9-15 b


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Q. HOW HAVE YOU ORGANIZED THE REMAINDER OF1

TESTIMONY?2

A. The remainder of our testimony is organized as follows:3

Section III provides an overview of state renewable energy po4associated renewable energy requirements, and the economic i5

offshore wind generation facilitated by the AWC Project.6

Section IV analyzes the AWC Project configuration and costs comp7the radial interconnection of individual wind farms.8

Section V evaluates the public policy and scale-related benefi9AWC Project.10

Section VI discusses and provides preliminary estimates of the relia11operational benefits associated with the AWC Project.12

And, finally, Section VII discusses the congestion relief and related 13benefits associated with the AWC Project.14

III. BACKGROUND: STATE RPS REQUIREMENTS AND15ECONOMIC BENEFITS OF OFFSHORE RENEWABLE16

POWER DEVELOPMENT17

1. State Renewable Energy Policy Requirements18Q WHAT ARE THE RENEWABLE ENERGY REQUIREMEN19


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West Virginia and the District of Columbiahave renewable portfolio1

or goals ranging from 15% to 25% by 2025. PJM projects that meeting 2

RPS requirements in its footprint would require up to 25,000 MW of3

2015 and 50,000 MW by 2025.14

Q. WHAT ARE THE RENEWABLE ENERGY REQUIREMENTS 5

FOUR COASTAL MID-ATLANTIC STATES WITH AWC L6

POINTS?7

A. All four coastal Mid-Atlantic states with AWC landing points hav8

legislation or regulations establishing renewable energy requirements9

ranging from 15 to 25 percent of total supply over the next 10 to 15 year10

New Jerseys RPS requires investor-owned utilities and retail su11procure 22.5% of their electricity sales from qualifying r12

resources by 2020. Qualifying resources include wind, solar, sm13

resource recovery facilities, biomass, fuel cells, geothermal, lan14

and tidal energy. In-state solar generation must provide appr15

2% of the total energy supply, and approved small hydro and16

recovery facilities must provide at least 2.5% of the total energ17

Legislation enacted in August 2010 also requires offshore wind t18

t f th bl l lth h th d t il f thi li9


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under development. That legislation aims to support the develo1

at least 1,100 MW of offshore wind.2

Delawares RPS requires all utility and retail suppliers to procu3their electricity sales from qualifying renewable resources by 24

at least 3.5% from solar generation. Solar PV and fuel cell resou5

before December 31, 2014 receive 300% credit (i.e., each MWh 6

counts for three MWh). Onshore wind resources sited before 7

31, 2012 receive 150% credit, and offshore wind resources sit8

December 31, 2017 receive 350% credit toward meeting the st9

requirements.10

Marylands RPS requires all utility and retail suppliers to procu11their electricity sales from qualifying renewable resources by 212

at least 2% from solar generation. On November 2010, the 13

Ocean Energy Management, Regulation and Enforcement (BO14

accepted the planning recommendations of the Maryland Offsh15

Task Force and issued a Request for Interest (RFI) and also a m16

offshore wind leasing area in federal waters adjacent to M17

Atlantic Coast (which made Maryland only the second state in 18

after Delaware to reach this point in the planning process).19


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year (2007) electricity sales that are supplied by non-nuclear ge1

According to the legislation, the utilities participating in the RPS2

are allowed to recover all incremental costs and also given inc3

the form of increased rate of return. In addition, utilities rece4

credit for the energy derived from onshore wind, and 300% cred5

energy derived from offshore wind. A study by the Virgini6

Energy Research Consortium, which was established by the 2007

Energy Plan legislation, has now identified 25 lease blo8

3,200 MW of potential offshore wind capacity in shallow wate9

the visible horizon.310

Figure 1 below summarizes the projected demand for renewable energy11

these state RPS requirements and goals. As Figure 1 shows, the total 12

estimated to increase from 11,700 GWh in 2010, to more than 40,00013

2020, and approximately 54,000 GWh in 2025. Assuming an averag14

factor of 37%, this demand is equivalent to 3,600 MW of renewable pow15

in 2010, more than 12,000 MW in 2020, and approximately 16,600 MW16

As discussed below, however, due to RPS credit multipliers, less offsh17

generating capacity would be needed to satisfy the existing requirement.18


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Figure 11Renewable Demand in Mid-Atlantic Coastal States by Year2

0

10,000

20,000

30,000

40,000

50,000

60,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Year

GWh

Sources and Notes:

[1] RPS targets from DOE's Database of State Incentives for Renewables and Energy Efficiency (DSIRE).

[2] Load forecasts based on EIA 2008 state electricity profiles; applied RTO-wide load growth rates from 2010 PJM Load F

[3] Virginia RPS goal is defined as a percent of base year (2007) sales minus average nuclear generation between 2004-06.

3

Q. HOW MUCH RENEWABLE CAPACITY CURRENTLY EXISTS 4

THESE STATES?5

A. Table 4 below summarizes renewable generation supply in the coa6

Atlantic states based on the unit-level database compiled by Ventyx, Th7

Velocity Suite. As the table shows, approximately 1,250 MW of 8

supply already exists, is under construction, or is at least partially 9

within states boundaries (mostly biomass and landfill gas). 10


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Table 41Renewable Supply in Mid-Atlantic Coastal States by Technolo2

Status Delaware Maryland New Jersey Virginia

TOTAL

CAPACITY

Assume

Capacit

Facto

(MW) (MW) (MW) (MW) (MW) (%)

Biomass 0 117 150 263 530 85%

Landfill Gas 7 26 65 128 226 85%

Onshore Wind 2 108 8 188 306 32%

Small Hydro 0 18 4 121 144 48%Solar 0 4 43 0 48 16%

TOTAL 9 274 270 700 1,253

Sources and Notes:

[1] Capacity calculated based on data compiled by Ventyx, The Velocity Suite (downloaded on 10/21/2010).

[2] Generation estimated based on technology-specific capacity factors.

[3] Includes existing units, and units that are under construction or permitted.

[4] "Small Hydro" includes only the units with a nameplate capacity of less than 30 MW.

[5] "Solar" does not include customer-sited generators.

