Creating Jobs and Building Industry with an Atlantic Transmission Backbone. August 12, 2011

Transcription

1 Creating Jobs and Building Industry with an Atlantic Transmission Backbone August 12, 2011

2 How many opportunities are there to create a new, multi-billion dollar industry? The benefits of offshore wind can be very substantial. Thousands of jobs can be created if the policy environment is stable, predictable and promotes scale over time. $ billions of increased economic activity leads to increased tax revenue In areas that are congested, offshore wind combined with well-planned transmission can provide billions in electrical system benefits 2

3 Agenda I. Overview of AWC a. Lowering the cost of offshore wind energy b. Lowering consumer prices by delivering power to congested areas II. III. Identifying and quantifying AWC s benefits a. Electrical system value b. Jobs and industrial development value Ideas for North Carolina a. Identify wind zones and plan offshore wind generation and transmission as an integrated system. b. Put offshore wind goals into state law (so transmission planning will follow). c. Consider a regional power purchasing pool that includes neighboring states. 3

4 I. An overview of AWC Offshore wind makes a lot of sense. Strong offshore resource compared to weak terrestrial resources Energy independence and jobs Energy diversity, etc. But the difficulty and expense of building transmission increases costs and slows progress. Cost and construction barriers to radial transmission leads to higher energy cost without transmission network benefits. Transmission problems add permitting delays and risk for offshore wind projects. AWC s offshore backbone is the solution. AWC is lower cost than radials and accelerates offshore wind development. AWC s north-south backbone provides congestion relief and increased reliability that lowers costs for ratepayers. 4

5 Permitting Streamlined logistics, manufacturing and construction possible only when project development cycles are predictable helps to drive costs out of all stages of industry and project development Outreach Proper Planning Prevents Pxxx Poor Vessel Fabrication & Operations Foundation Installation Submarine Cable Supply & Installation Project Performance Foundation Design & Fabrication Turbine Supply & Installation Electric Interconnection Site Surveys System Engineering 5

6 HVDC cable to other AWC converter stations The AWC backbone is a better value for ratepayers Two transmission options to get offshore wind to load. 1. Each wind farm lays multiple cables to get power to land (radial interconnections or ties ), or 2. The wind farms connect to a highcapacity offshore backbone. Either way, ratepayers will cover the cost. The question is which option is the best value and how to build and pay for it? The AWC backbone solution is cheaper than radial interconnections and provides greater benefits. 350 MW AC substation 1000 MW HVDC substation AC substation Buried AWC HVDC backbone cable Overhead AC cable Buried AC cable HVDC cable to other AWC converter stations 6

7 Local roads or an interstate highway network? Washington DC Pennsylvania Delaware Maryland New Jersey New York 10 year plan to build 350 mile subsea HVDC transmission system off mid- Atlantic states in 5 phases Enables up to 7,000 MW of offshore wind to be developed 12 or more miles off the coast Is buildable because it can be permitted Renewable wind energy at scale Virginia 7

8 I.a. Technical limitations and practical siting constraints cause radial ties to be more expensive than AWC s backbone. NJ example Radials: AC technology AWC: DC technology Total capital cost $3.42 billion $2.91 billion Savings with AWC $515 million The DC cables used by AWC are more efficient. 1,000 MW of capacity can be delivered on just two of AWC s DC cables. Delivering the same capacity with radial ties using AC cables takes five or more threecore 138 kv AC cables. AC cables are bigger than DC cables and use more copper. All that extra copper adds cost. Obstacles like sand and gravel areas lengthen cable routes and increase cost. 8

9 I.a. Transmission engineering analysis of NJ offshore wind farms shows that radial ties are the high-cost option. 3,000 MW NJ transmission options compared Summary of costs of radial ties connected at Corson, Cardiff, Lewis and Oyster Creek (using typical 138 kv AC cable) as compared to AWC backbone (using 320 kv DC cable) Transmission element Radial ties AWC backbone AC cable $2,000,000, DC cable -0- $780,000,000 Cable joints $100,000,000 $8,000,000 Horizontal drilling for cable landings $400,000,000 $45,000,000 Offshore and terrestrial AC/DC converters -0- $1,900,000,000 Shunt reactors and static var compensators $40,000, Duct banks $580,000,000 $75,000,000 Transformers $100,000,, Other $200,000,000 $97,000,000 Total capital cost $3,420,000,000 $2,905,000,000 Capital cost savings with AWC backbone $515,000,000 9

10 I.a. In addition to its lower capital cost, the AWC backbone is easier to permit. AWC allows wind farm developers to avoid all state and local permitting, except Coastal Zone Program consistency determination. Greater predictability, faster permitting and lower risk leads to a lower cost of capital and a lower cost of energy for ratepayers. Wind farm developer state permitting obstacles (NJ example) Using radial interconnections 1. Coastal Zone Consistency 2. Coastal Area Facility Review Permit 3. Freshwater Wetlands General Permit 4. Waterfront Development Permit 5. Tidelands Conveyance License 6. T&E Species Consultation 7. NJDOT ROW Use Permit 8. NJ State Park Crossing Easement 9. NJ Pinelands Commission Application 10. Additional municipal & county permits Using an AWC backbone interconnection 1. Coastal Zone Consistency 10

11 I.b. Congestion and reliability: hidden costs for ratepayers Additional land-based transmission is not the best way to relieve congestion. It is difficult and expensive to implement, and vulnerable to typical failures (including sabotage). Congestion is the inability to deliver power where it is needed. Eliminating congestion would provide huge value to consumers. For example, congestion costs $1 - $2 billion a year in NJ. An offshore backbone is more easily built, electrically separate, and more secure. 11

