Footnotes

The Allure of Deepwater Wind Power

European experience with offshore wind farms in relatively shallow costal waters is a maturing technology. With a dozen operational windfarms built over the last 12 years in waters up to 60 feet deep and with 20 or more in the construction and permitting stage their economic, environmental and safety issues have been largely addressed. These shallow water windfarms make use of well developed simple monopole foundations driven deep into the seabed or, so called “gravity bases”, concrete structures much like a flat bottom Christmas tree stand that are floated in place, submersed and filled with rock.

Certainly far offshore winds in deep water are more plentiful and stronger than those nearer the coast. And the lure of such development is understandable from the potential of enormous wind energy production. However technical viability and economic practicality lay somewhere in the future. The question is how far in the future? And what must be done to get there? And must we wait?

Future deepwater windfarms in over 60 feet of water or so will require much more expensive multi-leg structures or floating platforms for depths up to several hundred feet. This technology is being explored by energy companies with experience in offshore oil and gas platforms. Currently such construction is possible but its economic viability and operational performance is far from reality.

For example, the first deepwater demonstration project now in the permitting stage is undertaken by Talisman Energy, an oil and gas producer in the North Sea. It will consist of two newly designed five-megawatt (MW) wind turbines 14 miles off the Scottish coast in 150 feet of water. Perched on top of four-legged undersea lattice-type foundation structures, the two wind turbines will provide power to nearby oil and gas platforms in their Beatrice complex. The total cost of this project is $58 million dollars provided by Talisman, Scottish and Southern Energy (UK), and three government agencies [1]. This cost does not include the expensive high-voltage undersea cables that would be required to bring wind power ashore. Talisman will collect performance data, look for ways to reduce costs and develop operating procedures over five years to examine the feasibility and benefits of creating a future commercial deepwater wind farm at this site [2].

Compared to conventional shallow water offshore windfarms that cost about $2 million per MW installed [3], the fixed-pile foundation Talisman project at $5.8 million per MW is almost three times as expensive and prohibitively uneconomical in the near term.

In a cautious statement Talisman Energy has said “current forecasts for electricity prices will never render this Demonstrator Project economic. It is an R&D project, not a commercial one, and as such requires public sector funding in order to proceed.” Furthermore, they say it is impossible, at this stage to give any definitive answer regarding the go ahead for the commercialization of this project “but it certainly should not be regarded as inevitable.” [4]

For even deeper water installations from 600 to 2,000 feet, anchored floating platforms are envisioned. The first experiment with this type of foundation is under development at Hydro Oil & Energy in Norway [5]. In this project a single 3MW wind turbine will be mounted to an undersea floating concrete foundation that’s anchored to the sea floor 400 feet below the surface of the ocean. The hub of the turbine monopole will be 260 feet above the surface of the sea. For the concept to work, it is crucial that the wind turbines be light, requiring further technological development.

This floating wind turbine demonstration project will require about $23 million to complete [6]. The comparative unit cost is about $7.7 million per MW installed. Hydro’s future goal for large offshore floating windfarms is far in the future, “but if we’re to succeed in 10 to 15 years, we have to start the work today,” said Alexandra Bech Gjørv, Hydro’s director of new energy forms.

General Electric, in addition to manufacturing the 3.6 MW turbines slated for the Cape Wind project, has embarked on a multi-year research effort to design a 7 MW far offshore unit. The U.S. Department of Energy has signed a $27 million contract with GE for this development. The advanced wind system concepts will include innovative foundations, construction techniques, rotor designs and electrical components designed for use in the ocean’s harsh environment [7].

So the question remains. How far in the future will these research and development projects become realistically competitive with shallow water projects? History is replete with promising technologies that have taken decades to commercialize. For example the evolution of the transistor to large scale integrated circuits of today has taken 50 years. Photovoltaic cells have existed since the early 1900s and have yet to evolve into competitive large scale energy sources.

It is simply conjecture to answer the question of “how long?” for deep water wind. “The biggest challenge for deepwater wind turbines will be to merge the mature but expensive technologies borne of the oil and gas industry with the experience and low-cost economic drivers fueling the shallow water offshore wind energy industry,” said Walt Musial of the National Renewable Energy Laboratory [8]. He speculated that “commercial deepwater technology is 10-15 years away.” [9] And Greg Watson, Vice President of the Massachusetts Technology Collaborative adds: “A number of issues need to be addressed before economically viable electricity-generating wind facilities can be erected in the deep waters off the US. Our experts are confident they can be addressed, but not overnight, and not without the benefit of experience gained from shallow water projects.” [10]

All evidence makes it clear that we cannot afford to wait to avoid catastrophic consequences. How much time do we have? The mounting crisis of energy prices, national security and global warming can be eased in part with the development of shallow water wind farms. Let’s embrace the Cape Wind project, the flagship of our country’s first offshore windfarm. Let’s get started now and make it work.

Charles W. Kleekamp, P.E. Ret.

Vice President, Clean Power Now

Footnotes:

1. “Wind Farm Demonstration Project Launched,” 2004 Talisman Corporate Responsibility Report. The project will receive $7 million from each of the Scottish Executive and the UK Department of Trade and Industry and $10 million from the European Commission. Talisman and their co-venturer in this project will each contribute over $17 million.

2. Talisman reference in: http://www.talisman-energy.com/cr_online

3. “Offshore Wind Energy Potential for the United States,” Walt Musial, National Renewable Energy Laboratory, Wind Powering America - Annual State Summit, May 19, 2005, Slide #4: Shallow offshore costs range from 2200 €/kW to 1500€/kW, Horns Rev ~1650€/kW.

