Offshore wind will help to displace fossil fuel generation and fill capacity gaps caused by retiring generation in the New England region of the US, according to Bloomberg New Energy Finance associate Tom Harries.
Harries, who was speaking at the US Offshore Wind 2019 event in Boston today, said displacing fossil fuels and filling capacity gaps were two of three demand drivers for offshore wind, together with providing a clean source of power for the projected growing electric vehicle load.
Based on analysis of power demand peaks in Massachusetts, he said that evening peak demand, which is also highest in winter months, will coincide with the best offshore wind output helping to reduce power prices.
Offshore wind’s correlation with peak demand is good for meeting capacity gaps, but also “great news” for the power sector looking to reduce its carbon emissions, he added.
BNEF’s latest forecast for US offshore wind predicts a gradual growth from 2021-2022 and then a steady 1-2GW added each year to 2030.
Technological advances, such as bigger turbines, make installation of 1-2GW easier than five years ago, Harries said.
He said prices of $71 a megawatt-hour are possible based on revenues from power purchase agreements prices for the Vineyward Wind project, the levelised investment tax credit (ITC) benefit and capacity market payments.
Because of the diminishing ITC, he said project revenues will fall by 3% in 2023 and by 4% in 2024 and eventually by 9%.
“If you want the same PPA as Vineyard Wind, without ITC you need a 9% cost reduction,” he told delegates.
This will be feasible as turbines get bigger, he added.