12 Grid reliability is essential to military and industrial sectors Northeast blackout of 2003 estimated to cost about $7-$10 billion. AWC offshore subsea grid provides access denial. AWC technology provides controllability of power flows. We can instantly direct power to grid connection points where it is most valuable or most needed to support reliability. We can respond to grid stresses like the loss of a large generator or transmission line. We can balance the variability of offshore wind with conventional generating resources. We can re-start the grid after a blackout. 12

13 $86 AWC backbone provides the freedom and controllability to instantly move power where it is needed. $55 Congestion Price $92 $151 $428 $248 $524 $59 Real-time Total LMP ($/MWh) 07/23/2011-4:00 pm 13

14 II. Identifying and quantifying AWC s benefits for NJ Total benefits from 3,300 MW of offshore wind plus AWC are substantial - Capital cost approx. $14 billion ($4,200/kW): Benefits approx. $22 billion - Benefit Estimated net present value Notes Offshore wind energy value $6 billion Value of offshore wind energy generated by 3,300 MW) of wind farms. Energy market price suppression $8 billion Wind energy bids into the auction based energy markets at zero and reduces energy market clearing prices. AWC production cost savings and capacity market savings $1.7 billion AWC provides production cost savings by promoting more efficient dispatch of generation. AWC provides a controllable transmission network that has significant capacity value. Reliability improvements $2 billion AWC improves voltage and frequency regulation and can help re-start the grid after a blackout. This estimate is a fraction of the estimated cost of the 2003 northeast blackout ($7-$10 billion). Tax revenues from job creation and economic activity $2 billion The Brattle Group estimated economic activity at $30-$52 billion and job creation at 183, ,000 FTE job-years for 6,600 MW of offshore wind and the AWC backbone. We estimate associated tax revenues at a small fraction of this economic activity $2 billion. Value of emission reductions $2.6 billion Offshore wind produces significant reductions in CO2, SO2 and NOx. Assuming $30/ton the value of reduced CO2 emission s alone is equal to $2.6 billion. 14

15 II. Benefits a New Jersey investment scenario Jobs As many as 180,000 FTE job-years, or about 18,000 jobs, are possible from building and operating 3,300 MW of offshore wind capacity and the AWC transmission backbone. AWC investment AWC can offer jobs and facilities (approx. $2.9 billion investment, hundreds of jobs) Three NJ converter station locations Network control center AWC maintenance facilities AWC utility offices Industrial development AWC can help attract other jobs and facilities: Submarine cable manufacture Platform manufacturing Converter assembly HVDC center of excellence Construction facilities Individual radial transmission projects are too small to attract industrial development in transmission-related components. 15

16 III. Ideas for North Carolina a. Identify wind zones and plan generation and transmission as an integrated system. Proper siting helps reduce conflicts. Produces faster project timelines, lower risk, lower cost energy Plan transmission to maximize system benefits, not just to connect offshore wind. b. Include offshore wind goals in state law. Under FERC s Order 1000, transmission providers are required to plan for transmission needed to meet public policy requirements, including renewable energy goals that are reflected in law. c. Organize a regional offshore wind power purchasing pool with neighboring states. Cooperating states can reach scale faster, at lower cost to ratepayers, and maximize the industrial benefits. No state is big enough to start this industry on its own. If states pool their purchasing power they can create a durable, long-term demand for offshore wind turbines and other components. Predictable, durable demand is needed to attract industrial development and real job creation. Pooled purchasing allows offshore wind energy to be blended into the supply portfolio over a longer period of time, and over a larger number of purchasers, with the result that building an offshore wind industry would have minimal impact on rates. 16

17 III.a. AWC modeled offshore wind energy production costs 2011 Atlantic Grid Holdings LLC The yellow areas are lower cost. Given current turbine sizes and cost, water depth drives projects towards the coast. 17

18 TIER I: uses and conditions that preclude wind development 2011 Atlantic Grid Holdings LLC 1. Use Conflict a. Shipping Lanes / Navigational Channels b. TSS c. Submarine Cables d. Dumping Grounds e. Fish Havens / Shellfish Harvest & Management Areas f. Dump Sites 2. Air Space Designation a. VA Capes Operating Area b. Other Space Designated by FAA & NOAA & NAVY as prohibited, restricted and warning 18

19 TIER II: uses and conditions that influence, but do not preclude, wind farm development 2011 Atlantic Grid Holdings LLC 19

20 By aggregating and coordinating the region s offshore wind energy purchases we can send a steady demand signal to industry. Industry will respond competitively to serve the demand. To save logistics and labor expenses, suppliers will move some production from Europe to the mid-atlantic region. III. c. The secret of joint purchasing power The greatest upside opportunity for reducing the cost of offshore wind energy... is to attract major elements of a Mid-Atlantic offshore wind supply chain to the state. If the turbine and tower package were manufactured in Virginia, we estimate the project capital cost would decrease by $480 per kilowatt. VCERC and The Brattle Group separately found that offshore wind logistics and labor costs would be reduced by moving production from Europe to the U.S. producing a 20% capital cost savings for offshore wind energy projects. - Virginia Coastal Energy Research Consortium (VCERC) 20

21 Robert L. Mitchell Atlantic Wind Connection (240) Markian Melnyk Atlantic Wind Connection (240)