4. Q&A Talisman Energy, http://www.beatricewind.co.uk

5. Hydro (the organization) is an energy and aluminum supplier founded in 1905, with 36,000 employees in nearly 40 countries. They are a leading offshore producer of oil and gas, the world's third-largest integrated aluminum supplier and a pioneer in renewable energy and energy-efficient solutions.

6. “Norway’s Hydro Develops Floating Wind Turbines,” by Michael Richard, Treehugger, 11/6/05

7. “DOE, General Electric To Develop U.S. Offshore Wind Turbine,” Clean Edge News, March 17, 2006.

8. “Future for Offshore Wind Energy in the United States,” W. Musial, S. Butterfield, National Renewable Energy Laboratory, Energy Ocean Conference, Palm Beach, Florida, June 28-29, 2004.

9. “Offshore Wind Energy Potential for the United States,” Walt Musial, National Renewable Energy Laboratory, Wind Powering America – Annual State Summit, May 19, 2005, summary slide 23.

10. “Catching the Sea Breeze,” Commentary by Greg Watson, Boston Globe, January 11, 2006.

About Clean Power Now

Clean Power Now is a non-profit volunteer organization that informs citizens and empowers them to support viable renewable energy projects and policies, and to secure their local and regional benefits.

We believe that the timely development of such projects, in conjunction with energy efficiency and conservation, will bring about a clean, healthy environment, an improved economy and a more secure, sustainable America.

Our immediate focus is to increase citizen support of offshore wind power in Nantucket Sound.

4 comments »

Cape Wind, Rules, and Fairness

A comment has been made that no rules were in place when Cape Wind started is simply in error. Cape Wind has abided by all the rules in place since applying for a permit at least since November 15, 2001 when they submitted the “Expanded Environmental Notification Form” to the Executive Office of Environmental Affairs in Boston. That 200 page document and all the environmental assessments contained therein was undoubtedly very costly.

Since then an exhaustive list of rules were followed with 20 or more public agencies culminating with the permit application to the Army Corps of Engineers and their Draft Environmental Impact Statement of some 4,000 pages on November 8, 2004. By that time, some 20 million dollars was expended by Cape Wind in “following the rules” that were all in place at that time.

Since then the rules have changed, the Mineral Management Service (MMS) has taken over and more millions of dollars will be spent by Cape Wind by their willingness to comply with the changed rules in implementing a revised impact statement by the MMS that will be completed over the next two years or so.

Not to be lost in the detail... but indeed Cape Wind will pay a lease for a “shared” use of the federal property (it’s not state property) as required in the Energy Policy Act of 2005 (EPACT) just enacted last August. The Secretary of the Interior will certainly impose a reasonable lease (with 27% going to the State) for the shared use of the Sound (even though it extracts nothing other than electricity generated by the free wind).

And yes, competitive bids for offshore leases will be required for future wind farms in federal waters with the exception, in fairness, to the two windfarms that were in the permitting stages before the EPACT was enacted, namely Cape Wind on Nantucket Sound and the Long Island Power Authority’s windfarm off Long Island.

In response to the fairness issue let me add that the staff at the Senate Energy Committee said it best in a prepared a three-page document, entitled, “Cape Wind Termination Provision (Section 414) in the Coast Guard Authorization Conference Report”, and I quote(emphasis added):

“Because of the substantial financial investment made by Cape Wind under the previous regulatory system, which did not require competitive bidding prior to initiating project specific regulatory compliance activities (which are quite costly), the Cape Wind project and other projects that could demonstrate the same characteristics (either through construction of offshore test facilities or through responses to requests for proposals by a public authority) were exempted from the competition requirements that apply to de novo offshore wind development after the date of enactment of EPACT.  In addition to being an equitable outcome for projects that had fully complied with the previously existing Federal rules on the OCS, this also prevented the considerable prior public investment by Federal and State governments in analysis and permitting of offshore wind development from being thrown away arbitrarily.  

End of staff at the Senate Energy Committee quotation.

Regards,

Chuck Kleekamp, P.E. Ret.

Vice President, Clean Power Now

17 comments »

A Vote to far?

A few commentators have brought up the interesting question of putting the Nantucket wind farm permit up to a vote of “local” people to whom the water belongs.

An interesting and debatable concept, but one that most likely leads to a conclusion unsatisfactory to many. Rarely do I offer personal opinions since I like to be informed and debate on factual substantiated information. In this question I don’t believe there is an easy or correct answer to the debate. So my opinion only is offered. And indeed, everyone is entitled to an opinion. Yours are as valid as mine.

In our treasured town meeting, a true legacy of democracy, we are called on as residents to propose, discuss, and vote on all kinds of items from budgets to changes in zoning bylaws. Usually a majority rules. In some cases a two-thirds majority is required. None-the-less, every registered voter in town is welcome to his or her own opinion on just how to vote on these local issues. Hopefully, they are fully informed of the complexities of the issues.

The idea expands to the state level. Instead of voting on all budgets and all bills introduced, we elect our representatives to do that. Yes, there are some exceptions, like binding referendums on which we all can cast a deciding vote.

And not to bore, but on to the national level... likewise says it all. Well almost. Except for the most astounding fact that we don’t have a majority vote for the president. Some special group identified by our founding fathers called the “Electoral College” does that task. (As a young person, I always wondered where that college was located. Well, we all know how well that serves a true democracy. By the way, do the Iraqies have an Electoral College now?

Back to the point. A vote on the windfarm?

Well, just who “owns” that water sheet and the mineral and fishing rights within and below it? How do you get to be a resident and a registered voter on Nantucket Sound?