[6] Bluewater's proposed 350 MW project is not included because its status is listed as "Application Pending".3

Q. IS THE SUPPLY DESCRIBED ABOVE SUFFICIENT TO ME4

STATED RENEWABLE REQUIREMENTS OR GOALS OF C5

MID-ATLANTIC STATES?6

A. No. There is a large gap that will need to be met by additional reso7

addition to the 7,150 GWh from renewable energy plants that already 8

under construction, or are partially permitted, approximately 47,0009

additional renewable generation will be needed to meet state RPS targets10

Considering that at least 6,600 GWh is required to come from solar resou11

leaves approximately 40,000 GWh in additional demand from other 12

Di T i f J h Pf if b d S


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approximately 16,000 GWh from offshore wind.4 Taking the states R1

multipliers into account, this number goes up to more than 26,000 G2

approximately 22,000 GWh from offshore wind, which is only two thi3

incremental 40,000 GWh needed for RPS compliance by 2025.4

Q. HOW MUCH OFFSHORE WIND POTENTIAL EXISTS IN TH5

ATLANTIC REGION?6

A. The Mid-Atlantic offshore region has been recognized as one of the m7

locations for offshore wind generation. The National Renewabl8

Laboratory (NREL) has determined that total Mid-Atlantic offsh9

energy potential is over 480,000 MW, of which 44,000 MW is located i10

waters between 12 and 50 nautical miles off the shores of PJMs f11

Atlantic coastal states.512

Q. HOW MUCH ADDITIONAL OFFSHORE WIND CAPACITY WO13

NEEDED TO SATISFY ONLY THE REMAINING REQUIREM14

THE FOUR MID-ATLANTIC STATES RPS TARGETS?15

A. If the incremental 40,200 GWh required for RPS compliance of the f16

came only from onshore wind resources with an average 32% capac17

then approximately 12,800 MW of additional onshore wind capacity 18

needed (taking into account solar carveouts and the 200% RPS credit 19

Di t T ti f J h Pf if b d S


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come only from offshore wind resources with an average 40% capac1

then approximately 9,200 MW of new capacity would be needed (ta2

account solar carveouts and the 300% RPS credit for offshore wind in3

and 350% in Delaware). Thus, not even considering any potential de4

offshore wind energy in other PJM and neighboring states, the RPS req5

of the four Mid-Atlantic states with AWC landing points already sig6

exceeds the 6,000 MW of offshore wind generation that can be delivere7

by the Project.8

Q. HOW MUCH OF THE FOUR STATES RENEWABLE REQUIR9

WOULD LIKELY BE IMPORTED FROM STATES OUTSIDE TH10

ATLANTIC REGION?11

A. That is difficult to assess at this point. Most other states demand for re12

similarly exceeds their local supply, limiting the potential for onsh13

imports by the coastal Mid-Atlantic states. Only states in the Upper14

have significant long-term export potential. While these Upper Midwes15

have a large amount of high-quality onshore wind that could meet som16

coastal states RPS requirements, development of these resources is al17

by severe transmission constraints. In addition, the east coast states hav18

strong preference in favor of developing renewable resources within th19

Direct Testimony of Johannes Pfeifenberger and Sam


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Q. WHAT IS THE MID-ATLANTIC STATES RATIONAL1

SUPPORTING OFFSHORE WIND OVER ONSHORE ALTERNA2

A. The coastal states support the development of offshore wind resour3

number of reasons. First, the Mid-Atlantic offers attractive wind speeds4

capacity factors that are comparable to or exceed those in the Upper Mi5

addition, the Mid-Atlantic coast has large areas of shallow water tha6

suited for deployment of offshore wind generation at lower cost than 7

incurred in deep-water locations. As mentioned above, NREL estimate8

Mid-Atlantic has a very large offshore wind potential in shallow wa9

attractive wind speeds (almost half of the U.S. total).710

Second, offshore wind generation can be located close to the co11

centers, which avoids the transmission investment costs and losses 12

with integrating much more distant onshore renewable resources.8

Fi13

coastal states have expressed a clear preference for offshore wind devel14

their efforts to create a clean-tech industry and reach a scale of offsh15

power development that would support local manufacturing of wind tur16

related equipment as well as the development of supporting infrastructur17

specialized vessels and on-shore staging areas. The availability of 18

manufacturing and other infrastructure is seen as a critical factor in red19



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cost of renewable power options, in particular the still evolving offsh1

technologies.92

2. Production Cost, Energy Price, and Emissions Benefits3Q. WHAT ARE THE MAIN COSTS AND BENEFITS ASSOCIATE4

OFFSHORE WIND DEVELOPMENT?5

A. While developing this amount of offshore wind resources requires s6

investmentsapproximately $30 billion for 6,600 MW of installed c7

these investments have to be considered in the context of associated8

Some of these benefits include: (1) environmental benefits through9

emissions of CO2 and other pollutants; (2) promotion of a strategic ind10

the economic stimulus associated with manufacturing, constructi11

operations, and other economic activities; (3) electricity market benef12

form of reduced LMPs and production costs from fossil fuel power plant13

Q. HAVE YOU QUANTIFIED THESE BENEFITS?14

A. Yes, we have. We have analyzed the electricity market and emissions i15

injecting 6,600 MW of offshore wind using PROMOD simulations. We16

estimated the employment and economic stimulus impact of this leve17

investment, using the Job and Economic Development Impact 18



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Q. PLEASE EXPLAIN HOW YOU SIMULATED THE ELECT1

MARKET AND EMISSION IMPACTS OF OFFSHORE WIND 2

DEVELOPMENT.3

A. As discussed further in Section VII of our testimony and Exhibit AWC4

directed staff of Ventyx, the vendor of the PROMOD simulation 5

simulate market conditions for 2016 with and without the addition of 66

of nameplate offshore wind generation. These simulations showed tha7

wind via the AWC Project significantly reduces LMPs, as well as the 8

and production costs from fossil fuel generating plants.9

Q. WHAT ARE THE EMISSIONS REDUCTIONS ASSOCIATED10

6,600 MW OF OFFSHORE WIND?11

A. The approximately 23,000 GWh of energy produced by 6,600 MW of 12

displace more than 23,000 GWh of fossil generation (the displacemen13

than one-for-one because injecting power closer to the coastal loa14

reduces electrical losses by approximately 1,000 GWh, or more than 1015

average). Approximately 61% of the displaced generation is gas-fire16

coal-fired, and 1.5% oil-fired, and all of the associated emissions are e17

As previously shown in Table 1, injecting up to 6,000 MW of ene18

6,600 MW of offshore wind capacity will reduce CO2 emissions from 19



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y gExhibi

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an economic value of approximately $500 million per year.10 The pre1

