A new analysis prepared for the Sierra Club concludes offshore wind energy would be a money-saver for New Englanders, despite the high cost of construction.
The six-state region relies heavily on natural gas for power generation, the report explains, and the cost of gas can be quite high, particularly in winter.
“Charting the Wind” projects that bringing 9 GW of offshore wind online would save $2.79 or $4.61 per month per average residential customer, depending on whether a midrange or high-price gas scenario is used. The total would be $630 million in an average year in the midrange model, the authors write.
Synapse Energy Economics, which prepared the report, notes there are additional benefits to be gained by shifting from natural gas generation, beyond the savings on utility bills.
These include the climate and public health improvements yielded by reducing the power sector’s emissions of carbon dioxide, nitrogen oxides, sulfur dioxide and fine particulate matter.
Also, the average $3 billion spent per year to buy natural gas for power generation in New England goes out of the region. Slashing gas use could keep a significant percentage of that money in the regional economy.
The Sierra Club, a proponent of offshore wind energy, commissioned the report to counter some of the criticism being leveled at the offshore wind industry as it gains a foothold in U.S. waters — particularly after multiple projects from Massachusetts to Maryland were sidelined or canceled in the past year because of soaring costs.
“Opponents of offshore wind argue that building out offshore wind infrastructure is too expensive, often without any empirical support for that contention,” Sierra Club staff attorney Sarah Krame said during a news conference June 4. “Recent increases in the cost of offshore wind and the cancellation of contracts for development of offshore wind have further raised questions about the costs and benefits of this renewable resource.”
Synapse Vice President Melissa Whited said the authors specifically chose the highest recent construction cost as their baseline for calculating the savings for New England offshore wind, even though they hope the current financial pressures will moderate as the industry matures in the United States.
(That would be $150.15/MWh, the weighted all-in cost of the two most recent contracts agreed upon in New York — Ørsted’s Sunrise Wind and Equinor’s Empire Wind. See related story, Empire, Sunrise Wind Back Under Contract in NY.)
To calculate a savings of $2.79 or $4.61 per month for each New England family, Synapse modeled 9 GW of wind power feeding into the grid and performed a regression analysis of its impact on supply and demand curves.
Wind through turbine blades is free, but natural gas prices fluctuate sharply, particularly in New England, where as much as 35% of the supply is imported LNG on peak days.
“So, once we conducted this regression analysis, we found that adding all that offshore wind and shifting the supply curve would drop the price between 45 and 60% depending on the year,” Whited said. “And we use 23 historical weather years to account for that variation.”
Josh Berman, a senior attorney with Sierra Club’s environmental law program, pointed out an important confluence of factors: Offshore winds blow strongest in winter, when gas constraints are highest in New England.
“In addition, on a daily basis, offshore wind is highly complementary to solar power, having its lowest output in the middle of the day when solar generation is high and having higher operation at times when solar power is less available,” he said.
NetZero Insider asked about the savings calculation. New York state projects Sunrise and Empire would cost utility customers an extra $2.09 a month on average, while the New England report projects monthly savings of $2.79 or $4.61 per customer using the same $150.15/MWh construction cost estimate.
The answer is volatility, or lack of it.
“You have different markets and different structures of those markets,” Whited explained. “We also are more gas-constrained in New England. And so what we see is during the winter when the pipelines are operating at capacity, we have very expensive generators and oil-fired generators coming online, and the wholesale electricity market prices just skyrocketing in New England.”
She added: “You get a slightly different effect, a slightly more muted effect in NYISO because they have a different supply curve.”
Recent history holds an example in New England that might challenge the savings model projected.
Rhode Island Energy managed an offshore wind solicitation for Rhode Island in mid-2023, when the cost and supply chain crises were worsening. Only one proposal was submitted, and it was rejected as too costly for ratepayers. (See Rhode Island Energy Rejects Revolution Wind 2 Proposal.)
Whited said she did not know what the proposed cost of that project would have been.
In response to multiple contract cancellations along the southern New England coast and the offshore wind industry’s struggles, Connecticut, Massachusetts and Rhode Island joined in October 2023 for the first-ever multistate solicitation, seeking proposals for 6,000 MW of capacity.
Projects totaling 5,454 MW were submitted by the March 27 deadline for bids. No decision has been announced on the proposals, and no indication has been offered regarding whether the construction costs would be more or less than $150/MWh. (See New England States’’ OSW Procurement receives 5,454 MW in Bids.)