It seems to me that the waters within the three mile limit belong to the people of Massachusetts. You want to do something there?...  better know and abide by the state regulations. If indeed there were to be a vote, for example, on a permit for the windfarms proposed in Buzzards Bay (state waters), indeed all the residents of Massachusetts (who own it) ought to be able to vote on it. Note, since 81% of state residents support the windfarm on Nantucket sound, I presume that those same state residents would likely support the windfarms in the state waters of Buzzards Bay and would vote in the affirmative. Or would you argue that just the local folks who own contiguous ocean property on that Bay be able to vote on it?

And waters beyond the three mile limit? They clearly belong to all the people of the United States (except in Texas – I believe it’s 14 miles there). Then it follows then that all the residents of the United States should be allowed to vote on each offshore windfarm in federal waters. What do you think the result of that vote would be?

I think most informed people realize that efficiency alone, as important and well intentioned as it is, is simply not halting the national need for more electrical power. And these informed citizens would carefully consider their options and choices before casting a vote.

So what are the choices? Limit the size of the population? Build no new homes or businesses? Allow no one (including businesses) to increase their use of electricity over their 2006 level? Penalties for that? Build more coal or nuclear plants? Where? A vote on that too? Let’s put one or two in Boston, that’s where the big load is. Or maybe put a small nuclear plant on Nantucket Island, they wouldn’t have to put another cable under that pristine sound.  How about building more oil or natural gas fueled generating plants? Like the new prices? No worry for the next generation’s need for oil and gas... or will it last forever? And you like sending our wealth to those foreign suppliers of oil and gas that are so sympathetic to our needs? (We have reached peak oil and natural gas production in the United States in 1973... downhill ever since). And you like the health effects from polluting fossil plants? Need I remind you Cape Cod has the worst air quality in the Commonwealth? (And the pollution’s not all from the Midwest... did you notice that smoke stack when you came across the Sagamore Bridge... what do you think is coming out of it?  And the CO2 addition to global warming? And on ... bored yet? Or did your insurance policy just go up (or canceled) on your water-view home?

So now what is your vote? Like wind? Sure! But put it somewhere else please...? hey, Buzzards Bay is fine... right? And where to put the next one after that, and the next...? Well, just not where you’ll see it? Is that social justice? Let someone else vote on it for their view.

Well my choice is very clear... we must begin now with renewables, and the most benign viable utility scale renewable is wind power. It could easily contribute 20% to the national need.

I vote for the starting in Massachusetts with the offshore windfarm on Nantucket Sound. That Sound belongs to me...  as well as to you...  and indeed to every American. So let’s have a national vote!

Regards,

Chuck Kleekamp

11 comments »

A Response to Bill Koch

A guy with a Ph.D. from MIT ought to know better—that is, unless he’s the Chairman of the Board of Directors of the Alliance to Protect Nantucket Sound and a fossil fuel magnate to boot. That being the case, however, reasonable people cannot let his disparaging prognostications about the economic viability of wind power (William Koch, Wall Street Journal, 5/22/06) pass without a response more grounded in reality.

Mr. Koch declares that the economic uncertainties of Cape Wind Associates' proposed Nantucket Sound wind farm off Cape Cod will make the venture unviable.  But such risks should only be of concern to the private developer and his backers, not Mr. Koch. The wind power has to be sold into a competitive market at a profit or the venture becomes bankrupt.  So what are the risks and benefits to the public? Read on.

Tax Credits and Subsidies

Let’s be clear that there are absolutely no public subsidies for the construction of the Cape Wind project. The financial burden and risk is on Cape Wind, the financing institutions and insurance companies involved who are well aware of the costs involved. Besides, Federal law requires the Cape Wind to furnish a bond to comply with provisions of the lease including restoration of the leased area on termination.

To ensure a fair return to the public the Secretary of the Interior will establish a Federal lease with 27% of the revenue going to Massachusetts. In addition Cape Wind has made a 20-year host community agreement with the Town of Yarmouth, valued at over $9 million, for allowing the landfall cable to pass under its streets.

Recognizing the national peril of growing dependence on foreign oil and natural gas, our elected officials have established two governmental incentive programs to encourage renewable energy development:

1. A Federal Production Tax Credit (PTC) of 1.8 cents per kilowatt-hour (c/kWh) that renewable energy providers, including new nuclear plants [1], can use to offset taxes after the power is sold; for Cape Wind, it amounts to about $27 million per year [2].  This incentive is available only if the wind project is completed by the end of 2007. The PTC has lapsed and been renewed three times. There is no guarantee that it will be renewed again.

2. A Massachusetts requirement that retail electrical suppliers like NStar purchase a minimum percentage of renewable generation attributes in the form of Renewable Energy Certificates (RECs). These RECs are issued for electricity from sources such as landfill gas, biomass, solar, wind, tidal, and wave powered generators. This State mandate—the Renewable Energy Portfolio Standard (RPS)—became effective in 2003, with a minimum of 1% of supplier-delivered electricity from renewables, increasing to 4% by 2009.

REC pricing is determined by the commodity market.  Since there are currently insufficient renewable sources to meet the demand for RECs, an alternative compliance payment (ACP) of about $53 per megawatt-hour (MWh) must be paid by your supplier. This cost, of course, is passed on to the end user, namely you.  When Cape Wind comes online it will flood the market with 1.5 million RECs, undoubtedly lowering the price for these RECs. Future contracts for Massachusetts RECs are actually sold at a level of about $25/MWh. This incentive may be worth some $37 million a year to Cape Wind. But for end users like you and me, the abundance of RECs from the wind farm will obviate the need for suppliers to pay the ACP, lowering the cost of electricity for all of us.