of these emissions cost savings over 20 years from 2016 through 2035 2

$5.2 billion (expressed in 2010 dollars).11 These benefits are ad3

production cost benefits, since the production costs in the PROMOD m4

not include CO2 allowance price adders, reflecting the currently poor 5

for near-term climate legislation.6

Q. WHAT ARE THE IMPACTS OF 6,600 MW OF WIND GENERAT7

SYSTEM PRODUCTION COSTS?8

A. The PROMOD simulations show that injecting up to 6,000 MW of en9

6,600 MW of offshore wind capacity reduces system-wide production10

$1.1 billion per year. The present value of the $1.1 billion in annual p11

cost savings over 20 years from 2016 through 2035 would be at least $12

(expressed in 2010 dollars). The savings are primarily derived from13

fossil fuel-fired generation with zero-variable-cost generation, but14

substantially reducing congestion and losses on the prevailing west-to-15

on the onshore system. In fact, our simulations show that annual conges16

decrease by $410 million and losses decrease by more than 115 MW on 17



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ExhibiP

Q. HOW MUCH WOULD ADDING 6,600 MW OF OFFSHORE1

CAPACITY SAVE CUSTOMERS BY REDUCING ENERGY PRIC2

A. The PROMOD simulation results also show that this amount of offsh3

energy will reduce energy prices paid by customers by approximately $64

New Jersey, by $2-4/MWh in Delaware, Maryland and Virginia, by $2-55

Pennsylvania, and by $0.5-1.6/MWh in western PJM, with effects outsid6

as well. These price impacts, which are shown in Table 5, would reduce7

payments by $2.2 billion per year in PJM alone, without counting red8

other regions. Net of reduced loss refunds in the AWC Wind case9

system losses and LMPs are lower, which reduces marginal-loss-relate10

by $79 millionthe customer savings are only $2.1 billion, as describ11

Technical Appendix report filed as Exhibit AWC-403 with this testimon12

However, lower energy prices can be expected to increase capaci13

As energy prices decrease, so do the energy margins earned by generato14

will induce them to bid commensurately more in the capacity mar15

example, the potential developer of a new combustion turbine in EMAA16

anticipate $9/kW-yr lower energy margins and thus would bid that mu17

for capacity in order to be willing to enter the market.18

Assuming new combustion turbines set the capacity prices w19



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ExhibiP

per year ($5 billion NPV), offsetting some of their savings from reduc1

This yields a $1.6 billion annual netbenefit in terms of customer wholes2

purchase costs, calculated as $2.2 billion in annual LMP reductions net o3

marginal loss refunds ($79 million) and capacity price increases ($480 m4

5

Table 56Impacts of the AWC Project with Wind on PJM Load LMPs7

Compared to the Base Case (without AWC and without Offshore 8

Region State PJM Area Annual Base AWC AWC Wind A

Load Case Wind vs. Base Case vs

LMP LMP LMP Loa

(GWh) ($/MWh) ($/MWh) ($/MWh)

[1] [2] [3] [4]= [3]-[2]

AWC States DE DPLC 20,517 $55.4 $51.7 ($3.7)

AWC States NJ AE 13,978 $58.2 $52.2 ($6.0)

AWC States NJ JCPL 29,004 $62.5 $56.2 ($6.3)

AWC States NJ PSEG 54,250 $60.4 $53.7 ($6.8)

AWC States NJ RECO 1,751 $64.6 $61.6 ($3.0)

AWC States VA VP 114,406 $53.2 $50.9 ($2.2)

AWC States MD BGE 39,503 $54.3 $50.9 ($3.4)

AWC States MD PEPCO 36,283 $54.8 $51.2 ($3.6)Other PJM-E PA METED 18,518 $55.8 $51.3 ($4.5)

Other PJM-E PA PECO 47,010 $57.7 $52.1 ($5.6)

Other PJM-E PA PENN Elec 21,574 $48.0 $46.0 ($2.0)

Other PJM-E PA PPL 47,100 $56.1 $51.1 ($5.0)

Other PJM-E PA UGI 1,159 $57.6 $52.1 ($5.5)

PJM-W IL COMED 125,253 $43.1 $42.5 ($0.6)

PJM-W OH AEP 188,533 $44.4 $43.9 ($0.5)

PJM-W OH FE OHIO 78,361 $43.9 $43.4 ($0.5)

PJM-W WV APS 55,414 $48.7 $47.0 ($1.6)

PJM TOTAL 892,613 $50.2 $47.7 ($2.4)

AWC States 309,692 $56.1 $52.1 ($4.0)

Other PJM-E 135,361 $55.3 $50.7 ($4.7)

PJM W 447 561 $44 5 $43 8 ($0 7)

Direct Testimony of Johannes Pfeifenberger and SamE hibi


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ExhibiP

Employment and Economic Stimulus Benefits1

Q. WHAT ARE ECONOMIC STIMULUS BENEFITS?2

A. The development of offshore wind and associated transmission infrastru3

provide economic stimulus benefits for the Mid-Atlantic region through 4

employment, earnings by employees, and overall economic activity (i.e5

revenues associated with sales and re-sales of goods and services st6

These employment and economic activity benefits arise as direct, ind7

induced impacts associated with the investment. Direct impacts ca8

jobs, earnings, and economic activity generated by the direct co9

activities and spending on transmission infrastructure and wind g10

facilities. Indirect impacts arise as in-region suppliers to the transmi11

wind generation industries, as well as other upstream producers, benefi12

increased investment in infrastructure and generation. Finally, induced13

are created when the increased income from jobs supported by the tra14

and offshore wind construction is spent on products and services15

industries, generating a ripple effect throughout the regional economy.16

Q. HOW DID YOU ESTIMATE THE ECONOMIC STIMULUS BE17

PROVIDED BY THE 6,600 MW OF WIND AND ASSO18



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ExhibiP

Development Impact (JEDI) Model.12 The economic stimulus1

associated with the transmission infrastructure build-out was estimated b2

recent study that quantified transmission investment benefits for the S3

Power Pool (SPP) based on analysis conducted using the Minnesota 4

Group Model.13 JEDI and IMPLAN are widely-used by economists a5

analysts to estimate how specific investments affect a regional economy6

Q. FOR WHAT LEVEL OF WIND AND TRANSMISSION INVES7

AMOUNTS HAVE YOU ANALYZED ECONOMIC ST8

BENEFITS TO THE MID-ATLANTIC REGION?9

A. The investment assumptions we used for this analysis are summarized i10

below. As the table shows, these investments consist of appr11

$23 billion of investments in wind turbines and their foundations, appr12

$2.8 billion in lower voltage AC transmission cables to connect the turbi13

offshore substations, and $5 billion in HVDC-related transmission exp14

AWC Project) to interconnect these offshore wind farms to shore.15



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ExhibiP

Table 61

Estimated Wind Plant, AC Collector System, and2AWC Project Investment Summary3

ComponentsTotal Cost

(2010$)

