CASE STUDY:CASE STUDY:

The Atlantic Wind The Atlantic Wind ConnectionConnection

Economics and Management of Energy Business – Prof. J.A. Economics and Management of Energy Business – Prof. J.A. MathewsMathews

Project Group # 3 : Matteo Franza (ID 630791) Emanuele Project Group # 3 : Matteo Franza (ID 630791) Emanuele Gasparini (ID 626491)Gasparini (ID 626491) Barbara Di Cesare (ID 625581 ) Barbara Di Cesare (ID 625581 ) Damone Yahyaei (ID E03732)Damone Yahyaei (ID E03732) Claudia Rossi (ID 625771)Claudia Rossi (ID 625771)

INTERSTATE WATER INTERSTATE WATER CONNECTIONCONNECTION

INTER-FIRMS COOPERATIONINTER-FIRMS COOPERATION

INTEGRATED WIND POWERINTEGRATED WIND POWER

SUPER SMART GRID PARITYSUPER SMART GRID PARITY

Main challenges:

- Can the electrical grid accommodate very high amounts of wind energy without jeopardizing security or degrading reliability?-Given the constraints of the nation’s current transmission infrastructure, how could significantly larger amounts of wind energy be developed?

Current Situation:

-For near-shore wind farms, HVAC transmission is still possible.- Farther offshore will likely require use of HVDC undersea.- Significant technical interest needed- Managing short-term (seconds to hours) and long-term (days to years) operational.

Renewables have a large technical potential: environmentally Renewables have a large technical potential: environmentally substainable and help to diversify energy supplies reducing exposure of substainable and help to diversify energy supplies reducing exposure of risks.risks.

Current supply :19.6% of global electricity and 13.5% of global energy Current supply :19.6% of global electricity and 13.5% of global energy demand. demand.

Economic Core Barriers:Economic Core Barriers:

1) Uneven playing field 2) Marketplace barriers 3) Non-marketplace barriers 4) New technology lock-out

Public funding is the main driver for long-term developmentsPublic funding is the main driver for long-term developments

The Governments have the power to unlock these new technologies.The Governments have the power to unlock these new technologies.

Traditional paradigmsTraditional paradigms

1) Utility operators think only in terms of big power plants,1) Utility operators think only in terms of big power plants,

2) Non-alignment between electricity costs and prices,2) Non-alignment between electricity costs and prices,

3) Small firms have limited resources, the bigger ones aim to max profits on non-energy related 3) Small firms have limited resources, the bigger ones aim to max profits on non-energy related issuesissues

4) Consumers lack capital and knowledge about energy projects and efficiency investments 4) Consumers lack capital and knowledge about energy projects and efficiency investments Renewables were paradoxically victims of their successRenewables were paradoxically victims of their success

Lack of public interestLack of public interest

The physical removal of power stations removed them from Americans’ The physical removal of power stations removed them from Americans’ mindsminds

Despite the financial crisis, US passed Germany to become the biggest Despite the financial crisis, US passed Germany to become the biggest producer of wind power world-wideproducer of wind power world-wide

20% of nation’s electricity supply by 2030. Wind power industry added 39% 20% of nation’s electricity supply by 2030. Wind power industry added 39% of capacity in 2009 and 2% of electricity will soon come from wind turbinesof capacity in 2009 and 2% of electricity will soon come from wind turbines

Growth helped by the U.S Federal stimulus package through tax credit and Growth helped by the U.S Federal stimulus package through tax credit and investment incentives (investment incentives (According to the American Wind Energy Association)According to the American Wind Energy Association)

The US possess a large and accessible offshore wind energy resource, but The US possess a large and accessible offshore wind energy resource, but yet has no offshore wind generating capacity to date. yet has no offshore wind generating capacity to date.

The development of offshore wind as an energy source faces several The development of offshore wind as an energy source faces several significant challenges and barrierssignificant challenges and barriers

6,000MW capacity (5times nuclear reactors’ output)

350-mile underwater spine providing power to 1,9M households

Interstate water connection

The system uses HVDC transmission technology: cables are cheaper per mile (lower losses, less copper use than HVAC and transmit an equivalent amount of energy).