As with the PTC, there is no guarantee that the RPS won’t be watered down by the Massachusetts State legislature (two unsuccessful attempts have already been made).  We should ask those who rail against these incentives for Cape Wind if they would be willing to abolish them for all renewable projects across the United States and in Massachusetts effectively killing this vital new industry.

The Importance of Fuel Cost

Since electrical generators are required to bid into the grid on the basis of their fuel cost, wind power—with zero fuel cost—will always cause the equivalent amount of the most expensive electricity to be rejected from the top of so-called “clearing price” bid stack.

This bidding process and resulting power dispatch into the New England grid is controlled by the Independent System Operator of New England (ISO NE). The clearing price policy is intentionally designed to “ensure that clean energy sources with no fuel costs, such as wind, are dispatched and displace plants with higher operating costs and air emissions.” [3].  This means that generators fueled by oil, which currently have a fuel cost of about 8c/kWh (and which supply 24% of the ISO NE grid [4]) will, in general, be the first to be rejected by the equivalent wind power.

This will not only lower the cost of wholesale electricity but will also lead to a reduction of oil imports. The 1.5 million MWh of power represented by Cape Wind is equivalent to some 2 million barrels of oil which would not have to be purchased every year from unstable and unfriendly places like Iraq, Iran and Venezuela.

Second only to oil for fuel cost, at about 5c/kWh in summer, is natural gas.  Last winter, the fuel cost for electricity from natural gas was 9c/kWh due to additional peak demand for heating.  According to ISO NE, oil and gas plants set the clearing price for electricity 80% of the time [5].  At a time when the price of natural gas was half of what it is now, the Massachusetts Energy Facilities Siting Board determined that the operation of the wind farm would provide average annual savings of $25 million to New England customers.  Imagine what that figure would be today.

Wind Farm Productivity

Mr. Koch also questions the amount of electricity that will be produced by Cape Wind.  The meteorological test tower erected in Nantucket Sound has shown the wind farm, had it been operating from April 2003 to March 2004, would have provided 1.7 million MWh of electricity.  This empirical evidence, documented in a U.S. Department of Energy report [6], demonstrates that the anticipated figure of 1.5 million MWh by Cape Wind is a conservative estimate.

Furthermore, it should be pointed out that the Cape Wind facility, had it been operating during the cold snap of January 13-15, 2004, would have eased the electrical crisis that put the ISO NE grid system on the brink of rolling blackouts.  At that time some 500 MW of gas-fired power became unavailable due to lack of fuel [7].  So during winter it’s not more peaking plants that we need, it’s more wind power to supplement the use of limited natural gas.

During summer peak usage there is enough natural gas available for existing generators to make up for the occasional lack of wind power. The Utility Wind Integration Group said: “In areas of limited penetration [Cape Wind is only 1%], modern wind plants can be added without degrading system performance.” [8]. This group added that wind plants can improve system performance, and that the employment of a wind farm does not require the addition of any conventional backup, since wind is used primarily as an energy resource.

The Coming Crisis

Finally, Mr. Koch says that it’s a “fact that New England does not need more power.” He couldn’t be more wrong. Stephen G. Whitley, ISO NE's Senior Vice President, has said: "While demand for electricity continues to grow across New England, construction of new generating resources has stagnated. Without new investment in power infrastructure and greater energy efficiency and conservation, New England could soon be consuming more electricity than it can produce or buy from its neighbors." [9].

In conclusion, Cape Wind will not only reduce reliance on imported oil and gas, it will also avoid the emission of a million tons of harmful greenhouse gas, enhance our health through improved air quality, and help moderate the increasing cost of electricity. It’s time to get started.

Charles W. Kleekamp, P.E. Ret.
Vice President, Clean Power Now

Footnotes
1. “Energy Policy Act of 2005,” Section 1306, Subsection 45J, p. 406.
2. The expected average production of the wind farm is 1.5 million megawatt-hours of pollution free electricity a year. In perspective, this is equivalent to about one-quarter of the average production of the oil fired Mirant Canal Power Plant in Sandwich, the third largest power plant in the state.
3. “Electricity Costs and Pricing in New England’s Power Market,” ISO NE, February 2006.
4. “Insuring Long Term Reliability of New England’s Regional Electricity System,” Gordon van Welie, President, ISO NE, Platts Northeast Power Markets Forum, March 30, 2006.
5. Ibid. “Insuring Long Term Reliability of New England’s Regional Electricity System,”
6. “Diversification Analysis – Natural Gas Supply/wind Performance,” Albert Benson, U.S. Department of Energy, June 6, 2004.
7. New England Power System Operations under Extreme Winter Conditions, January 14-16, 2004,” Stephen Whitley, Senior Vice President, ISO NE, March 19, 2004.
8. “Utility Wind Integration State of the Art,” by the Utility Wind Integration Group, May 2006.
9. “ISO New England Forecasts Possible Record-Breaking Electricity Demand for Summer 2006; Demand Growth Continues to Outpace New Generating Capacity,” Business Wire, April 26, 2006.

About Charles Kleekamp: Mr. Kleekamp is a recently retired professional electrical engineer and a founding director of Clean Power Now. He received degrees in mathematics, electrical engineering and computer and control engineering from the University of Michigan. He spent his career developing computers, laser and fiber optic communications systems for commercial and military applications.

About Clean Power Now: Clean Power Now is a non-profit volunteer organization on Cape Cod that informs citizens and empowers them to support viable renewable energy projects and policies, and to secure their local and regional benefits.

We believe that the timely development of such projects, in conjunction with energy efficiency and conservation, will bring about a clean, healthy environment, an improved economy and a more secure, sustainable America.