Percentage of

Total

Investment

Uni

(20

($ Billion) ($

6,600 MW Wind Plant Investment 23.0 75%

Offshore AC Collector System Investment 2.8 9%AWC Project Investment 5.0 16%

Total 30.8 100%

Sources & Notes:

Wind Plant Investment includes turbines, blades, towers, foundations, and

additional labor and development, and permitting costs.

AWC Project Investment includes HVDC system components: off- and onshore

converters and HVDC backbone and lateral cables.4

5

Q. HOW HAVE YOU USED THESE INVESTMENT ASSUMPTI6

YOUR ANALYSIS?7

A. For the purposes of this analysis, the JEDI model was used with p8

settings for the state of New Jersey (as a proxy for the region), but th9

turbines, blades, towers, and foundations were adjusted to reflect10

equipment and construction costs as summarized in Table 6. To11

preliminary estimate of transmission-related benefits, we simply s12

benefits per billion dollar of investments derived from the SPP stu13

necessary investment in the offshore collector system that connects th14



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ExhibiP

Q. HAVE YOU ANALYZED TO WHAT EXTENT THE ECO1

STIMULUS BENEFITS OF OFFSHORE WIND PLANT AND RE2

TRANSMISSION INVESTMENT DEPENDS ON THE DEGR3

WHICH THE WIND GENERATION AND TRANSM4

COMPONENTS ARE MANUFACTURED WITHIN THE MID-AT5

REGION?6

A. Yes, we have. To analyze the extent to which economic stimulus benef7

on the degree of in-region manufacturing of wind plant and tra8

components, we analyzed the impact of three cases:Low, Medium, and9

region manufacturing. Table 7 summarizes the in-region man10

assumptions associated with each of these three cases.11

Table 712Local Manufacturing Share13

Assumptions for the Economic Analysis Impact14

Share of In-Reg

Manufacturi

Wind Farm Low MediumEquipment

Turbines 0% 0%

Blades 0% 100%

Towers 0% 100%

Transportation 0% 100%Balance of Plant 82% 93%

Total Wind Farm Local Manufacturing Share 26% 55%

Offshore AC Collector SystemWires and electrical equipment 0% 50%



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For the wind farm construction-related analysis, these 1

manufacturing assumptions were analyzed with the JEDI model. 2

transmission-related analysis, we relied on the SPP study, which 3

analyzed transmission build-out scenarios for aLow in-region manufact4

(assuming all transmission equipment would be imported from out5

suppliers) and a Medium case (assuming that 50% of transmission 6

related electrical equipment facilities would be manufactured within th7

These SPP investment levels and economic stimulus results were used to8

normalized ratios for the amount of jobs, earnings, and overall econom9

stimulated by the transmission investment for both theLow andMedium10

manufacturing cases. These ratios were then applied to the tra11

investments associated with the AWC Project. The difference between12

and the Medium in-region manufacturing case was then applied to 13

estimate of theHigh in-region manufacturing case.14

Q. WHAT ARE THE RESULTS FROM THIS ANALYSIS?15

A. The results from our preliminary economic stimulus analysis are summ16

Table 8 below. As Table 8 shows, the combination of the offshore 17

associated transmission investment are estimated to support a total of 118

263,000 full-time equivalent (FTE) years of employment du19



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benefits as described earlier. Of the approximately 120,000 FTE-ye1

Medium in-region manufacturing case for wind plant construction, appr2

39,000 (33%) are directly supported by on-site construction, enginee3

design work; approximately 62,000 (52%) are supported indirectly at4

of wind power generation components and construction materials; an5

18,000 (15%) are induced by the additional spending (food, housing6

etc.) of employees supported by the direct and indirect economic activiti7

As Table 8 also shows, the total earnings by employees w8

construction-period jobs supported by the wind and associated tra9

investment range from $7.6 to $17.4 billion, depending on the level of10

manufacturing. The estimated overall economic activity stimulated11

investments during the construction period ranges from $16.4 to $51.5 b12



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Table 81

Analysis of Jobs, Earnings, and Economic Activity2

Full-Tme

Equivalent

Years

Total

Earnings

(2010$)

To

(FTE-Years) ($ Billion)

Low In-Region Manufacturing (19% of All Equipment)

Wind Plant Construction (6,600 MW) 79,000 $5.0

Offshore AC Collector System Construction 18,000 $0.9

AWC Project Construction 33,000 $1.6

Total 130,000 $7.6

Medium In-Region Manufacturing (54% of All Equipment)

Wind Plant Construction (6,600 MW) 120,000 $8.2

Offshore AC Collector System Construction 23,000 $1.1


Total 184,000 $11.4

High In-Region Manufacturing (98% of All Equipment)

Wind Plant Construction (6,600 MW) 184,000 $13.3Offshore AC Collector System Construction 28,000 $1.5


Total 263,000 $17.4

NREL (Musial, 2007)*

Wind Plant Construction (Scaled to 6,600 MW) 257,000 NA

Wind Farm Operation Over 20 years 145,000 NA

Ontario Offshore Wind Study (2010)**

Base Case (55% Local Sourcing of Development Costs)

Wind Plant Construction (Scaled to 6,600 MW) 166,551

High Case (63% Local Sourcing of Development Costs)

Wind Plant Construction (Scaled to 6,600 MW) 191,080

Sources & Notes:

* "Large-Scale Offshore Wind Power in the United States: Assesment of Opportunities and Barriers,"NREL , Sepetember 2010.

