Creating a Cost-Effective Offshore Wind Power Grid & Transmission Infrastructure: What are the practicalities?

The following is a transcript of a speech given by Bryan Sanderson, Senior Vice President, Anbaric Transmission at the Offshore Wind Power USA conference held February 2014 in Boston, Ma.

Good morning, and thank you for giving me the opportunity to stand up here and opine for a few minutes on offshore transmission.

Before I do that, for those of you not familiar with Anbaric Transmission, I’d like to take a couple of minutes to give you a little background about us. We are an independent company that has been behind two successfully developed HVDC Projects – the Neptune Regional Transmission System, and the Hudson Transmission Project. Each of these are 660MW HVDC connections from PJM to Long Island and Manhattan respectively, and each were awarded through competitive RFP processes. As an independent, each of our projects must rest on its fundamental economics.

We have a few other projects in our pipeline:

  • Green Line: The Green Line will be a 1000 MW HVDC tie from northern Maine into the greater-Boston area, designed to connect remote wind resources to load.
  • Grand Isle Intertie: The GII will be a 400 MW connection from Plattsburgh, NY into Burlington, VT – like Green Line, the goal of this project is to connect incremental wind resources into the ISO-NE market.
  • Poseidon: Poseidon is very similar to Neptune – bringing 500 MW of power from central NJ to Long Island.
  • And lastly, the Bay State OSW Tmx System

I think the title of this session was well chosen – “Creating a Cost-Effective Offshore Wind Power Grid & Transmission Infrastructure: What are the practicalities?” I say this because the practicalities may dictate that best offshore grid we can build right now may not the most cost effective on the basis of $/MWh delivered, nor the most elegant from a technical or engineering perspective, nor the most robust platform for connecting thousands of megawatts of offshore projects. But for now, that’s OK – we need to start somewhere.

Julia and her colleagues at Green Power Conferences have asked us to comment on several areas within this broader subject – a few of which are:

  • Trends in development and financing
  • The cost implications of creating the ‘right’ transmission infrastructure
  • Whether offshore transmission should be financed independently or as a backbone; and
  • What innovations could the US adopt from the Europeans

I’ll try to address each of these – at least tangentially – through the story of our own Bay State Offshore Wind Transmission System.

At Anbaric we first started thinking seriously about creating an offshore transmission grid in 2009. During our initial planning, we recognized the inefficiencies of running dedicated transmission lines from each project to the shore, and the conflicts that would likely arise as multiple projects tried to connect into the limited subset of landing spots that are environmentally, electrically, and economically desirable. We looked for other industries that might have these same challenges, and thought offshore oil & gas might be a good model – there are thousands of oil & gas platforms in the Gulf of Mexico, and they share a handful of highly networked pipeline systems to move their products to shore. Well, it turns out that oil & gas is quite a mature industry with deep and liquid markets for their products, which happen to carry good margins, and those pipeline systems weren’t built overnight.

POINT 1: The practical cost-effective grid must be sized to meet the needs of the industry it’s meant to service. In the current world – where offshore wind does not compete on a $/MWh basis with available on-shore resources – the pace and size of development will be determined by policy, and we’ve yet to see any policy that truly supports the large-scale deployment of offshore wind, and by policy, I mean financeable contracts.

So, we sat back for a bit to see where policy would lead. Between 2009-2011 we saw BOEM take a more proactive role by designating the wind energy areas and beginning the leasing processes. The state of Massachusetts had released its Ocean Management Plan and held an RFI for both offshore wind and transmission, and had stated a goal of developing up to 4000 MW of offshore wind. This represented some progress. Though we still liked the idea of building a networked system to bring thousands of MW of wind to shore, we recognized that the costs to do so in advance of the generation would be prohibitive and unlikely to win political favor.

POINT 2: Offshore transmission is expensive, and financing it will require a commitment by somebody to pay for it – either the wind generators themselves, the RTO’s through a FERC-Order 1000 public policy mechanism, or the states through some vehicle to be determined. As an independent transmission developer, the one question we ask ourselves every day is “who is our customer?” The answer to this question will determine the transmission system that gets built. Financing by the generators will almost guarantee a series of radial interconnects. Only through some sort of broader cost allocation can larger, more efficient grids be developed, and these require planning.