Our immediate focus is to increase citizen support of offshore wind power in Nantucket Sound.

8 comments »

Understanding ISO New England and Wind

When I found out how electrical power is bought and sold on the wholesale market several years ago I was simply astounded. You may be too. Allow me to explain.

A not-for-profit private corporation called the Integrated System Operator of New England (ISO NE) was established in 1997 by the Federal Energy Regulatory Commission to manage the region's power generation and transmission system and to administer the wholesale electricity marketplace. This means ISO NE controls which generating plants put electrical power into the electric grid (i.e., who gets dispatched) to exactly balance the need of all users and they set a wholesale price by a confidential bidding system.

The price paid to bidding power plant owners (called merchant power plants) is based on an auction system called “pay on peak.” This scheme is more formally (legally) called a “uniform clearing price (UPC). This is how it works.

A UPC auction is one in which each winning bidder (generator) receives the same unit price (cents per kilowatt-hour) based on the price of the last unit needed to meet the demand, regardless of what the individual offer was [1]. This bidding stack, arranged from low-to-high bid, is established on a day-ahead basis with 5 minute increments of time. When the total amount of power bid reaches the anticipated need for the next day the “clearing price” is established. Those below the clearing price get dispatched the next day, and those above, don’t. And this is the astounding part... everyone that bid below the clearing price (and hence dispatched) gets paid at clearing price!

This means if you bid to sell power your power at 3 cents/kWh and the clearing price is set at 6 cents/kWh, you get paid at 6 cents/kWh. A good deal for a coal plant whose fuel cost is 2 cents/kWh. But if you use fuel oil to generate electricity with a fuel cost alone of 8 cents/kWh [2], you simply do not get to sell your power (unless you underbid at a loss). All bidding is strictly confidential for competitive reasons. Only the clearing price is public information.

Incidentally, if the day-ahead power need turns out to be more than anticipated, generators can bid a separate “product” called spinning reserve at a higher price since it is held back unless needed. Also ISO NE offers an additional premium if the generator’s power dispatch can be automatically controlled from ISO’s control center in central Massachusetts.

The policy makers have determined that a UPC auction is the best way to bring the lowest cost to consumers. I’m not sure at all that is the case. However, ISO NE claims that a “pay-as-bid (PAB)” system would inflate prices since bidders would price their offer above their operating costs [3].

On the other hand, ISO NE claims, and rightly so, that “a UCP ensures that clean energy sources with no fuel costs, such as wind, are dispatched and displace plants with higher operating costs and air emissions. [4].” And that’s why wind power from municipal power owners such as Hull Wind, and Princeton Municipal, and Cape Wind will always get dispatched and bump the highest bidders off the top of the stack. This saves everyone in New England some money by putting downward pressure on the price of electricity and indeed avoiding the importation and use of expensive fuel oil and or natural gas.                                                        

By the way, if you would like to see the clearing price ticker as it changes minute by minute, go the ISO NE web site at: http://www.iso-ne.com/. Put it on your “Favorites List.” Check it a few times during the day and night and over the seasons to get an idea of how the wholesale price of power fluctuates over the demands of users like you and I.

A note of explanation on this site. On the right you will see the “LMP Price Ticker” where the clearing price is displayed in dollars per megawatt-hour. To convert to the more familiar cents per kilowatt-hour, merely divide by 10. In other words if the LMP price is $60, this is the same as 6 cents per kWh. 

As a note, LMP stands for “Locational Marginal Price.” The New England region is divided into several zones or locations called LMP zones. Originally the zones were defined by state boundaries and most still are such as Maine, Vermont, New Hampshire, Connecticut and Rhode Island. But Massachusetts is now further subdivided into the North East sector including Boston (NEMABOST), South East Mass (SEMASS, our region), and West & Central Mass (WCMASS). And then there are the tie lines for power transmission to or from New England, like the Cross Sound Cable (Long Island Sound), New Brunswick, New York AC (New York ISO), Highgate (Hydro-Quebec), Phase I/II (Hydro-Quebec Phase I/II tie lines). In addition to the “Energy Component” which reflects the bid price, allowances are made for “Congestion” (too much load) on the transmission lines and for the power “loss” in the resistance of transmission lines.

The LMP concept is implemented to reflect the congestion realities and optimize the lowest cost in each zone. This “clearing price” is the wholesale price that is charged to the distribution companies like NStar or ConEdison Solutions who in turn will put a profit on it and sell it to you and me at a fixed price... at least for a few months.

The instantaneous load on the New England grid is also displayed at the bottom of the ticker. In these shoulder months of spring and fall, it ranges from about 10,000 megawatts (MW) at night to maybe 16,000 MW (peak of the day) out of a total capacity of some 32,000 MW.  For some more interesting information click on the “Morning Report.” It gives the detail status of the system for the day including power coming and going on the tie lines to New England. The explanation of which are for another discussion but are reasonably apparent to the viewer.

So what’s this all have to do with wind power or hydro or solar? It means that energy sources with zero fuel cost, that is renewables, will always get dispatched. If these renewable sources can’t make a profit at the clearing price set for the most expensive bidders over a reasonable period of time they will simply go bankrupt. On the other hand, it is expected that they can compete or they wouldn’t invest the capital necessary to begin operations in the first place.

Indeed, we hope all renewables will make a handsome profit and begin to wean our county from the perils of our addition to oil and natural gas.

Footnotes:

1. “Electricity Costs and Pricing in New England’s Power Market,” ISO New England Inc., February 2006, p. 1.

2. “Wind Footnotes on Emissions, Health and Oil,” C. Kleekamp, CapeCodToday Blog [Footnotes], April 23, 2006.