"Offshore Wind: Viable Option for Coastal Regions of the United States",Marine Technology Society Journal , 2007

** "Employment and Economic Impacts of Ontario's Future Offshore Wind Power Industry", The Conference Board of Canada, December 20103

4


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Q. HOW MUCH OF THE ECONOMIC STIMULUS BENEFIT 1

OFFSHORE WIND INVESTMENT IS DEPENDENT ON THE E2

TO WHICH COMPONENTS CAN BE MANUFACTURED WITH3

MID-ATLANTIC REGION?4

A. As Table 8 documents, the extent to which these investments benefit5

Atlantic region depends to a considerable extent on how much of the 6

equipment can be manufactured within the region. For example, the7

region manufacturing case (in which only 19% of all equipment i8

locally) supports only 130,000 FTE-years of employment while theMe9

(with 54% of all equipment manufactured sourced locally) supports ove10

FTE-years, an increase of almost 50%. As we discuss further in Section11

testimony, this means developing offshore wind at a pace and scale12

support the creation of local supply-chain industries should be an import13

policy goal that provides significantly greater economic benefits for the 14

Q. WHAT ARE THE EMPLOYMENT BENEFITS THAT CO15

AFTER THE CONSTRUCTION OF OFFSHORE FACILITIES HA16

COMPLETED?17

A. Once construction of the AWC Project and the 6,600 MW of offshore w18

has been completed, employment and related benefits to the local econ19


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over a 20-year operation period. Second, the development of 6,601

offshore wind generation in the Mid-Atlantic region will create a manu2

base and local supply chain for logistical services that can support th3

expansion of offshore wind generation beyond the 6,600 MW facilitat4

AWC Project. If additional offshore facilities are added at a steady r5

employment and associated economic benefits would continue 6

Considering the enormous offshore wind generation potential of the Mi7

region, this is a plausible outcome.8

Q. IS THE MAGNITUDE OF YOUR PRELIMINARY ESTIMA9

THESE ECONOMIC STIMULUS BENEFITS OF OFFSHORE10

DEVELOPMENT CONSISTENT WITH THE MAGNITUDE OF11

BENEFITS FOUND BY OTHER STUDIES?12

A. Yes. As shown in Table 8, NRELs research has found employment imp13

close to the upper bound of the benefits we estimated.14 The table also s14

results from a recent study for Ontario offshore wind development15

similar to our estimates.1516

17


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IV. AWC PROJECT CONFIGURATION1AND COSTS2

Q. PLEASE SUMMARIZE THE CONFIGURATION OF TH3

PROJECT.4

A. As explained in the testimony of Mr. Paul McCoy, the AWC Project is c5

as a double-circuit HVDC offshore transmission backbone with twelve6

AC-DC converter stations interconnected at seven existing substatio7

onshore grid. As shown in Figure 2, each circuit will be able to trans8

MW of energy and capacity between interconnection points along 9

accommodate six 500 MW offshore AC-DC converter stations to int10

offshore wind plants, and interconnect a total of 3,000 MW of onshor11

converter stations at four locations.12

As also shown in Figure 2, both circuits interconnect with 113

converter stations at PJMs Fentress substation in southern Virginia. 14

interconnection points are: 500 MW at Piney Grove (MD), 500 MW at15

(NJ), and 1,000 MW at Hudson (NJ) for one of the circuits, and 10016

Indian River (DE), 500 MW at Cardiff (NJ), and 500 MW at Sewaren (N17

other circuit. In addition to facilitating the interconnection of offsh18

power plants, this configuration provides an offshore reinforcement to th19


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Figure 21

Preliminary AWC 2-Circuit Design2

1000

Hudson

1000

IndianRiver

500

Cardiff

500

Larrabee

500

Sewaren

500

PineyGrove10

Fentr

500MWOffshorePlatform,ConverterandSwitchesDCSwitch 500MWOnshoreC

1000MWOnshore

3

4

Q. WHAT IS THE TOTAL INSTALLED NAMEPLATE CAPACITY5

OFFSHORE WIND FARMS FACILITATED BY THE AWC PROJ6

A. Considering the transmission capability to inject 6,000 MW, we have7

6,600 MW of installed offshore nameplate wind generation capacity 8

interconnected to the AWC Project. Building slightly more wind capac9

the overall cost of renewable power For example National Grid t10


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Q. DOES BUILDING WIND CAPACITY IN EXCESS O1

TRANSMISSION CAPABILITY RESULT IN SIGNI2

CURTAILMENT OF WIND GENERATION?3

A. No, not if the wind capacity exceeds the transmission capacity by onl4

we have assumed. Analyzing the NREL data for the AWC sites, we f5

only 0.2% of the potential energy generated from 6,600 MW of offsh6

would have to be curtailed to avoid exceeding the 500 MW output limit7

the 12 offshore converters. This minimal curtailment was incorporate8

market simulations.9

Q. HOW DO THE AWC PROJECTS COSTS COMPA10

CONVENTIONAL RADIAL INTERCONNECTION OF INDI11

OFFSHORE WIND PLANTS?12

A. The AWC Project is able to reliably deliver 6,000 MW of offshore wi13

and additionally provide a fully controllable 2,000 MW HVDC transmi14

between southern Virginia and northern New Jersey at a total15

approximately $5 billion. In comparison, we estimate that delivering 616

of wind power with radial high-voltage alternating current (17

transmission lines from individual wind plants to shore would cost18

$3.4 and $5.3 billion without offering the substantial additional publ19


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Q. YOU NOTED THAT IT WOULD COST BETWEEN $3.4 BILLI1

$5.3 BILLION TO INTERCONNECT OFFSHORE WIND FARM2

INDIVIDUAL RADIAL HVAC TRANSMISSION LINES. HOW D3

ESTIMATE THESE COSTS?4

A. We have estimated these costs by analyzing the installed costs of the 5

transmission elements needed to interconnect individual offshore wind6

the onshore grid. These transmission elements include: (1) an offshore 7

consisting of switchgear, transformation, and platform; (2) several HVA8

from the offshore substation to shore; and (3) an onshore substatio9

transformation (as a conservative assumption). These cost estimates are10

publicly-available information on the costs and project configuratio11

variety of sources, including actual project proposals. They do not in12

cost of wind turbines, turbine foundations, and the transmission collect13

that connects the individual turbines of a wind farm to the offshore s14

because these cost elements will be identical or approximately 15

irrespective of whether the individual wind farms are integrated16

individual HVAC lines to shore or through the AWC Project.17

Q. HOW MANY INDIVIDUAL WIND FARMS DID YOU ASSUME 18

BE DEVELOPED TO DELIVER 6,000 MW OF OFFSHORE19


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The second scenario we evaluated consisted of twenty radial HVAC tra1

