An Offshore Power Grid

How should we build an offshore power grid? Here are a few factors to consider:

Location - Where will the offshore wind farms be built?

Ratepayers - How can we provide the greatest value to the ratepayers that will purchase the power?

Protecting a Vulnerable Grid - Where should we connect the new offshore wind farms to the existing terrestrial power grid to keep the grid reliable and keep connection costs affordable?

Location

At first glance the open ocean may look empty, but there are a surprising number of species and human users already occupying this space. Recognizing the potential for conflict with offshore wind farms, the federal government looked for areas with the fewest competing uses, and its these areas which it has leased for offshore wind farms. States have joined in and adopted programs to support offshore wind energy development in Massachusetts, New York, New Jersey and Maryland. These competitive programs award support payments to wind farm developers; compensating for the environmental value of their energy output in a manner that the competitive energy market does not. Maryland has approved 368 MW of offshore wind farms, Massachusetts hopes to develop 1,600 MW, New York’s goal is 2,400 MW, and New Jersey could have a 3,500 MW goal under a new governor in 2018. An offshore grid should have a flexible design that allows it to accommodate the growth of offshore wind farms in multiple states. Unlike in Texas, the growth in Atlantic offshore wind will not be coordinated or controlled by a single state.

Ratepayers

Ratepayers want affordable power delivered reliably. And most also believe that we should be responsible stewards of the environment. US ratepayers should initially expect to pay more for offshore wind; although the bill impacts should be small because offshore wind will be a small part of the energy mix. The offshore wind industry is still relatively young and costs will drop as the industry matures. The small additional cost is an investment in establishing an offshore wind industry in the United States; an investment in jobs and a diverse, more secure energy supply.

 

The ratepayer investment in offshore wind is worthwhile if the trend is towards lower cost and eventually, participation in the market without subsidies. We are clearly seeing that trend. Competition among wind project developers and among manufacturers supplying turbines and other components has substantially reduced the cost of European offshore wind projects. In Europe, offshore wind costs have fallen 46% since 2012. A typical project in UK waters had costs in the range of 144 Euro per megawatt hour, and recently a solicitation in the Netherlands resulted in projects costing about 73 Euro per megawatt hour. We are even seeing signs that future European offshore wind projects could compete directly with traditional power on an unsubsidized basis. In April 2017, a German project expected to be operational in 2024 was awarded without subsidies.

How is this possible? Offshore wind turbines have grown larger, with taller towers and bigger rotors. Turbines were smaller than 1 MW in the 1990s, 6 MW machines are common today, and turbines larger than 10 MW are expected before long. Taller towers place the rotors at altitudes with higher wind speeds, and bigger rotors capture more wind, which means more energy is produced with less investment in fixed costs like towers, foundations and submarine cable circuits.

 

The process energy regulators use for competitive solicitations also has helped achieve cost reductions. A process that removes barriers and reduces risks for developers allows them to compete more vigorously on price. Under the Dutch system, for example, the government provides an independent connection to the electricity grid and regulates all conditions for the construction of the wind farms, including the location, permits and approvals. The company with the lowest bid receives the permits to build and the contract awarding the subsidy.

 

Transmission is an important part of the process that leads to lower cost. Highways, railroads and electric transmission should be “common carriers” which provide non-discriminatory, open access to all users. Free competition depends on market participants having open access to these critical “highways”. The Texas experience with open-access lines shows that when transmission barriers to entry are removed, wind developers compete more effectively and use the high-capacity transmission lines to access the markets and deliver the energy we need.

Protecting a Vulnerable Grid

The grid is a web of interconnected circuits, substations and other facilities. Changes to one facility can make the whole network stronger or weaker. Today, there is virtually no US offshore electrical network – we have to build it. And when we do, we should build it in a way that makes the grid stronger.

 

The power grid is like the highway network that we use every day. Early Sunday morning traffic is a breeze, but on Monday morning it’s jammed. Like the highways, the power grid gets congested at times of heavy demand and power cannot move freely. Back-up power plants need to be maintained to keep the lights on in areas that could experience a shortage when the grid is congested. The back-up generators are usually older, less efficient, more polluting and higher cost than the plants that would provide the power at normal times. And as a result, power prices go up during congestion events. Ratepayers pay higher prices year-round to maintain the back-up plants in standby for the occasional peak loads.

Vulnerability and age also affect the grid. Coastal substations, where switches control circuits and transformers change voltages, can flood during severe weather. Many circuits are held up by towers that are over eighty years old. Corrosion, cracked insulators and failing foundations become a concern as these facilities age. Fixing these vulnerabilities is important to maintaining a secure, reliable power grid.

As we build an offshore grid we have the opportunity to efficiently correct issues facing the land-based grid. For example, we can lessen congestion by connecting offshore circuits to areas of high power consumption. This provides an extra energy supply that would reduce high power prices during congestion events and save money for ratepayers. We also can combine the construction of an offshore circuit with upgrades to vulnerable and aged circuits along the coast. For a substation in danger of flooding during a storm surge, the solution needed to keep the lights on may be to raise and re-build the substation. That’s the best time to re-design the substation to accept an offshore wind transmission circuit. Ratepayers would save money since the construction costs of the combined project will be lower than two individual projects. All it takes is planning.