3. Ibid, ISO NE, p. 2.

4. Ibid, ISO NE, p. 2.

Power Now: Clean Power Now is a non-profit volunteer organization that informs citizens and empowers them to support viable renewable energy projects and policies, and to secure their local and regional benefits.
We believe that the timely development of such projects, in conjunction with energy efficiency and conservation, will bring about a clean, healthy environment, an improved economy and a more secure, sustainable America.
Our immediate focus is to increase citizen support of offshore wind power in Nantucket Sound.

1 comment »

Wind Footnotes on Emissions, Health and Oil

Some readers have questioned the impact of the Nantucket Sound windfarm on power plant emissions, public health and the reduction of imported oil. The answer is in the factual details. Bear with me.

Let’s take the question of health first. Least there should be any doubt that power plant emissions are unhealthful I point to the landmark Harvard study by Levy and Spengler titled “Estimated Public Health Impacts of Criteria Pollutant Air Emissions from the Salem Harbor and Brayton Point Power Plants.” This report states that emissions from these two coal and oil fired power plants alone are responsible for 159 premature deaths a year, some 42,000 asthma attacks and 300,000 incidents of upper respiratory symptoms per year. And further, the concentrations of the responsible pollutants are greatest with in 5 to 20 miles of the primary source [1]. The pollutants responsible are sulfur dioxide and fine particulate matter. The peer review of this study was provided by Dr. Jonathan Samet of Johns Hopkins University, and Dr. Bruce Egan of Egan Environmental Inc.

Incidentally, Attorney General Thomas Reilly wrote a commentary article in the Cape Cod Times of titled “Fighting for the air we breathe.” He referred to this Harvard study and lamented: “Given the health impacts at issue, the citizens who live downwind of these power plants should not have to wait another decade for an end to the pollution. How many people are going to unnecessarily die or face respiratory problems in the interim?” [2]. He certainly gives us a sense of urgency to this issue.

Seeing Reilly’s question I made a linear extrapolation of the Harvard findings based on the power reduction in either of these two plants by approximately 1.5 million megawatt-hours that would be provided by the wind farm on Nantucket Sound. This work was submitted to Dr. Levy for review. His response was: “Since incremental reductions would provide incremental public heath benefits, his [Kleekamp’s] framework is appropriate. Applying Kleekamp’s approach to our revised estimates yields a mortality offset of approximately 15 fewer deaths per year in both cases.” [3]. That’s the answer to Mr. Reilly’s question.

Whether the sulfur dioxide and particulate pollution comes from coal or oil fired generating units makes no difference to human health. We live directly in the shadow of the Canal Plant which burns some 8 million barrels of high sulfur (1%) fuel oil a year [4]. The emissions of this plant and Brayton Point, including their unhealthful ozone forming nitrogen oxides, are concentrated over the land mass of Cape Cod due to the dual sea breeze effect as documented by the meteorological model of pollutant dispersion funded by the Massachusetts Department of Health [5]. These studies provide some rationale for the fact that Cape Cod has the worst air quality in the state as measured by the Massachusetts Department of Environmental Protection air monitoring station in Truro and reported by the American Lung Association [6].    

And so how is the wind farm related to the use of oil? As we have noticed the price of oil has increased dramatically due to limits on the world’s maximum pumping rates, and importantly, the concern about the unreliability and instability of some of the world’s most productive oil regions.  Crude oil is now over $70 dollars a barrel compared to just $20 as recently as 2002. That increase in price has led to the increasing cost of Canal’s residual fuel oil (No. 6 oil) to $52 per barrel [7]. This fuel oil price for Canal results in a electrical production cost of 8.4 cents per kWh just for the fuel alone [8], not including operating and maintenance costs. Adding O&M costs to the fuel cost results in a realistic wholesale cost of about 14 cents/kWh for oil generated electricity [9].

Shortages of natural gas have resulted from our country’s huge investment in modern combined cycle gas turbine power plants during the 1990s which were economical and competitive with coal generation at the time. Now the increasing demand for natural gas, hence it’s increased price, has driven the fuel cost alone to 5.5 cents per kWh for power produced from the modern gas turbine plants [10]. When compared to the fuel cost of coal, which has been stable for many years due to government subsidies, the price of electricity produced by coal plants remains at less than 2 cents per kWh [11]. And the cost of fuel for nuclear energy is likewise less than 2 cents per kWh [12].

This analysis points out the fact that the cost of oil generated electricity, like that from the Canal Plant, is the most expensive by far when compared to any other fuel. And this means that oil generated electricity, when bid realistically into ISO New England (the grid controller) for dispatch the next day, it will be on top of the bid stack. If the oil generator bid price is above the clearing price for the energy needed that hour of the next day, it will not get dispatched. Of course the owners may bid in at a loss hoping to make a profit at peak use times of the day. But that’s a risky strategy game and may explain why the owner of the Canal Plant, the Mirant Corp, has been in bankruptcy for the last 3 years.

In any case, when the wind power is bid into the ISO New England grid system with zero fuel cost it will be always be dispatched and will bump the highest bidder (which is oil, for now at least) off the top of the stack. Hence the wind power will take the place of equivalent oil generated electricity (since power cannot be stored on the grid) avoiding the need to burn the equivalent amount of fuel oil.

Thus the wind farm will save on the imported oil, some 2 million barrels a year [13]. In addition, the wind power will likewise displace the unhealthful emissions, and a million tons of carbon dioxide from such fossil plants. And it will reduce the clearing price of all power bid into the New England grid helping to stabilize the retail consumer price. The same scenario can be said for natural gas generated electricity if and when its power price exceeds the equivalent cost of residual fuel oil. It has done so at least once in the recent past.