lines with a capacity of 300 MW each. Either of these radial tra2

scenarios can thus deliver 6,000 MW of offshore wind generation simi3

capability of the AWC Project.4

Q. WHAT VOLTAGE LEVELS AND HOW MANY INDIVIDUAL 5

WOULD BE NEEDED TO ACHIEVE THESE 500 MW AND 6

TRANSFER CAPABILITIES TO INTERCONNECT INDIVIDUA7

FARMS TO THE ONSHORE GRID?8

A. We evaluated two configurations to achieve 500 MW transfer capabi9

230 kV HVAC submarine cable system consisting of two parallel circuit10

a 138 kV HVAC cable system consisting of three parallel circuits.11

300 MW transfer scenario, we developed the costs for a 138 kV HV12

configuration with two parallel circuits.13

Q. WHAT ARE THE OVERALL COSTS AND INDIVIDUAL14

ELEMENTS ASSOCIATED WITH EACH OF THESE THREE15

RADIAL OFFSHORE TRANSMISSION CONFIGURATIONS?16

A. Our estimates of the overall costs and cost elements of these three HV17

transmission configurations are summarized in Table 9.18


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Table 91

Estimated Costs of Radial HVAC Transmission Lines2Interconnecting Individual Wind Power Plants to the Onshore Grid3

Description of Illustrative HVAC Systems

Interconnection of 12

offshore wind farms based

on two 230 kV cables laid

in parallel trenches

Interconnection of 12

offshore wind farms based

on three 138 kV cables

laid in three parallel

trenches

Interconn

offshore win

on two 138 k

in paralle

Category (2010$ Billion) (2010$ Billion) (2010$

[A] [B] [C] [

[1] Offshore substations

and platforms$1.0 $1.0 $

[2] Offshore radial

cables$1.6 $1.9 $

[3] Onshore landing and

radial cables $0.5 $0.6 $

[4] Onshore substations $0.2 $0.2 $

[5] Total HVAC

System Cost$3.4 $3.8 $

Sources and Notes:

[1A]:

[1B]: 12 offshore substations and platforms.

[1C]: 12 offshore substations and platforms.

[1D]: 20 offshore substations and platforms.

[2]:

All systems assume 6,600 MW of installed wind generation capacity which is equivalent to a 10% overbu

MW of transfer capability. Each illustrative HVAC system has equally sized wind farms (i.e., 12 wind fa

of installed capacity each).Offshore substation costs based on onshore substation (with transformer) costs based on estimates from E

Reliability Organzation of Texas ("ERCOT"), "CREZ Transmission Optimization Study," April 2, 2008, p

platforms based on cost estimates from National Grid, "2010 Offshore Development Information Stateme

September 2010, p. A-69.

Cable cost estimates based on similar technology from National Grid, "2010 Offshore Development Infor

Statement: Appendix," September 2010, pp. A-67-68. All cable costs are based on 3-core cross-linked po

(XLPE) technology. Each offshore wind farm is 25 miles from the shoreline. A total of 55 miles of addit

was assumed from the shoreline to the onshore substation. Includes cable installation costs based on vari

costs per mile (excludes materials, ancillary vessels, and surveys) from National Grid, "2010 Offshore De

Information Statement: Appendix," September 2010, p. A-70. Fixed installation costs per radial interconn

surveys, engineering, mobilization/demobilization based on estimates from Green, J., Bowen, A., Fingeris

Y., "Electrical Collection and Transmission Systems for Offshore Wind Power," March 2007, p. 3.


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Q. WHICH OF THESE THREE RADIAL HVAC TRANSM1

CONFIGURATIONS WOULD MOST LIKELY GET BUILT?2

A. Assuming 6,600 MW of offshore wind could actually get develop3

through radial interconnections without an offshore backbone, we be4

most likely outcome would be a mix of these three configurations depen5

number of factors, including the availability of onshore interconnecti6

(e.g., existing 138 kV and 230 kV facilities close to shore), the abil7

onshore grid to accommodate injections of wind generation in the 308

500 MW range, and the size of wind farms that individual developers a9

finance through individual power purchase agreements. While t10

configurations of radial cable system interconnecting individual wind 11

certainly differ from the three configurations we evaluated, total costs o12

radial cable systems to interconnect individual wind farms with the on13

will very likely be within the $3.4 to $5.3 billion range of our cost14

These costs of interconnecting individual wind farms with their o15

transmission cables will be avoided if this amount of offshore wind gen16

integrated by means of the AWC Project.17

Q. HAVE YOU VERIFIED THAT YOUR COST ESTIMATES FO18

RADIAL INTERCONNECTIONS OF INDIVIDUAL WIND FA19


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A. Yes. We have used the same approach to estimate the cost of the AW1

This yielded cost estimates ranging from $4.9 to $5.6 billion, which is v2

consistent with the $5 billion estimate from the Project sponsors.3

Q. YOU MENTIONED THAT THERE ARE ADDITIONAL BENEFIT4

THE AWC PROJECT OFFERS OVER RADIAL INTERCONNE5

OF INDIVIDUAL WIND PLANTS WITH THE ONSHORE GRID6

ARE THESE BENEFITS?7

A. As we discuss in the next three sections of our testimony, the additiona8

offered by the AWC Project over the individual radial interconnection o9

wind power plants with the onshore grid includes a number of publ10

reliability, and congestion relief-related economic benefits. As the11

presented in Sections V, VI, and VII show, the modest incremental c12

offshore transmission backbone over the cost of radial interconnection13

than offset by the cost savings and economic benefits associated w14

economies, reduced siting and permitting uncertainties, and the relia15

congestion relief advantages offered by the AWC Project compared16

interconnections of individual offshore wind power plants.17


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V. PUBLIC POLICY BENEFITS1ASSOCIATED WITH THE AWC PROJECT2

Q. WHAT ARE THE PUBLIC POLICY BENEFITS THAT TH3

PROJECT PROVIDES COMPARED TO INTERCONN4

OFFSHORE WIND VIA CONVENTIONAL RADIAL LINES?5

A. The AWC Project will facilitate meeting the coastal Mid-Atlant6

renewable energy policy requirements and goals. It will do so in a7

substantially reduces the barriers, uncertainties and costs of developing8

wind generation, and that attracts more in-region manufacturing. It9

reduce the environmental shoreline impact of siting the needed transmiss10

Q. HOW DOES THE AWC PROJECT REDUCE THE UNCERT11

AND OVERALL COSTS OF DEVELOPING OFFSHORE12

GENERATION?13

A. The AWC Projected reduced the uncertainties and overall costs of d14

offshore wind generation in several important ways. First, it significant15

environmental permitting barriers and associated uncertainties with offs16

developments. Second, it greatly streamlines the PJM transmission pla17

interconnection process for developing significant amounts of offsh18

generation in the region. Third, the Project allows for a decoupli19


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offshore wind developments, leading to reduced costs and increased loc1

