Offshore, Project Development, Wind Power

Proposed Long Island Offshore Wind Farm ‘Terminated’

Just hours after the Long Island Power Authority (LIPA) released the results of a study on Thursday evaluating the economics of its proposed 140 megawatt (MW) offshore wind farm, the local media reported that LIPA Chairman Kevin Law was terminating the project due to cost.

The study, conducted by Pace Global Energy Services, concluded that the project costs for the Jones Beach offshore wind farm could reach over $800 million—more than double the original estimated cost from wind developer FPL Energy.

“As I understand the situation, Kevin Law, LIPA’s chairman, has indicated that he will bring the offshore wind park issue before the LIPA Board of Trustees at its next meeting, which is Sept. 25, with the recommendation that it be terminated,” Bert Cunningham told RenewableEnergyAccess.com on Thursday. “A final decision on the fate of the Offshore Wind Park and/or what alternatives to consider will then be made in concert with the Board.”

According to an article on Forbes.com, Law told the Associated Press that the decision to halt the project was economically based and that “we didn’t even have to consider environmental or aesthetic concerns.”

However, the Pace study found that the costs for the proposed offshore wind project are in line with market expectations for North American offshore projects—given the early stage development of the U.S. market and the overall lack of a well-defined national energy policy to support “these kinds of projects.”

“Costs for developing offshore wind projects in Europe are considerably lower due to the experience in building such projects there and the government incentives offered for such [renewable] energy resources,” noted the authors of the study, Assessment of Offshore Wind Power Resources.

When compared with the cost of a Long Island-based combined cycle natural gas-fired generating plant, the Pace study concludes that the “levelized green premium” for wind-generated power, when spread out over a 20-year period, would come to about $66 million per year or about $2.50 per month for the typical residential consumer who uses 775 kilowatt-hours (kWh) per month.

The “green premium” for wind power is calculated by taking the difference between the cost of a megawatt-hour (MWh) of electricity produced in a combined cycle natural gas power plant on Long Island, which is about $137 per MWh, and an MWh of power produced by the Offshore Wind Project, which could be $291. The “green premium” of $153 per MWh when annualized and spread over a 20-year power purchase agreement projects the “levelized green premium” to be about $66 million per year in 2010 dollars.

“Obviously, there is a premium for building an offshore wind project when compared to conventional energy projects,” stated LIPA CEO and President Richard M. Kessel, a proponent of the offshore project, in a recent press release. “Long Island must decide where it wants to go with its energy future. Should we continue on as we have in the past by adding more and more fossil fuel power plants or do we give a large-scale renewable energy project a chance to help break the grip of oil and natural gas as the primary fuels used to keep our lights on?”

LIPA requested the study after FPL Energy gave the Authority an updated cost estimate of $697 million, as of the end of 2006, to construct the project. FPL’s cost estimate did not include the financing and transmission cable costs. With those costs added in, the project could have cost up to $811 million if developed.