Least one think that oil and natural gas fueled generators are a minor contributor to the New England grid, the facts according to Gordon van Welie, President of ISO New England, are that 24% of our electricity comes from oil and 38% from natural gas, for a total of over 60% of our system supply [14].

This one wind farm cannot solve the entire problem of our addiction to oil, but it is a big first step and can serve as the flagship of our nation in developing domestic offshore wind now. We simply cannot wait for the economic development of far offshore deepwater wind or the hydrogen economy. These futuristic hopes are at least a decade or more away. The shallow water wind energy is here now and the cost of the fuel is zero, and will be forever. If future sources of lower cost renewable non-polluting domestic electricity are realized the windfarm on Nantucket Sound can be decommissioned and removed at the end of its useful life as required by the new energy bill.

These substantiated arguments lead to the obvious conclusion regarding the deleterious health impacts of fossil fueled power plants that can be offset by the windfarm on Nantucket Sound while at the same time reducing our tragic dependency on imported oil and avoiding the emission of a million tons a year of the greenhouse gas, carbon dioxide. We must start now.

Footnotes:

1. “Estimated Public Health Impacts of Criteria Pollutant Air Emissions from the Salem Harbor and Brayton Point Power Plants,” Jonathan Levy and John Spengler, Harvard School of Public Health, May 2000, p. 4.

2. Thomas Reilly, “Fighting for the air we breathe,” Cape Cod Times, May 22, 2000, p. A-11.

3. A letter to “Whom it may concern,” from Dr. Jonathan Levy dated December 4, 2002.

4. Canal fuel consumption is based on net average power generation of approximately 6 million MWh per year from its Unit #2 which has a calculated heat rate of 10,164 BTU/kWh. Reference: Emission Control Plan for the Mirant Canal Station, W 025308, prepared by Earth Tech, Inc. for the MA Department of Environmental Protection, Table 1, December 2001.

5. Bruce Egan, et. al. “Development of a Dispersion Modeling Capability for Sea Breeze Circulations and other Air Flow Patterns over Southeastern Massachusetts, Upper Cape Cod Modeling Study,” by Egan Environmental, REF File Number 1J2, January, 2002. Preformed for the MA Department of Public Health.

6. American Lung Association, State of the Air Report 2005. http://lungaction.org/reports/SOA05.

7. The spot price of residual oil, 1% sulfur, from New York Harbor is from the US Energy Information Agency: http://www.eia.doe.gov/oil_gas/petroleum/info_glance/residual.html

8. The fuel only cost of electricity generated at the Canal Plant is based on its heat rate of 10,164 BTU/kWh and the fact that one barrel of residual is equivalent to 6,287,000 BTU that costs $52 per barrel.

9. The fuel only cost of electricity generated by oil plants is approximately 60% of the total cost.

10. The fuel only cost of electricity generated in a modern combined cycle combustion gas turbine plant is based on a heat rate of 6,700 BTU/kWh and the spot cost of a million BTU of natural gas of $8.22 at the Henry Hub in Louisiana.

11. The fuel only cost of electricity generated by coal plants is based on a heat rate of 10,500 BTU/kWh with a cost of coal at $1.56 per million BTU from the US EIA web site: Monthly Energy Review>Energy Prices, Table 9.10. http://tonto.eia.doe.gov/merquery/mer_data.asp?table=T09.10

12. Nuclear based electricity costs 1.72 cents/kWh. Reference: “Second Look at Nuclear Power?” Alan S. Brown, The BENT of Tau Beta Pi, Spring 2006, p. 31.

13. The oil equivalent of 2 million barrels of oil to generate 1.5 million MWh generated from wind is based on Canal’s consumption of 8 million barrels of oil to generate 6 million MWh.

14. Reference from a presentation by Mr. Gordon van Welie given to the Platts Northeast Power Markets Forum on March 30, 2006.

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Robert Kennedy?s Misguided Editorial

In response to Robert F. Kennedy Jr’s editorial in the New York Times regarding the pristine beauty of Nantucket Sound let me paraphrase an old children’s story:

“Window, window, on the wall....
Whose view is most valuable of all?”

When considering the shoreline dollar value per mile of expensive homes and powerful legislators, I’m guessing that the Nantucket Sound shoreline would indeed be in first place.

However in perspective, let me offer the opinion that all ocean views are equally exquisite. The sunrise from Gloucester, the view from New Hampshire’s short coast toward the Isles of Shoals, off the coast of Maine toward any number of islands, and on and on...

It takes a lot of gall and hypocrisy to say that Nantucket Sound is the only place that ranks special view considerations. Especially when one believes in renewable wind energy... “But just not here please.”

Even if all these other locations were equally promising for a viable (i.e. profitable) wind farm (which they are not at this time) it is simply a stab in the eye of environmental justice to suggest putting it in someone else’s view.

Furthermore to consider a windfarm in any location, even in Nantucket Sound, equivalent to putting one in Yosemite National Park is ludicrous. We are not blowing up Mount Rushmore to build condominiums. All landscapes are certainly unique, but not seascapes. All seascapes are equally beautiful, and certainly not one over any other.

Cape Wind is simply putting up a windfarm five miles off the coast where the tips of the blades would measure a half-inch off the horizon on a ruler when held at arms length. And that when visible only on a very clear day. Cape Wind must have a decommissioning bond (as established by the federal government) to remove it at the end of its useful life or if the government lease is violated along the way. The monopoles can be jacked out or cut off the ocean bed and cables jetted out as they were put in... leaving the Sound in its “pristine” condition. (And that “pristine” condition now touted is certainly an arguable point).

