Pricing offshore wind power

Offshore wind offers a very large clean power resource, but electricity from the first US offshore wind contracts is costlier than current regional wholesale electricity prices. To better understand the factors that drive these costs, we develop a pro-forma cash flow model to calculate two results:...

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Bibliographic Details
Published in:Energy policy 2011-10, Vol.39 (10), p.6408-6421
Main Authors: Levitt, Andrew C., Kempton, Willett, Smith, Aaron P., Musial, Walt, Firestone, Jeremy
Format: Article
Language:English
Subjects:
Applied sciences
Breakeven price
Capital
Capital markets
Cash flow
China
China (People's Republic)
Cost
Costs
Economic data
economic sustainability
Electric energy
Electric power
Electric rates
Electricity
electricity costs
Energy
Energy economics
Energy market
Energy policy
Energy prices
Europe
Exact sciences and technology
General, economic and professional studies
Levelized cost of energy
Markets
Mathematical models
Natural energy
Offshore
Offshore engineering
Offshore structures
Offshore wind power
Policies
Policy making
Power marketers
Power resources
Prices
Project management
Renewable energy sources
Studies
U.S.A
United States
wind
Wind energy
Wind power
Wind power Offshore wind power Levelized cost of energy Breakeven price
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Summary:Offshore wind offers a very large clean power resource, but electricity from the first US offshore wind contracts is costlier than current regional wholesale electricity prices. To better understand the factors that drive these costs, we develop a pro-forma cash flow model to calculate two results: the levelized cost of energy, and the breakeven price required for financial viability. We then determine input values based on our analysis of capital markets and of 35 operating and planned projects in Europe, China, and the United States. The model is run for a range of inputs appropriate to US policies, electricity markets, and capital markets to assess how changes in policy incentives, project inputs, and financial structure affect the breakeven price of offshore wind power. The model and documentation are made publicly available. ► We calculate the Breakeven Price (BP) required to deploy offshore wind plants. ► We determine values for cost drivers and review incentives structures in the US. ► We develop 3 scenarios using today's technology but varying in industry experience. ► BP differs widely by Cost Scenario; relative policy effectiveness varies by stage. ► The low-range BP is below regional market values in the Northeast United States.
ISSN:0301-4215
1873-6777
DOI:10.1016/j.enpol.2011.07.044