of wind turbines, plant components, and logistics services.2

Q. PLEASE EXPLAIN HOW THE AWC PROJECT R3

ENVIRONMENTAL PERMITTING BARRIERS AND UNCERTA4

ASSOCIATED WITH OFFSHORE WIND DEVELOPMENT.5

A. Environmental permitting of any transmission project, large or small,6

time consuming, and uncertain. The Department of Energys Electricity7

Committee, for example, noted that the fragmented nature of tra8

permitting and siting is exacerbated by a lack of coordination which ma9

delay the already lengthy siting process, add to the cost of transmission10

and increase the financial risk to a transmission developer. As the d11

Cape Wind permitting process has shown, permitting constra12

environmental sensitivities create costly barriers and significant dela13

siting process.14

A major advantage of the AWC Project is that it prov15

coordination and economies of scale for the permitting process: it rep16

many individual offshore-to-shore permitting efforts with a single17

permitting process for all 6,600 MW of offshore plants supported by the 18

The value of a coordinated and streamlined single shoreline p19


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tourist and residential areas, aviation routes, fishing zones, and shippin1

These constraints will limit the number of viable sites for both offsh2

farms and associated onshore landing points. In fact, because of such ov3

shoreline and offshore constraints, the Maryland Offshore Wind Dev4

study found that there may be only a few locations where wind farms5

interconnected.186

In short, in addition to offering a smaller environmental foot7

single streamlined permitting process of the AWC Project will greatly r8

uncertainties and costs of offshore wind development.9

Q. PLEASE EXPLAIN HOW THE PROJECT STREAMLINES T10

TRANSMISSION PLANNING AND INTERCONNECTION PROC11

A. Similar to streamlined environmental permitting, the AWC Project als12

substantially streamlined PJM transmission planning process compar13

interconnection of individual wind power projects. The AWC Proje14

evaluated in the PJM interconnection and transmission planning effort a15

project for injecting up to 6,000 MW from 6,600 MW of offshore wind n16

capacity into the onshore grid. Evaluating the interconnection of this a17

offshore wind generation as a single transmission project and interc18


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request avoids a lengthy iterative transmission planning and interc1

process for many individual projects. Given that individual wind power2

may be delayed or withdrawn, PJM would constantly have to re-evaluate3

combinations of wind plant and on-shore locations in its interconnecti4

For the AWC Project, a single planning effort can identify the best land5

for all 6,000 MW of potential injections from the offshore wind plants. 6

will this single planning step save time and effort, it will also result 7

optimal configuration for both onshore and offshore transmission.8

Q. YOU NOTED THAT THE AWC PROJECT ALLOWS 9

DECOUPLING OF THE SELECTION AND OPTIMIZATI10

LOCATIONS FOR ONSHORE LANDING POINTS AND OFF11

WIND PLANTS. HOW DOES THE PROJECT ACHIEVE THAT?12

A. Unlike individual radial transmission interconnections from offshore w13

to shore, the AWC Project is able to decouple the landing point and w14

locations so that each can be separately optimized. In the case of tran15

the AWC Project does not require a straight radial interconnection 16

offshore wind farm to shore. Instead, the Project allows for the select17

best locations for submarine cables to come on shore and interconnec18

onshore grid, while offshore wind plant locations can be developed 19


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HVDC backbone stretching from northern New Jersey to southern1

almost independently from the selected landing points.2

Q. DOES THIS DECOUPLING ALSO SIMPLIFY THE PERM3

PROCESS FOR WIND DEVELOPERS?4

A. Yes, very much so. The fact that onshore permitting and PJM interc5

processes are resolved through the AWC Project greatly simplifies the 6

permitting requirements for wind plant developers by limiting the 7

permitting needs to federal waters at locations that are mostly beyond t8

horizon from shore. Once these offshore permits are obtained, th9

developers can simply interconnect their plants with the AWC Proj10

various offshore locations. This expedited and simplified siting proce11

the Dutch grid operator, TenneT, referred to as a plug and play sol12

2009 position paper evaluating a proposed offshore transmission grid. 13

further noted that:14

[The] availability of offshore cables, grids and connections en15wind farm operators to plug in directly in order to supply elect16to the grid. This provides developers and financial backers with17assurances in advance, allowing national and international objec18

to be achieved more quickly.

19

19

Q. ARE OFFSHORE GRIDS SIMILAR TO THE AWC PROJECT20

DEVELOPMENT ELSEWHERE?21


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1,600 MW of offshore wind);20 TenneTs North Sea analysis to int1

6,000 MW of offshore wind capacity;21 and the Irish Scottish Links o2

Study (connecting Scotland, Ireland, and Northern Ireland).22 More3

European countries recently signed a memorandum of understanding4

offshore grid networks in the North Sea to interconnect 150,000 MW5

capacity by 2030.236

With over 2,000 MW of installed offshore wind capacity and m7

under construction and planned, Europe currently has the most offsh8

development experience. This has evolved from embracing the idea o9

grids as an infrastructure priority to help meet renewable energy targ10

most cost effective and efficient manner.24 The AWC Project would 11

nascent U.S. offshore wind experience leapfrog past individually interc12

single offshore wind farms and bring offshore wind power developm13

U.S. more on par with that in Europe.14

Q. HAVE YOU QUANTIFIED THE POTENTIAL ECONOMIC VA15

THE AWC PROJECTS ABILITY TO INCREASE THE CERT16

RAMP-UP, AND SCALE OF OFFSHORE WIND DEVELOPM17

THE MID-ATLANTIC REGION?18


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attributed to a combination of support structures (20% to 30%) and log1