So we revised our plans from a networked system to two 1,000 MW radial interconnections into southeastern Massachusetts, each of which could accommodate multiple farms. This meant that we A) could build at a scale large enough to capture economies of scale, B) avoid the technological risk of implementing a network, and C) could build in phases, timed along with the wind farms, reducing the risk of stranded costs.

Well, a couple more years have passed since we filed the above plans with ISO-NE, and we’ve yet to see the concrete policies put in place that could support both offshore generation and transmission.  There is hope that the actions by the Maryland Governor and Legislature and the recent coordination among the New England Governors and NESCOE will lead to something positive for the industry. But I suspect that in the near term, this will mean hundreds of MW deployed, not the thousands we’ve all been hoping and working so hard for.

This brings me to my THIRD POINT: The optimal offshore grid will also be an evolving system – if the industry starts with smaller, isolated projects, it makes sense to build a smaller, project specific grid. But as the industry develops and we begin to see thousands of real MWs on the horizon, then we can start to talk about big integrated systems. Anbaric remains flexible in its approach, and we’re happy to build whatever system is optimal for the wind projects that will be built.

Lastly, the question was asked “What innovative approaches could the US take from Europe and the supergrid?” My answer is not a technical one, but rather “get the policy right to support the industry for the long term.” This is no longer a science experiment – it works. Let’s do it. Once we begin to build actual projects on a sustained basis, engineers and entrepreneurs will have incentive to tackle the hard problems and bring innovation.

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US Grid Security? Everything is Just Fine

On March 12 the Wall Street Journal published an article (subscription required) about the security of the US electricity grid and its extreme vulnerability. Later that day the Federal Energy Regulatory Commission (FERC) issued a statement criticizing the WSJ for its story.

“Today’s publication by The Wall Street Journal of sensitive information about the grid undermines the careful work done by professionals who dedicate their careers to providing the American people with a reliable and secure grid. The Wall Street Journal has appropriately declined to identify by name particularly critical substations throughout the country. Nonetheless, the publication of other sensitive information is highly irresponsible. While there may be value in a general discussion of the steps we take to keep the grid safe, the publication of sensitive material about the grid crosses the line from transparency to irresponsibility, and gives those who would do us harm a roadmap to achieve malicious designs. The American people deserve better.”

That is true, the American people do deserve better. Taking a look out my window I see victorian age technology. A weary row of decades old wooden poles overburdened with every type of cabling. Mile after mile, they lean in every direction, interrupted by the occasional rats nests of spliced wires sprouting out of rusted junction boxes. It is upon this system, developed by generations long past that our way of life rests, with minimal investment and a lot of hope that it will somehow just keep on running.

In late 2012 the National Research Council issued an excellent report with takes up the issues surrounding grid security. “The U.S. electric power delivery system is vulnerable to terrorist attacks that could cause much more damage to the system than natural disasters such as Hurricane Sandy, blacking out large regions of the country for weeks or months and costing many billions of dollars”

Just yesterday Utility Dive released an excellent article pointing out the following: “If nine key substations are knocked out, the U.S. could suffer a crippling coast-to-coast blackout for 18 months — or more.”

So really, if a bunch of reporters and researchers can, by simply doing their jobs come up with these details, does anyone really think the bad guys can’t do this too?

So who can fix it? Utilities? They can’t even set their own prices because of our consumer need to believe that “electricity is cheap.” Electricity producers? Nope, this is a pure commodity business, they can’t make a profit unless they keep things “cheap” also.

The problem is us. Sorry to say, we have absolved ourselves of investing in ourselves and our national infrastructure. Unless things change, this is our legacy. What previous generations bequeathed to us we have largely failed to maintain and improve. We hire a government who rather than admit the obvious, instead criticizes the press for doing its job.

So today when you are driving around your town, notice those weary poles and thank your great-grandparents for building a really great system, thank the utilities for keeping it running on a shoestring, thank the power producers for keeping everything so cheap for us. And perhaps most importantly, lets thank ourselves for keeping a government in place who so effectively tells us just what we want to hear.

