Resource Documents: Economics (213 items)
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New York State Great Lakes Wind Energy Feasibility Study
Author: New York State Energy Research and Development Authority
[from Summary:]
Based on the totality of this analysis, this concludes that Great Lakes Wind currently does not offer a unique, critical, or cost-effective contribution toward the achievement of New York State’s Climate Act goals beyond what existing, more cost-competitive programs are currently expected to deliver. This conclusion is based on a fulsome analysis of the resource development costs, ratepayer impacts, expected State benefits, transmission and interconnection limitations, infrastructure and supply chain constraints, visual impacts, and potential environmental impacts of Great Lakes Wind, as discussed below and throughout the Feasibility Study.
The Feasibility Study analyzed the physical characteristics of Lake Erie and Lake Ontario to determine that they would require a combination of fixed offshore wind foundations in Lake Erie and floating offshore wind foundations in Lake Ontario. The Feasibility Study further notes that the potential theoretical buildout of the New York areas of each lake could result in a generation capacity of up to 1,600 megawatts (MW) in Lake Erie and up to 15,000 MW in Lake Ontario. But this theoretical and technical potential faces numerous practical considerations that would need to be addressed before such projects can be successfully commercialized and benefit the State. These practical considerations include higher relative costs compared to alternative renewable energy generation, risks associated with new technologies (e.g., floating wind platforms and ice loading), lack of an existing supply chain, lack of adequate port facilities and specialized vessels, limited Points of Interconnection (POIs) and associated transmission headroom, and challenges related to visual impacts, wildlife impacts, and uncertainties with regards to environmental risks as well as conflicts with other lake uses including commercial and recreational fishing, shipping, and navigation.
The Feasibility Study estimates costs associated with Great Lakes Wind that at first appear comparable to costs under the Offshore Wind Standard. However, when comparing the costs and benefits of Great Lakes Wind to other renewable energy options in the State’s portfolio, the appropriate comparison is to land-based renewables and not offshore wind projects.
Great Lakes Wind does not provide the same electric and reliability benefits that offshore wind offers New York State. The PSC adopted the Offshore Wind Standard “… because of its proximity and direct access to load centers, offshore wind would provide substantial reliability and diversity benefits to the electric system […] It may also produce significant public health benefits by displacing fossil-fired generation in the downstate area.”4 Great Lakes Wind projects would not have the same proximity and direct access to load centers (Zones J and K) or displace downstate fossil-fired generation. Therefore, at the interconnection points of Great Lakes Wind projects in Central and Western New York, the more appropriate cost comparison is with more cost-effective technologies typically sited in that region such as land-based wind and solar.
This white paper finds that Great Lakes Wind projects would be significantly more costly for ratepayers to support than projects currently advanced under Tier 1 of the Clean Energy Standard (CES), such as land-based wind and solar. For example, the 2021 Tier 1 solicitation resulted in Index REC Strike Prices between $42 and $63/MWh, which is 55 to 230 percent cheaper than the $98 to $138/MWh range estimated for Great Lakes Wind projects. Moreover, that cost differential could increase further as the Feasibility Study cost estimates of Great Lakes Wind do not fully account for additional costs associated with interconnection, infrastructure, and labor, which would require site-specific evaluations and more detailed modeling.
The potential grid Points of Interconnection (POIs) identified for Great Lakes Wind in the Feasibility Study are in areas with limited hosting capacity, with competition from other less expensive land-based renewable generation projects which are also advancing in this region. As a result, Great Lakes Wind projects would incur high interconnection costs to advance and would displace lower-cost alternatives.
From an infrastructure perspective, ports around the Great Lakes would need, in some cases, significant upgrades to support the development of these projects, and in-lakes vessels or purpose-built vessels would need to be used for construction and operation. The required ports, vessel infrastructure, and supply chain investments needed to execute Great Lakes Wind were not quantified in the Feasibility Study and would add to the overall cost of Great Lakes Wind.
Substantial public and regulatory concerns have also challenged wind energy projects in and around the Great Lakes, primarily due to anticipated viewshed impacts and implications of the projects on wildlife. Through the public feedback events and webinars, the public expressed a wide range of interest, both in support of and expressing concerns about Great Lakes Wind. Viewshed, environmental, and public health issues are the primary concerns, and job creation and economic development opportunities are the primary arguments supporting Great Lakes Wind. The Feasibility Study demonstrates that the visual impacts of Great Lakes Wind, at least in Lake Erie, would be considerable given the need for a relatively limited distance from shore necessary to support a project at scale in that lake. For example, in Lake Erie, limiting the viewshed impact by siting turbines beyond 12 miles from shore would reduce the potential hosting capacity from 1,600 MW to less than 200 MW and further diminish the economic viability of these projects.