HVDC is ideal for connecting long distances

Transmitting wind energy from an offshore wind farm to land starts with the turbines, which are connected to an offshore converter platform at the center of, or near to, the wind farm. The energy leaves the platform by way of high capacity HVDC cables that are buried in the seabed. These cables are connected to other platform hubs serving other wind farms and then to land-based converters where the energy is converted from HVDC back to HVAC and injected into the grid.

‘09 Indicato

rs

Google Marubeni

Good Energies

Net Income 14.81 bln $ 1.36 bln $ 0.739 bln $

N.I. as % Rev.

28.8% 3.3% 2.56%

ROE 20.6% 16% 8.9%

Liquidity 33.8 bln $ 7.07 bln $ 1.703 bln $

Debt/ Equity

4.9 3.46 0

P/E 17.47 6.8 9.48

‘09 Indicators SECTORNet Income % revenues 21.7%

ROE 14.1%

Debt/Equity 9.6

P/E 31.4

GOOGLE relative to its operating sector

•Dec.16th 2009: Google’s new subsidiary known as Google Energy in Delaware

• Approved the right to buy and sell electricity on federally regulated wholesale markets

•Goal: Google will use these RE to become carbon neutral / Aims to find low costs and clean powers.

Source: http://gigaom.com/cleantech/google-buys-wind-power-first-deal-for-google-energy/

‘09 Indicators

ENEL Green Power

Google

Net Income 0.584 bln $ 14.81 bln $

Net Income % rev.

24.7% 28.8%

ROE 17% 20.6%

Liquidity 281.96 bln $

33.8 bln $

Debt/Equity 2.1 4.9

Op. activ.

Op. liabil.

Invest.

Italy 7.046 bln $

0.627 bln $

457.52 mln $

Rest of Europe

1.549 bln $

0.218 bln $

340.48 mln $

M-S America

1.137 bln $

0.0705 bln $

143.64 mln $

N. America

1.139 bln $

0.0625 bln $

47.88 mln $

ToT 10.871 bln $

0.978 bln $

989.52 mln $

Total Wind Energy Capacity in USA (350 MGW)

EBIT in US = 49 Mln $Tot. Net Wind En. Prod. = 1.128 KWh

Source: http://www.enel.it/northamerica/wmUS.asp

FEDERAL: $0.022 Federal tax credit for each kilowatt-hour of electricity produced by wind.

STATE: The New Jersey’s Governor signed the Offshore Wind Economic Development Act providing $100 million in tax credits.

Steps Cost (millions $)

Year

Initial development

500 2013

First Phase 1,300 2016 (150miles NJ-DE)

Second Phase 3,200 2020 (350 miles)

Total 5 bln

Initial Investment

Quote

200 mln $(liquidity)

37,5%

200 mln $(liquidity)

37,5%

80 mln $(liquidity)

15%

INCENTIVES

MR Mitchell (CEO of Trans-Elect Co said that companies’ investments are financing a small MR Mitchell (CEO of Trans-Elect Co said that companies’ investments are financing a small

fraction of the total cost. Moreover, once the first phase is ready to be built, Google, Good fraction of the total cost. Moreover, once the first phase is ready to be built, Google, Good

Energies and Marubeni will decide whether they want to continue to invest in the project. They Energies and Marubeni will decide whether they want to continue to invest in the project. They

haven't committed to invest anything beyond the initial investment.haven't committed to invest anything beyond the initial investment.

Joint Joint ventureventure

The 2008’s DOE study on large scale wind penetration in the East Coast to improve the grid coverage:

- The 20% Report evaluates requirements and outcomes in technology, manufacturing, transmission plus the environmental impact,

- Significant costs and challenges ,- Major national commitment is needed,- Main task: impact and transmission assesment

NREL’s National Wind Technology Center developed advanced design tools to support the wind industry with state-of-art analysis capability (TurbSim, FAST, HydroDyn)

Utility-scale wind turbines are taller and more flexible; components are better interconnected; the structural loading is reduced; innovative hub control strategies

Fear of peak oil, climate changes Electricity infrastructure capable of meeting future needs and reducing CO2 emissions of 80% by 2050

The rapid expansion of wind power creates the need for decentralized lines. A new architecture of SG: Intelligent Power Network to capture ec. of aggregations.

SSG is a combination of supergrid system (large-scale transmission) and smartgrid system (decentralised approach).