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Understanding Offshore Project Risk through Data Management

The high cost of developing offshore wind is often sited as one of the main drawbacks for further adoption of the technology. There are several strong arguments which challenge this notion including the fact that it is an emerging sector still in an R&D heavy phase, the long-term truth that after project capitalization the long-term variable fuel costs are free, the price suppression effect this creates for legacy technology (an effect now being seen in Europe where renewable production is reaching critical mass. Taking this into account though, there are areas in which better overall project planning and management should do result in consistent quality and price improvements.

In the UK a major cost reduction effort launched by the Offshore Wind Cost Reduction Pathways Study is well underway. Just this month DNV KEMA released its subsea cable guidelines, a years long joint industry project which does an excellent job of beginning to establish best practices for installing power cables offshore – an area in which the industry has seen a great deal of turmoil to date.

One area which is somewhat less glamorous but which has been shown in other industries to be able to transform and improve cost models over time is with data management. In January an £850,000 effort called the Offshore Renewable Energy (ORE) Catapult, was launched by The Crown Estate and several offshore wind farm owners and operators. The plan is to build a database to store anonymised data that will improve safety, reliability and availability, helping companies identify operational improvements and cost reduction opportunities internally and for the wider sector.

This is a huge step in the right direction. Offshore wind project developers spend tens of millions on gathering the necessary data to map out turbine siting and the corresponding balance of plant including the cables, substations and the necessary shore side facilities. This ranges from weather information to sea conditions throughout the year and over time, to water column information, seabed conditions, existing seabed users such as fishing interests, oil & gas or telecommunications – the list goes on.

As can be easily imagined, managing this wide and deep range of data comes with significant complexity. Like all systems in the natural world interdependency is the norm – add engineered structures, hundreds of them, into the mix and the data analysis requirements grow exponentially. A good example of data management tools being developed in this area is what Uni Research is doing in the area of site planning.

Another example of proactive data management can be found at TÜV SÜD PMSS with its multi-contracting project management systems and its effort to de-risk the construction process. That’s what it all comes down to – project risk, operating risk, financial risk – and if the risk cannot be parsed and quantified throughout all aspects of the projects, then it is assumed to be high – and if the risk is high, then the costs associated with building, insuring and operating are going to be high as well. These installations are designed to be operational for decades so the data gathered and organized today will provide the foundation for our being able to cost effectively solve the problems which will arise tomorrow.

To that end, data management and analysis will play a major role in de-risking, and ultimately reducing the overall costs of installing and maintaining windfarms offshore. Just think, by managing data effectively companies such as Google and Amazon know everything about us. If the data of our personal habits has such value surely gathering and managing data for offshore windfarms for decades to come will have some value as well.

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Which way forward? Planning for or Ignoring Climate Change

In another example of the interesting juxtaposition that characterizes US climate change policy, long time climate change denier, Sen. James Inhofe (R-Okla.) announced Tuesday (Feb 4, 2014) his plans to introduce a bill allowing states to opt-out of Environmental Protection Agency regulations on power plants, saying that the regulations will cause winter blackouts. As evidence for the necessity of this opt-out plan he pointed out that January has been one of the coldest months on record, therefore disproving claims that there is global warming and climate change.
The full story can be found here

In contrast to the Senator from Oklahoma, On January 17th Massachusetts Governor Deval Patrick announced a $50 million plan to help his state prepare for the effects of climate change. “The question is not whether we need to act. We’re past that,” Patrick said. “The world’s climate is changing and human activity is contributing to that change. Massachusetts needs to be ready.”

According to an article published by the Boston Herald, administration officials say Massachusetts is already feeling the effects of climate change, citing five major storms since 2010, a significant rise in Eastern Equine Encephalitis in mosquitoes that led to aerial spraying in 2012, and the 2013 closure of oyster beds for the first time in state history because of vibrio parahaemolyticus (a type of dangerous bacteria)

The city of Boston, like New York City, and others up and down the East Coast are located at sea level and are often on the front lines of environmental change. Recognizing this change for what it is and preparing for the inevitable impact it will have on our infrastructure, our economy and our ecology seems to be the only responsible course of action.