Provided in twenty years or so, if there is plenty of new electrical energy from new nuclear plants (perhaps we should build a small one on Nantucket Island so they won’t have to lay a new cable through Nantucket Sound from the mainland), and from new coal plants located in Boston and in growing Plymouth, and especially if we are importing lots of cheap LNG form Algeria and Iran through the new terminals in Fall River, Providence, off Gloucester, and in Maine, we could certainly decommission the wind farm in Nantucket Sound and the one off Long Island, and the one off Texas,....

And if the futurists are right, their will be lots of profitable wind turbines and wave generators 50 miles off our coast that are contributing to our ever growing need for more electrical energy.

Dream on....

Certainly one or two offshore wind farms now will not solve the total energy crisis but it could be a beginning of generating substantial utility scale renewable energy. It is more than enough to satisfy the mandated Massachusetts Renewable Energy Portfolio Standard (RPS) thus lowering power supplier’s costs in lieu of alternative payments, and hence lowering your cost. And it would relieve the pressure on the price of electricity from natural gas and ease the looming crisis of our natural gas shortage (but that’s another topic for later).

As to Kennedy’s opinion that “because offshore wind costs twice as much as gas-fired electricity... the project is financially feasible only because the federal and state governments have promised $241 million in subsidies.”

Well let’s just see about that...

With the cost of natural gas quoted in the same New York Times at $13.50 for a million BTU, and knowing the efficiency (the heat rate) of modern combined cycle combustion gas turbines which is about 6,700 BTU per kWh, one can calculate the cost of gas generated electricity due to the cost of only the fuel alone as 9 cents per kWh. And that’s not to mention the cost of paying employees, maintenance, taxes, insurance, return on investment to bond holders, etc. As a rule of thumb, the cost of generating electricity is based on about 60% being the cost of the fuel. So that makes the cost of generating electricity at the gas merchant plants in the ball park of 15 cents per kWh to break even on the wholesale market.

And for Kennedy to say that offshore wind is double that cost, that is 30 cents/kWh, is preposterous. In Denmark, Energy E2 at their offshore windfarm in Nysted, the world’s largest, is making money with a price guaranteed by the government at about 7 cents per kWh [1]. And that’s less than the price of just the fuel for our natural gas plants. Incidentally, there were no Danish government subsidies to build that project. Its cost was equivalent to about $2,000 per kW installed, roughly the same as anticipated for the Nantucket project.

By the way, in case you haven’t noticed, the price of electricity on the Cape has just increased by 81 percent [2]. And that’s due partly from the fact that 41% of the generating capacity of all New England is fueled from natural gas, and growing [3].

It’s not that wind is expensive, it’s free. It’s the insistent and escalating cost of natural gas and fuel oil that is rapidly increasing your electric bill. The age of cheap gas and oil is over [4]. We’re running out of earth’s ancient resources. Wouldn’t it be nice to have a 10 year fixed price contract for most of the power we consume on the Cape and Islands that only Cape Wind could offer? I notice the contracts from NStar and the Cape Light Compact jump substantially every year.

As to Kennedy’s claim on subsidies.... There are simply no subsidies for the construction of this project. There is an incentive (a production tax credit, PTC) for all wind energy generated in the United States of about 1.8 cents per kWh (the energy bill). For the 1.5 million MWh per year predicted for the Nantucket wind farm, that amounts to 27 million dollars per year. And only if it’s completed before the end of 2007, a virtual impossibility. As for the state incentive... if and only if, the price of the renewable energy certificates (RECs) in Massachusetts holds at $52 per MWh on the commodities market would there be a substantial return from their sale. Once the market is flooded with the RECs from the wind farm, they are bound to fall in price. Long term contracts for future MA RECs are now priced around $25. And in Texas for example, with all their wind energy Their RECs are selling for much less, about $14 last time I looked.

And a second big if.... only if the congress renews the PTC, now good only through 2007, and there’s no guarantee on that renewal. And a third big if... if the Massachusetts legislature doesn’t pass one or more amendments (they tried to do that twice already) to the RPS that water it down by allowing trash and old hydro to qualify (similar allowances killed the market in Connecticut and Maine were the RECs now sell for about 50 cents instead of 50 dollars).

So under the best of circumstances all renewable energy incentives might amount to about $60 million per year at the very most. And that’s long way from Mr. Kennedy’s false assertion of a promised $241 million dollars.

Mr. Kennedy has made many unsubstantiated claims about the wind farm in his editorial. Too many to discredit here. It is simple and easy for him to make such erroneous claims in an editorial without substantiation. But it is lengthy and complex to debunk each one.

Unfortunately for all the good he has done on other fronts for the environment, he is totally misguided on this one and loses credibility in doing so.

Chuck Kleekamp, P.E. Ret.
A Director of Clean Power Now

Footnotes:
[1] A roundtable discussion with Clean Power Now at Nysted on May 26, 2005, hosted by Mr. Bjarne Hexgart of ENERGI E2, one of the consortium owners of the Nysted offshore wind farm. The cost as presented was 0.43 Danish Krone (DKK) per kWh, equivalent at a rate of 6 DKK to one US dollar is 7.2 cents per kWh.
[2] “Electricity Costs to Skyrocket,” by David Schoetz, Cape Cod Times, 12/1/05
[3] U.S. Department of Energy, “Diversification Analysis – Natural Gas Supply/Wind Production,” A. Benson, Regional Director, June 6, 2004
[4] The spot price of natural gas on January 31, 2002 (just four years ago) was listed in the New York Times as $2.04 per million BTU. It has climbed inexorably to 6 to 7 times that price now.

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