““Development of SuperSmart Grids for a more efficient utilisation of electricity from Development of SuperSmart Grids for a more efficient utilisation of electricity from renewable sources” Battaglini, Lilliestam, Haas, Patt. renewable sources” Battaglini, Lilliestam, Haas, Patt.

Climate challenges require major changes to the ways we generate and use energy.

Large-scale projects goal: to transform the global energy system to one relying on clean, abundant, widespread renewable resources (Jacobson&Delucchi, 2009).

Energy sector, by EIA energy-use categories

TW power in 2030 (conventional fossil fuels)

Elect. fract. End-use energy/work w.r.t. fossil fuel

Upstream factor EHCM

factor

TW power in 2030 replacing all fossil fuels with WWS

World U.S. Electric e-H2 World U. S.

Residential

Liquids 0.37 0.04 0.95 0.82 1.43 1.00 0.90 0.29 0.03

Natural Gas 0.84 0.18 0.95 0.82 1.43 1.00 0.90 0.61 0.13

Coal 0.11 0.00 1.00 0.82 1.43 1.00 0.90 0.08 -

Electricity 0.92 0.20 1.00 1.00 1.00 1.00 0.95 0.83 0.18

Renewables 0.02 0.01 0.50 0.82 1.43 1.00 0.90 0.02 0.01

Total 2.26 0.43 1.83 0.35

Commercial

Liquids 0.18 0.02 0.90 0.82 1.43 1.00 0.95 0.15 0.02

Natural Gas 0.32 0.13 0.90 0.82 1.43 1.00 0.95 0.26 0.10

Coal 0.03 0.00 0.90 0.82 1.43 1.00 0.95 0.03 0.00

Electricity 0.78 0.22 1.00 1.00 1.00 1.00 1.00 0.78 0.22

Renewables 0.01 0.00 0.90 0.82 1.43 1.00 0.95 0.01 0.00

Total 1.32 0.38 1.22 0.35

Industrial

Liquids 2.41 0.31 0.60 0.82 1.43 0.72 0.95 1.76 0.22

Natural Gas 2.35 0.28 0.60 0.82 1.43 0.82 0.95 1.95 0.23

Coal 2.15 0.08 0.60 0.82 1.43 0.73 0.95 1.59 0.06

Electricity 1.75 0.12 1.00 1.00 1.00 0.93 1.00 1.62 0.11

Renewables 0.15 0.14 0.90 0.82 1.43 1.00 0.95 0.13 0.12

Total

Transportation

8.80 0.92 7.05 0.74

Liquids 4.44 1.07 0.73 0.19 0.64 1.18 0.85 1.30 0.31

Natural Gas 0.05 0.03 0.90 0.82 1.43 1.00 0.85 0.04 0.02

Coal - 0.00 0.90 0.82 1.43 1.00 0.85 - -

Electricity 0.04 0.00 1.00 1.00 1.00 1.00 0.95 0.03 -

Projected end-use power in 2030, by sector, U. S. and worldProjected end-use power in 2030, by sector, U. S. and world

Wind and solar are assumed to comprise 90% of the future supply Material sources related to wind power: Turbines are made of steel,

concrete, magnetic materials, aluminum, copper and wood exposy widely abundant and recyclable.

Major criterion in the WWS evaluation: the full private cost of delivered power (capital costs, storage and maintenance costs)

Wind power less costly- Electric vehicles: cheaper transportation costs- Hurdles: Subsidies and taxes on fossil power needed.

Energy

Technology

Rated power of one

plant or

device

Percent of

2030 power demand met by

plant/device

Number of plants or devices needed

World

Footprint Area (% of Global Land

Area)

Spacing Area (% of Global Land

Area)

Number of plants or devices needed

U.S.

(MW)

Wind turbine 5 50 3.8 million 0.000033 1.17 590,000Wave device 0.75 1 720,000 0.00026 0.013 110,000Geothermal plant 100 4 5350 0.0013 0.0013 830Hydroelectric plant 1300 4 900 0.407 0.407 140Tidal turbine 1 1 490,000 0.000098 0.0013 7600Roof PV system 0.003 6 1.7 billion 0.042 0.042 265 millionSolar PV plant 300 14 40,000 0.097 0.097 6200CSP plant 300 20 49,000 0.192 0.192 000046

Number of WWS power plants or devices needed to power the world’s and the U.S.’s total energy demand in 2030 Number of WWS power plants or devices needed to power the world’s and the U.S.’s total energy demand in 2030

Main challenge for WWS meet the demand:

- Less downtime than current electric power technologies,

- Need to be interconnected.

