California Does Not Need Big, Very Expensive Floating Offshore Wind Farms


Guest blog by S. A. Shelley Californians do not need big and very expensive offshore floating wind farms. In fact, nobody needs big and very expensive offshore floating wind farms. Fixed offshore wind farms started out very expensive, requiring significant government subsidies, but small. They have since matured to allow for big inexpensive offshore wind farms with no government subsidies of any kind. The latest fixed offshore wind farms are producing and supplying electricity to their grids at a cost competitive rate compared to the current supply, and this is a result of technological evolution, improved execution strategies and increasing turbine size (power output). However, floating offshore wind technology is still in the nascent, small and heavily subsidized phase of the technology lifecycle. Yet, for some reason, various consortia are pitching huge floating wind farms right off the bat to California. That’s a big problem and folks in California need to watch that they do not get forced to subsidize those projects.

Morro Bay Wind Farm CAPEX
Figure 1 Morro Bay Wind Farm Project CAPEX

Let’s take a look at two proposals for floating offshore wind farms currently in vogue in California, Morro Bay and Humboldt Bay. Morro Bay has been in the sights of offshore wind developers for many years, and in 2015 Trident Winds even presented at a public information workshop for the city of Morro Bay. Originally the project was supposed to be 1GW of floating wind, but in 2016 it was scaled back to around 765 MW but now it’s back up to 1 GW and back in the news. But for the purposes of this evaluation, let’s examine the economics of the Morro Bay farm of around 765 GW using the OWOE online sizing tool. For turbine size, I’ll assume 8 MW (which works out to be 96 turbines). Input the distance offshore of 33 miles, water depth, net capacity factors, etc, and the free OWOE online tool yields a total project cost of around $8,140,000,000 (Figure 1) – that’s not a typo, but 8 billion dollars.

Morro Bay Wind Farm Project Financials
Figure 2 Morro Bay Wind Farm Project Financials

But what does that mean, financially?  One can then take the capex output from the OWOE tool and input it into other financial tools to calculate NPV (Net Present Value), IRR (Internal Rate of Return) and LCoE (Levelized Cost of Electricity). NREL has an online LCoE calculator that also defines LCoE and various factors used to calculate it. Or, one can continue with the subscription OWOE tool to get some additional financial output (Figure 2). Financial analysis suggests that the Morro Bay project will lose around $4 billion, yielding a negative return of close to 14%. This means that for Morro Bay to work, someone will need to throw money into the project such as in the form of massive subsidies or outright grants. Hopefully, it will not be the residents of California who already suffer from some of the highest electricity rates in the country.

Figure 3 Humboldt Bay project capex

Now let’s consider the Humboldt Bay project a bit further north along the coast. This project is a bit smaller in scope, consisting of around 120 MW of 8 MW turbines. Again, using the free OWOE online sizing tool, we arrive at a total project cost of around $1.37 billion (Figure 3). Looking a bit further at the finances (Figure 4) suggests that Humboldt Bay will lose around $740 million, yielding a negative return of close to 15%. Again, someone will need to throw additional money into the project. Who will that be?

Humboldt Bay project financials
Figure 4 Humboldt Bay project financials

Can the costs from the OWOE online tool be trusted? Absolutely. If the reader is so inclined, the reader is welcome to verify the OWOE online tool against a couple of other floating wind projects, one operational, HyWind Scotland ($285M quoted cost vs. $280M OWOE excluding $22M finance costs), one being developed, Kincardine ($450M quoted cost vs $450M OWOE), and one cancelled for being too expensive, WindFloat Pacific ($210-250M  quoted cost vs $240M OWOE excluding $47M DOE grant).

So why do consortia keep pitching big floating offshore wind farms?  Because they can still make a lot of money from subsidies and selling green energy credits in the secondary markets, regardless of how commercially challenged their technology is and because they are trying to achieve large enough economies of scale to hopefully force their technology to be commercially viable.

Some readers may argue that the total social benefits of having clean power are worth dumping $billions in subsidies into massive floating offshore wind projects. I’d argue that those same readers should wait a couple of years until the next generation floating wind farm technology arrives, technology that has been designed from the outset to be commercially effective without any government subsidies. Or better yet, California should work first to utilize all available onshore green power, especially solar, with energy storage before venturing offshore for wind power. When California does venture offshore, it should start small and use next generation commercially viable floating wind technology. California does not need big, very expensive wind farms now. Nobody does.

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