There is no doubt, it will be difficult to transition from our old ways (however useful and profitable they have been to us in the past) to environmentally friendly new ways of living. Continuing to deny vast scientific consensus in an attempt to further delay action will exacerbate the problem making these inevitable changes even harder and more costly.

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Market Developments in Japan and the US

Beginning 2014 on an upbeat note are two developing stories (not occurring in Europe which is the center of the offshore wind market) that no doubt will continue to capture industry headlines throughout the year.

First is in Japan with the impressive progress of The Fukushima Floating Offshore Wind Farm Demonstration Project (FORWARD).

The 2011 Great East Japan Earthquake and Tsunami as part of its terrible impact, hit a nuclear reactor in the Fukushima Prefecture of Japan, resulting in one of the most dangerous nuclear accidents of our times. As part of its response, the Japanese government has made a massive and sustained commitment to the development and deployment of renewable energy, in particular offshore wind.

Due to the ultra-deep water around Japan, the technology required for offshore wind was unique in that the foundations which support turbines with a nameplate capacity of 7MW, needed to float. The newest generation of these turbines stand some 187 meters (613 feet) above the surface of the water with blades over 80 meters in length.

FORWARD deployed the worlds first grid connected floating turbines in 2013 and is comprised of a consortium of Industry, Government and research institutions. The initial development off the coast of Fukushima anticipates a total project investment of ¥18.8 billion and is being rolled out in two phases which are expected to be completed in 2015. The full story of the project and its expected economic impact can be found here.

What is impressive about all of this is the level of commitment and support it has been given at all levels and the speed to which it is being executed. With a global wind power market forecast to grow to ¥4.3 trillion by 2020, clearly Japanese industry is positioning itself for a leadership position.

The other positive news is that the Cape Wind project, which is being developed off the coast of Massachusetts, has signed an agreement with Siemens to be supply the 130 3.2MW offshore wind turbines for the project. Unlike the quick Japanese project development, and despite having the longstanding support of Massachusetts state government, Cape Wind has been caught up in bitter, often politically motivated legal fights for the past decade. With contracts now being awarded the project is expected to be completed and commissioned by 2016.

Given this progress in both Japan and the US, along with the very active European market, we expect a big story for 2014 will be the emergence of the global offshore wind industry – and with it the innovation, volume and scale necessary to continue to wind farm efficiencies and to drive down the overall installation costs.

Here’s to a great 2014!

Posted in Alternative Energy, Floating Offshore Wind, Offshore Wind, Uncategorized | Comments Off

UK Announces Revised Financial Support for Wind Industry

In early December the UK Treasury announced its policy regarding support for wind energy. It was published as part of an overall UK infrastructure investment plan. The much anticipated announcement was a mixed bag for industry, with additional support for offshore wind and a reduction of support for onshore wind.

In a statement RenewableUK, the leading advocacy organization for wind energy in the United Kingdom, described the announced details as follows:

The reduction in financial support for offshore wind is less steep than had been mooted in the draft strike prices which were published in the summer – for the financial year 2018/19, the level of support has been increased by £5 per megawatt hour, from £135/MWh to £140/MWh.

Financial support for onshore wind has been reduced by £5/MWh from 2015 onwards compared to the draft strike prices, e.g. £100/MWh in 2015/16 has fallen to £95/MWh, and £95/MWh in 2017/18 has dropped to £90/MWh.

Much has been written about this shift in support towards offshore wind and Government officials have gone to some length to explain that the shift is a result of the onshore industry no longer needing the support, while offshore is still in its early stages. Chief Secretary to the Treasury Danny Alexander denied that the shift was in any way a response to NIMBY complaints about the siting of large on-shore wind farms.

Either way, the announcement will shake up the industry in the UK with the likely pull back of on shore projects, and a burst of anticipation at port facilities and other coastal regions such as Grimsby who will likely benefit as offshore wind continues its impressive growth.

