New study finds that the market value of offshore wind varies significantly along the U.S. east coast

April 16, 2018

A new study from Lawrence Berkeley National Laboratory finds that the ‘market value’ of offshore wind—considering energy, capacity, and renewable energy certificates (RECs)—varies significantly along the U.S. east coast, and generally exceeds that of land-based wind in the region.

Although offshore wind power deployment in the United States has been limited to date, with just a single 30 MW project operating off the coast of Rhode Island, interest in this energy source has grown significantly in recent years, particularly along the U.S. east coast where there is a perception that offshore wind may provide greater value than some other forms of electricity generation. But the economic value of wind power can vary significantly by location, depending on the time-varying wind resource profile at a given site, as well as local pricing and market rules within the regional power market. 

The new Berkeley Lab study, funded by the U.S. Department of Energy, unpacks the various value components and explores a hypothetical question: What would the marginal economic value of offshore wind projects along the east coast have been from 2007 to 2016, had any such projects been operating during that time period? Berkeley Lab researchers answer this question by developing a rigorous approach based on historical weather data at thousands of potential offshore wind sites combined with historical wholesale market outcomes and REC prices at hundreds of possible locations. The study’s focus on the value of offshore wind complements the large body of literature that has analyzed the cost of offshore wind.

The study finds that the historical ‘market value’ of offshore wind (considering energy, capacity, and REC value) is highest for sites off of New York, Connecticut, Rhode Island, and Massachusetts—i.e., all areas where offshore wind is being actively pursued—and lowest for sites along the southeastern coast (see figure). The analysis also finds that offshore wind can reduce air pollution emissions and wholesale electricity and natural gas prices, though effects vary in magnitude over time and across regions.

The ‘market value’ of offshore wind is found to have exceeded that of land-based wind, due to offshore wind sites being located closer to major population centers and also having a time-varying profile of electricity production that is more-correlated with that of electricity demand. Yet, the cost of offshore wind is also higher than that of land-based wind, requiring important economic tradeoffs. Cost reductions that approximate those witnessed recently in Europe may be needed for U.S. offshore wind to offer a credible long-term economic value proposition on a widespread basis along the eastern seaboard.

Finally, the research discusses how the various value components might change in the future, and assesses multiple ways to potentially enhance the value of offshore wind, including by varying the location of grid interconnection and by adding electrical storage.

Knowing how the historical value of offshore wind has varied both geographically and over time, and what has driven that variation, can provide important insights to a variety of stakeholders, including offshore wind developers and purchasers, as well as energy system decision-makers. In addition, focusing on market value may help to inform the U.S. Department of Energy on its offshore wind technology cost targets, as well as the early-stage R&D investments necessary to reach them.

A 12-page executive summary, accompanied by a more-detailed slide deck that explains the study and a journal article submission, can be downloaded at https://emp.lbl.gov/publications/estimating-value-offshore-wind-along. A free Webinar to summarize the key results will be offered on April 26 at 12:00pm (Pacific), 3:00pm (Eastern)—register here: https://cc.readytalk.com/r/ja3pp23pw6k1&eom

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