Gov. Charlie Baker may have gotten a little carried away on Wednesday talking about the “terrific pricing” the state is going to get for offshore wind power.
“People are going to be really surprised, I think, because the argument has always been, ‘Well, renewable and clean energy sources are great but, jeez, they’re more expensive.’ I think people are going to be really surprised by what they see here,” Baker said during an “Ask the Governor” segment on WGBH radio. “We’re going to be able to significantly reduce our carbon footprint and at the same time give homeowners and businesses in Massachusetts terrific pricing.”
The governor’s comments seemed to imply that the price of electricity from the Vineyard Wind project selected last week under a state procurement would be competitive with existing forms of power generation. But that’s highly unlikely, unless analyst estimates are way off base. Prices for the electricity produced by Vineyard Wind are likely to be higher than electricity produced using natural gas and other fuels – just not as high as Baker and many other analysts had expected.
Indeed, if electricity produced from offshore wind farms was as cheap as electricity produced using other fuels, there would have been no need to hold a special procurement for offshore wind. The companies could have just built their wind farms and competed in the region’s wholesale market just like any other power producer. The special procurement was set up to secure the development of a clean, renewable source of energy with the potential to spur the creation of a major new industry.
Most analysts believe electricity generated by offshore wind farms will be more expensive, at least initially. The US Energy Information Administration does an annual assessment of the cost of producing electricity from various fuels and offshore wind was the most expensive in its March report.
A University of Delaware study released in March 2016 surprised nearly everyone by predicting electricity produced from wind farms off the coast of Massachusetts would fall from 16.2 cents a kilowatt hour to 10.8 cents over the 10-year period from 2020 to 2030. Those price estimates were well below what Cape Wind would have charged if it had been built (24 cents a kilowatt hour on a 20-year levelized basis) and significantly less than what the small Deepwater Wind wind farm off the coast of Block Island is charging (30 cents a kilowatt hour) for its electricity.
Dan Dolan, the president of the New England Power Generators Association, said the average wholesale price of electricity in New England in 2017 was 3.4 cents a kilowatt hour. “So even if Vineyard Wind comes in at 8 to 10 cents a kilowatt hour, we’re still talking two or three times the average wholesale electric price,” he said.
Baker has been very skeptical about offshore wind in the past. In his first run for governor in 2010, he opposed Cape Wind as a sweetheart deal for its developer. But over time his opposition has softened and now it appears he has become a full-fledged supporter of offshore wind.
Baker is not alone in his enthusiasm. Matthew Beaton, his secretary of energy and environmental affairs, has said the price being negotiated by the state’s utilities with Vineyard Wind will be attractive. And each of the companies that bid in the offshore wind procurement promised that their price would be very competitive.
Deepwater Wind, one of the bidders, even submitted a bid in a separate, broader clean energy procurement that was eventually won by a company planning to import hydroelectricity from Quebec. Deepwater Wind didn’t win that procurement, but it was surprising to many that the company even thought it had a chance.
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