installation (as high as 20%). If we assume that the reduced uncertai2

ramp-up, larger scale and local supply facilitated by the AWC Project3

save 20% on that portion of total offshore wind generation costs, thes4

will reduce the overall costs of developing 6,600 MW of offshore wind5

between $1.2 billion to $3.0 billion.286

Finally, the streamlined environmental permitting and PJM tra7

planning and interconnection process will reduce the costs and time 8

development efforts. If we assume a coordinated effort in streamlined p9

development, and transmission planning and interconnection process 10

20% of the total project development and permitting costs, the associate11

for 6,600 MW of wind development would be approximately $600 mill12

on estimates by NREL that approximately 10% of total installed offsh13

generation costs are attributable to project development and permitting e14

The combination of these scale-related cost savings on offsh15

development$3.2 billion lower wind turbine costs, $1.2 to 3.0 billion16

construction, logistics, and installation costs, and $0.6 billion i17

development and permitting costsamounts to $5.0 billion to $6.8 18


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approximately 20% of a total $30 billion investment need. These co1

alone have the potential to offset the entire cost of the AWC Project, ev2

considering that the Project offers substantial reliability and energ3

benefits and avoids between $3.4 billion and $5.3 billion in transmiss4

that would be associated with radial interconnections of individual wind 5

Q. IS THE ESTIMATED 20% SCALE AND COORDINATION-R6

REDUCTION IN OFFSHORE WIND PLANT COSTS CONS7

WITH THE SAVINGS ESTIMATED BY OTHERS?8

A. Yes. For example, Steve Holliday, the Chief Executive Officer of t9

Kingdoms National Grid (the countrys regulated transmission c10

recently noted in the context of planning an offshore grid to interconnec11

wind plants that [u]nless we get coordination between offshore and12

right, the investment overall will be much higher than it needs to b13

further stressed that [a]n uncoordinated approach may cost 25 perc14

overall, past the end of the 2020s. And [we] will have to pay in our 15

bills more for unnecessary investments.31 Similarly, and as already not16

the Virginia Coastal Energy Research Consortium has estimated t17

manufacturing of wind turbines and towers would reduce the 18

approximately 22%.19


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Q. SOME OF THE ESTIMATED COST REDUCTIONS ARE ASSO1

WITH LOCAL MANUFACTURING AND LOGISTICS SERVICE2

WOULD THE AWC PROJECT HELP DEVELOP SUCH A 3

SUPPLY CHAIN?4

A. Attracting local manufacturing and logistics services requires that offs5

development has sufficient predictability and annual scale so that sup6

justify the upfront investments needed for building up the local ind7

manufacturing and investing in the necessary supporting infrastructure. 8

manufacturing of wind farm components, VCERC notes that:9

[The] one-time investment to build a turbine manufacturing 10(including a foundry for large castings, and separate facilitie11blade fabrication, tower fabrication, and nacelle assembly12estimated to be at least $500 million. Review of trade publica13and conversations with turbine manufacturers suggest that a de14of 100 to 150 turbines per year (or 500 to 800 MW per year) 15minimum of 5 years is required to justify such an investment.3216

17

Similarly, investments will be needed in supporting infrastructu18

harbor facilities and specialized vessels to erect offshore wind turbin19

offshore platforms, and lay submarine cables. NREL estimates that 20

capital outlay for vessels alone would be more than $100 million and21

construction of the initial dedicated offshore wind vessel might requir22

large-scale wind project with sufficient capital investment to offset th23


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pipeline.33 Without such supporting local infrastructure, offshore win1

will be more expensive and may also be delayed by the limited availabi2

recent Ontario study of offshore wind development noted:3

The [local] supply potential for offshore wind will depend critica4the pace at which specialized construction, manufacturing, ass5and staging facilities can be developed. These factors will be far6

important than the availability of suitable sites in determining ho7the industry can be established and the extent to which it can gr8As a result, the industry must address a critical mass issue.349

10

The AWC Project can spur local manufacturing by cre11

predictability, ramp-up, and scale needed to overcome these initial in12

hurdles to achieve cost reductions and facilitate timely project compl13

avoid supply bottlenecks.14

Q. WHAT IS THE ADDITIONAL EMPLOYMENT AND ECO15

DEVELOPMENT BENEFIT OF INCREASED 16

MANUFACTURING AND SUPPLY OF LOGISTICS SERVICES?17

A. As discussed in Section III of our testimony, an increase of local manu18

local construction, and other services substantially magnify the employ19

economic stimulus benefits of the offshore wind investment to the Mi20

region. As we estimated in Section III of our testimony, increa21

manufacturing and supply of logistics services can easily increase em22


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(in which only 19% of all equipment is sourced locally) supports only1

full-time-equivalent years of employment while the medium case (with 52

equipment manufactured or sourced locally) supports over 180,000 FTE3

increase of almost 50%. As our analysis showed, the increase would4

larger if more than 54% of all equipment would be manufactured o5

locally. This means that developing offshore wind at a pace and scale 6

by the AWC Project not only reduces overall costs but also provides sig7

greater economic benefits for the region.8

Q. YOU MENTIONED THAT THE AWC PROJECT WILL REDU9

ENVIRONMENTAL IMPACTS OF SITING OFFSHORE10

GENERATION. PLEASE EXPLAIN.11

A. The AWC Project allows for a single, coordinated environmental permit12

focusing on the best onshore interconnection points that avoid nature 13

and other sensitive coastal areas. The Project makes this possible by 14

high capacity and the offshore backbone, which enables the selection o15

points to be largely independent of the wind farms offshore locatio16

coordinated landing point selection benefit has also been recognized i17

where several offshore grids are under development. For example, the D18

operator TenneT noted that: [c]ompared with separate private connecti19


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spatial planning. For instance, there is less disruption to sea and coasta1

because transsections of dykes and dunes are kept to a minimum.352

In addition, the Projects HVDC technology allows for the transm3

6,000 MW of offshore power with fewer cables than AC techno4

therefore, narrower right-of-ways. This smaller environmental fo5

HVDC technology has also been recognized by PJM in its analysis of6

Atlantic Power Pathway (MAPP) project, where it found that the HVD7

requires less space for the same power transfer, reducing the disturbe8

40% compared to an HVAC solution.36

9

Finally, the environmental impact of offshore wind is reduced f10

the fact that

Brattle Testimony AWC 400 403

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