As of Dec 2013 there are over 1,000 offshore wind turbines in UK waters producing over 3.5Gw of electricity to British homes and businesses. That type of scale has taken over a decade of work to reach. Now, with firm Government support announced, that growth can accelerate.

In the end, investors need to have a clear and stable path forward if they are to invest with confidence. For a long while the UK Government has made the expansion of renewable energy a cornerstone of its energy policy. This latest announcement reaffirms that commitment and will allow wind energy, (mostly offshore) to continue to expand its place in the UK energy production portfolio.

Posted in Alternative Energy, Offshore Wind | Comments Off

“I would say the industry is falling apart,”

At the Reuters Global Commodities Summit in Houston this week, Stefaan Sercu, chief executive of GDF Suez Energy Marketing NA Inc. shared is bleak opinion that Power Generators in the US are facing a market which has all but eliminated the opportunity for new investment.

“I would say the industry is falling apart,” said Sercu.

At the conference and elsewhere the blame is place on falling natural gas prices on one side and increased government mandate and regulation on the other. In the mandate category it us usually renewable energy portfolio requirements which top the complaint list.

Just who is supposed to pay for the care and feeding of the transmission networks largely built by our great grandparents is always, like religion and politics, just one of those problems not discussed in good company. Heaven forbid we face up to the glaring truth that a simple care and feeding will no longer cut it – the electricity system in the US has become our weak link, our most vulnerable asset. A simple google search on the vulnerabilities of the system; from run-of-the-mill natural disasters (forget more superstorms) and various bad people like terrorists will keep you awake at night.

We can’t afford to fix it is the common refrain – just look down most main streets around East Coast towns and you will see the decades old wooden poles groaning under the accumulated weight of technology. The rats nest of wires and the growing bend in the pole (that we all try not to see) is our system. That is what our way of life depends upon.

Sercu is correct, why should private companies take on the risk of these investments? These companies exist in world of system division created on a set of 1970’s era political and technical fault lines. Remember local and long distance?

Whether we prefer cheap natural gas with emissions much less than coal or we believe that the climate is actually changing and we really should do something about it – transmission, distribution, ie: the system – it needs to be there, no matter what – given the age and ragged state of the US electrical system today – the only entity capable of taking on that type of meta-risk is …. Government.

Uh Oh.

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Floating Offshore Wind Projects Continue to Advance

As of 2013 all of the offshore windfarms operating in the world are mounted on foundations in relatively shallow water firmly anchored or embedded in the floor of the sea.

The dependence current technology has on shallow water has put a major constraint on market development, limiting it to only those areas where offshore wind can be built using these traditional foundations.

The Oil &Gas industry has long utilized sophisticated floating structures for deep water exploration and extraction. By adapting and innovating floating technology for use in offshore wind, the possibility of huge market expansion and as a result, a much lower cost from electricity produced from offshore wind is just now coming into view.

Currently there are only a few demonstration units installed anywhere in the world, the most advanced of these are located off the coast of Norway and another off the coast of Portugal. Earlier this summer we highlighted the demonstration unit installed off the coast of Maine. Just this last week it was announced that Principle Power Inc. a Seattle based company, (the same company which operates the floating unit off of Portugal) has applied for a commercial wind lease off the coast of Coos Bay, Oregon. This area would be used for the installation of their floating wind demonstration units.

In recent months Japan has aggressively advanced floating wind as a major new contributor to its future electricity supply even as it dismantles its nuclear power program in the wake of the Fukushima disaster. The Environmental Ministry projects that offshore wind has the potential to produce 1.6 billion Kw or 8 times the current capacity of Japan’s electricity production.

To develop this technology on a fast track the University of Tokyo’s Graduate School of Engineering has partnered with several leading manufacturing companies to develop large capacity  (2Mw-7Mw) floating turbines with the ultimate goal to build the worlds first 1Gw floating offshore wind farm.

We look forward to the day when such renewable energy projects are developed just over the horizon in the deep water off of Tokyo and near such electricity hungry American cities as Los Angeles, San Francisco and Honolulu.