With regards to the impact of Great Lakes Wind on wildlife species and the environment, this issue is exacerbated by the lack of data relating to the temporal and spatial distributions of wildlife both at specific locations and across the Great Lakes as a whole, including data on aerial fauna, fish habitats, benthic communities, and human uses. Further, sediment contamination is widespread but not well mapped to support least impact site identification. And the extent and duration to which Great Lakes Wind development could resuspend or redistribute these contaminants are uncertain. Each of these issues imparts development risks and uncertainties to potential projects. These issues are not necessarily insurmountable, but additional research, data collection, and analysis are warranted to identify areas of lowest risk and support project development certainty.
While the Feasibility Study identifies job and other economic benefits that could arise from Great Lakes Wind development, without the strategic case for Great Lakes Wind as a critical contributor to the Climate Act goals, these benefits alone do not justify the high level of ratepayer cost given the renewable energy alternatives that have already demonstrated their ability to contribute in more beneficial ways. NYSERDA has not identified unique characteristics of Great Lakes Wind that reflect a component otherwise missing in the State’s efforts to achieve the Climate Act goals. The response rate to Tier 1 solicitations indicates an adequate development pipeline in the geographies where Great Lakes Wind could interconnect to and already maximize the contribution from those areas to at least the 70 percent renewables by 2030 target. Without unique characteristics that would set Great Lakes Wind apart from more cost-effective contributors towards the Climate Act goals, the high additional cost is challenging to justify, at least with a view to the 2030 target.
After completing the Feasibility Study and considering these various dimensions collectively, NYSERDA recommends that now is not the right time to prioritize Great Lakes Wind projects in Lake Erie or Lake Ontario.
New York State Great Lakes Wind Energy Feasibility Study
Federal Support for Developing, Producing, and Using Fuels and Energy Technologies (2016)
Author: Dinan, Terry; and U.S. Congressional Budget Office
| Table 1. Energy-Related Tax Preferences, 2016 | |||
| Type of Fuel or Technology Supported | Tax Preference | Estimated Total Cost (Billions of Dollars) |
Expiration Date |
| Tax Preferences Affecting Income Taxes | |||
| Renewable Energy | Credits for the production of electricity from renewable resources | 3.4 | Various |
| Credits for investments in solar and geothermal equipment, fuel cells, and microturbines | 2.6 | Various | |
| Credit for investment in advanced energy property, including property used in producing energy from wind, the sun, or geothermal sources | 0.3 | Fixed $2.3 billion in credit; available until used | |
| Five-year depreciation for certain renewable energy equipment | 0.3 | None | |
| Total | 6.6 | ||
| Fossil Fuels | Expensing of exploration and development costs for oil and natural gas | 1.8 | None |
| Option to expense depletion costs on the basis of gross income rather than actual costs | 0.9 | None | |
| Exceptions for publicly traded partnerships with qualifying income derived from certain energy-related activities | 0.9 | None | |
| Amortization of costs of air pollution control facilities | 0.5 | None | |
| Credit for investment in clean coal facilities | 0.2 | Fixed dollar amount of credit; available until used | |
| 15-year depreciation for natural gas distribution lines | 0.2 | 12/31/2010 | |
| Amortization of geological and geophysical expenditures associated with oil and gas exploration | 0.1 | None | |
| Total | 4.6 | ||
| Energy Efficiency | Residential efficiency property credit | 1.1 | 12/31/2021 |
| Credit for energy-efficiency improvements to existing homes | 0.5 | 12/31/2016 | |
| Credit for new energy-efficient homes | 0.4 | 12/31/2016 | |
| Credit for plug-in electric vehicles | 0.3 | Expires for each manufacturer when the number of vehicles it sells reaches the limit set by the federal government | |
| Deduction for energy-efficient commercial buildings | 0.2 | 12/31/2016 | |
| 10-year depreciation for smart meters or other devices for monitoring and managing energy use | 0.1 | None | |
| Electricity 15-year depreciation of certain property related to electricity transmission | 0.1 | None | |
| Total | 2.6 | ||
| Nuclear Energy | Special tax rate for reserve funds for nuclear decommissioning | 0.2 | None |
| Tax Preferences Affecting Energy-Related Excise Taxes | |||
| Renewable Energy | Biodiesel and renewable diesel credits | 3.6 | 12/31/2016 |
| Tax incentives for alternative fuels | 0.6 | 12/31/2016 | |
| Grants in Lieu of Tax Credits Affecting Energy-Related Excise Taxes | |||
| Renewable Energy | Section 1603 grants | 0.1 | 12/31/2011 |
| All Energy-Related Tax Preferences | |||
| Total | 18.4 | n.a. | |
—Terry Dinan, Senior Adviser Microeconomic Studies Division, Congressional Budget Office
Before the Subcommittee on Energy Committee on Energy and Commerce, U.S. House of Representatives, March 29, 2017
Download original document: “Federal Support for Developing, Producing, and Using Fuels and Energy Technologies”
Biden Administration’s Offshore Wind Fantasy
Author: Lesser, Jonathan
As this report will demonstrate, the realities of offshore wind planning, development, and construction render the president’s goal unachievable. A single offshore wind project can easily take longer than a decade to develop. Although numerous projects scheduled to be built before 2030 have been announced in the last decade, only one—the 800-MW Vineyard Wind project, to be built off the Massachusetts coast south of Martha’s Vineyard—has begun preliminary construction. And that project is facing at least three lawsuits that are sure to delay its completion.
