Virginia : Offshore Wind

Feasibility AnalysisTrevor S. Daubenspeck

US Offshore Wind Potential

Virginia Offshore Wind Potential

Benefits of Chesapeake Bay Location

• Natural, ice free, bay• Proximity to Norfolk / Newport News:– Railroad / Airport / Highway connectivity– Established engineering / construction labor force– Existing Naval / Industrial terminals– Proximity to electrical grid & population center

• Renewable Energy Standards– Virginia Law : 15% of all electricity must be derived from

renewable sources by 2025– US Navy : 50% of onshore energy must come from renewable

sources by 2020

Couple with Additional Energy Investment

• Outer Continental Shelf– Estimated contents:• 130 to 500 million barrels of oil• 1.14 to 2.5 trillion cubic feet of natural gas

Offshore Location

Wind Details

• Class 5 & 6 Wind Installations• Potential of 47,900 MW• Max Pot. Output 176m MWhrs / yr

• Specified 25 OCS lease blocks (seen in slide above), can support 3,200 MW– 11m MWhrs / yr (10% of VA’s annual consumption)

• Efficiency level of 89%

Wind Details

• Current Levelized Costs of Energy (LCOE):– Offshore Wind: $105 to $130 per MWh– Coal-fired: $85 to $100 per MWh– CC Gas turbine: $80 to $100 per MWh

• Assume 600 MW yield• Assume no emission capture

– Definition of LCOE: the cost of generating electricity including initial capital, return on investment, as well as the costs of continuous operation, fuel, and maintenance.

from Virginia Coastal Energy Research Consortium (VCERC)

Cost Structure of Wind

• 3 Main components (85% of total cost):– Wind Turbines– Submarine Power Cables– Monopile Foundations

• VCERC’s Cost model predicts:– $3,000 to $3,600 per kW– Comparison:

• Scrubbed Coal @ $2,809 per kW• Advanced CC @ $991 per kW

– Offshore Wind won’t be price competitive until Y2017

Cost Breakdown Scenarios

Offshore Wind Electricity Generation

• Like Onshore Wind, Offshore wind does not produce a constant flow of energy

On-peak / Off-peak Prices

Offshore Wind Cost Estimates (Incremental)

• Submarine Cable Cost Estimate:– $5.54 per km per kilowatt

• Foundation / Monopile Cost Estimate:– $410 per kilowatt

• Wind Turbine Cost Estimate:– $2,160 per kilowatt

Cost Uncertainties

• Wind Turbine Costs– Rise/fall : supply driven market

• Steel Prices• Exchange Rates• Price of Electricity– Prices expected to increase in L-T

Looking at Past Offshore Wind Projects

• A PWC / GBI Research survey report on Existing Offshore Wind projects revealed the following:– Post-tax IRRs : 10 ~ 15% (for 85% of respondents)– Weighted Average Cost of Capital (WACC): 10 ~

15%• Suggesting that the IRR of the majority of offshore

projects breakeven or are economically profitable

Actions

• Federal Government– Investing $50.5m in R&D over next 5 years for

additional viability analysis• Gamesa (Wind Turbine manufacturer)– Constructing an R&D center in Chesapeake, VA to

develop a 5 MW offshore turbine prototype for North America

• Virginia funding is currently stalled