Ways to reduce the intermittency effect of wind:

- Combining multiple WWS,- Smoothing out supply to match demand,- Storing excess energy for later use,- Forecasting water to better plan backup

energy supply.

Programs to managing demand and planning the energy system infrastructure:

- Feed-in tariffs: subsidies to cover the spread between generation costs and electricity prices (stimulating effect)

- Taxation of fossil fuel production and

elimination of subsidies- Upgraded and expanded transmission

grid for a smart integration. Large-scale restructuring of the electricity distribution

Feed-in tariffs and intelligently structured transimission system are necessary but not sufficient.

Sensible, broad-based policies and social changes are needed to convert a possible 25% of the current energy system to WWS in 10-15 years and 85% in 20-30 years.

Federal level on the move Memorandum Of Understanding (MOU) June 2010 to spur cooperation in wind technology between DOI & DOE:

- Integration of state‐federal activities- Facilitate the development of domestic

energy resources- Resource assesment- Public engagement

A strategic partnership between federal and state governments is essential for sitting and permitting offshore wind in the United States.

BOEM state task forces and the Atlantic Offshore Wind Energy Consortium (10 governors) mature the regulatory and stakeholder engagement processes.

The pooling of several large offshore wind farms into clusters in the GW range new options for an optimised integration of electricity supply systems.

Integration enhances the economical benefit of wind energy (windfarm clusters in Inner Mongolia).

The Wind Farm Cluster Management (WCM) is required to coordinate the geographical distributed wind farms and control them as a unique electrical system.

Germany was the first country to implement this kind of project

Lack of U.S. wind energy policies,

No institutional knowledge about offshore wind energy facilities,

Newly emerging US Wind’s Regulatory and institutional structures,

Strategical cooperation between the Federal government and States needed

Offshore’s Capital costs are twice as high as land-based,

Lack of incentives,

Turbine blades much larger, no land-based transportation and construction constraints.

The blades may also be allowed to rotate faster offshore,

Blades noise is less likely to disturb human habitations,

Faster rotors operate at lower torque, which means lighter, less costly drivetrain components.

The AWC,according to our findings and researches, is going to prove feasibility and sustainability in the LT.

Although for its implementation socio-ec. challenges have to be overcome, the grid system is essential for siting and permitting offshore wind power development.

The project’s merit is to improve customers access to clean energy resources and extend the reliability of grid parity from the Mid Atlantic region to the whole Globe.

Evaluating the Feasibility of Meeting all Global Energy Needs with Wind, Water, Evaluating the Feasibility of Meeting all Global Energy Needs with Wind, Water, and Solar Power, Jacobson Delucchi 2009and Solar Power, Jacobson Delucchi 2009

Large scale deployment of renewables for electricity generation, K.Neuhoff Large scale deployment of renewables for electricity generation, K.Neuhoff Oxford review of economic policy 2005Oxford review of economic policy 2005

Rejecting renewables: the socio-technical impediments to renewable Rejecting renewables: the socio-technical impediments to renewable electricity in the US, BK Sovacool, Energy Policy, 2009 electricity in the US, BK Sovacool, Energy Policy, 2009

Supersmart grid: a more efficient usage of electricity from renewable sources, Supersmart grid: a more efficient usage of electricity from renewable sources, A Battaglini, J Lilliestam, A Haas, Journal of Cleaner Production, 2009 A Battaglini, J Lilliestam, A Haas, Journal of Cleaner Production, 2009

American Wind Energy Association, Wind Energy project, 2010American Wind Energy Association, Wind Energy project, 2010

AWS truewind, NY’s offshore wind energy development potential in the Great AWS truewind, NY’s offshore wind energy development potential in the Great Lakes, January 2010,Lakes, January 2010,

AWC website, NY Times website, NREL website, Google website, EGP website. AWC website, NY Times website, NREL website, Google website, EGP website.