Posted in Alternative Energy, Floating Offshore Wind, Offshore Wind | Comments Off

Jobs in Offshore Wind

When the topic of offshore wind is brought up, one of the most commonly asked questions is how many jobs would be created by a project or better yet a number of projects?

Up and down the East Coast underutilized port facilities are a common sight. The decades of struggle for of all types of maritime industry has been well documented as jobs have moved out of the country, or simply vanished with shifting markets.

Creating electricity via a maritime resource such as offshore wind sounds ideal – but how real are the jobs and has this been proven elsewhere?

A new set of jobs data published in mid-September gives a current view of wind and marine energy jobs creation to date in the UK. Published by RenewableUK, the report highlights a 74% increase in wind and marine energy job creation since 2010.

Some specific data from the report are as follows:

  • In the UK, wind, wave and tidal energy sector directly employs 18,465 people full time.
  • The sector also supports 15,908 indirect jobs, making a total of over 34,300 employees
  • Number of employees in offshore wind has doubled since 2010.
  • More than 70,000 jobs could be created over the next decade.
  • 91% of the industry’s jobs in the UK are currently filled by UK citizens.

The full report can be found here.

This growth is impressive. Every State along the American Coast would love to be in a position to report similar growth numbers – and it is not all large corporate employers. More than 80% of all employers in the wind, wave and tidal industries employ fewer than 250 people and 56% employ fewer than 25 people. Small, innovative businesses growth is a key ingredient for a healthy economy and clearly a major component of a growing offshore wind industry.

The types of jobs created by this industry cut across a range of skills from Service, to R&D, engineering & design to manufacturing and maritime based installation, operations and maintenance. A 2013 report from the International Economic Development Council cites a useful breakdown from the Carbon Trust of offshore wind jobs by category:

Carbon Trust jobs breakdown by type

Rebuilding maritime industry has long been a priority for US government and business throughout the East Coast, West Coast and the Great Lakes, but the options have been few and far between. Producing renewable energy using the stronger winds offshore provides just such an opportunity – Just as in the UK and elsewhere, its time we brought industry back to the American waterfront.

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The Rise of the Microgrid

In 1969 no one could have imagined the benefits brought by the Internet – and in 2013 no one can properly imagine the benefits which a new approach to our electricity infrastructure will bring.

In 2003 outages on 3 Ohio transmission cables caused over 50 million people and much of the US Eastern Seaboard to lose power. New research published in August provides little comfort.

The argument goes that formal power grid structures, unlike their informal social media counterparts, are more dependant on central structure and will by their nature collapse quickly when destabilized.

Back in the Cold War, the telecommunications grid systems was vulnerable to the same risk – that it could easily be knocked out. The solution to this problem was a government project called ARPANET, which was the foundation of today’s internet; A highly interconnected, decentralized communications system which has profoundly changed the world.

Ironically, and arguably, a great vulnerability faced by the internet in the US is the long-term loss of electricity from the out of date American power grid.

There are no easy answers – but there are some interesting recent developments.

Microgrids are (comparatively) small clusters of electricity production, storage and transmission which are designed to operate independent of a larger transmission system, bypassing that system altogether in the event of an outage.

The idea is that these independent clusters can function – when the larger grid is out. Exactly the same principles which gave us the internet.

Microgrids can also be designed to operate efficiently with the unique demands of renewable energy – making them ideal for a world of more regionalized and mixed sources of electricity production.

Microgrids were in high visibility after Hurricane Sandy hit the East Coast of the US in 2012.

This summer the state of Connecticut, a frequent victim of hurricane damage, began an innovative program to fund the development of 9 microgrids throughout the state.

Along the same lines the California Energy Commission recently announced that it is funding a microgrid demonstration project at Camp Pendleton in San Diego.

Also in California, the US Navy this week announced that it was taking a step further by linking three microgrids: at the hospital a Naval Base San Diego, a data center at Naval Base Coronado and at Naval Base Point Loma – providing a secure centrally managed microgrid.

Lets move past our Victorian age electricity grid – reworking the way we think, innovate and invest in our electricity infrastructure will reshape our economy for the better.

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