Even if the president’s goal were physically achievable, it should not be pursued because of offshore wind’s dismal economics. Offshore wind is hugely expensive, much more so than solar, onshore wind, hydropower, and geothermal. And despite proponents’ claims to the contrary, the costs of installing offshore wind facilities are not decreasing. Furthermore, economic and physical constraints are likely to raise the costs of offshore wind projects, as developers compete for scarce resources. Moreover, because it is inherently intermittent—producing electricity only when the wind blows—offshore wind will require significant investment in backup supply resources, primarily gas- and oil-fired generators, to compensate for the more than 50% of all hours when the wind is not blowing. Although wind and solar proponents claim that battery storage will eliminate the need for fossil-fuel backup generation, the costs, raw-materials requirements, and manufacturing capacity needed to produce the quantity of battery storage that is needed to provide even three or four hours of backup power would be staggering.
February 3, 2022
Download original document: “The Biden Administration’s Offshore Wind Fantasy”
Full Cost of Electricity “FCOE” and Energy Returns “eROI”
Author: Shernikau, Lars; Hayden Smith, William; and Falcon, Rosemary
Abstract
Understanding electricity generation’s true cost is paramount to choosing and prioritizing our future energy systems. This paper introduces the full cost of electricity (FCOE) and discusses energy returns (eROI). The authors conclude with suggestions for energy policy considering the new challenges that come with global efforts to “decarbonize”.
In 2021, debate started to occur regarding energy security (or rather electricity security) which was driven by an increase in electricity demand, shortage of energy raw material supply, insufficient electricity generation from wind and solar, and geopolitical challenges, which in turn resulted in high prices and volatility in major economies. This was witnessed around the world, for instance in China, India, the US, and of course Europe. Reliable electricity supply is crucial for social and economic stability and growth which in turn leads to eradication of poverty.
The authors explain and quantify the gap between installed energy capacity and actual electricity generation when it comes to variable renewable energy. The main challenges for wind and solar are its intermittency and low energy density, and as a result practically every wind mill or solar panel requires either a backup or storage, which adds to system costs.
Widely used levelized cost of electricity, LCOE, is inadequate to compare intermittent forms of energy generation with dispatchable ones and when making decisions at a country or society level. We introduce and describe the methodology for determining the full cost of electricity (FCOE) or the full cost to society. FCOE explains why wind and solar are not cheaper than conventional fuels and in fact become more expensive the higher their penetration in the energy system. The IEA confirms, “the system value of variable renewables such as wind and solar decreases as their share in the power supply increases”. This is illustrated by the high cost of the “green” energy transition.
We conclude with suggestions for a revised energy policy. Energy policy and investors should not favor wind, solar, biomass, geothermal, hydro, nuclear, gas, or coal but should support all energy systems in a manner which avoids energy shortage and energy poverty. All energy always requires taking resources from our planet and processing them, thus negatively impacting the environment. It must be humanity’s goal to minimize these negative impacts in a meaningful way through investments – not divestments – by increasing, not decreasing, energy and material efficiencies.
Therefore, the authors suggest energy policy makers to refocus on the three objectives, energy security, energy affordability, and environmental protection. This translates into two pathways for the future of energy:
(1) invest in education and base research to pave the path towards a New Energy Revolution where energy systems can sustainably wean off fossil fuels.
(2) In parallel, energy policy must support investment in conventional energy systems to improve their efficiencies and reduce the environmental burden of generating the energy required for our lives.
Additional research is required to better understand eROI, true cost of energy, material input, and effects of current energy transition pathways on global energy security.
Lars Schernikau, energy economist, entrepreneur, and commodity trader in energy raw materials, Zurich, Switzerland, and Technical University of Berlin, Germany
William Hayden Smith, Professor of Earth and Planetary Sciences, McDonnell Center for Space Sciences, Washington University, St. Louis, Missouri, USA
Rosemary Falcon, retired DSI-NRF SARChI Professor, Engineering Faculty, University of the Witwatersrand, Johannesburg, South Africa
Journal of Management and Sustainability; Vol. 12, No. 1; 2022
doi:10.5539/jms.v12n1p96
Full Cost of Electricity “FCOE” and Energy Returns “eROI”
