Ocean Winds Offshore Leases Return
The offshore wind industry is encouraging Orsted to sell its offshore wind leases to another company. BOEM say the lease sale is permitted provided they approve of the buyer. The sale would allow the construction of additional wind complexes.
But wind industry sources predict that new developers will soon offer to buy the leases, drawn by slowing inflation, lower expected interest rates, and more attractive terms for offshore wind power now offered by New Jersey regulators. Bold Added
To help insulate any buyer from inflation, Board of Public Utilities contracts for generating power from the lease areas now have a clause that allows the price to be raised or dropped by 15%, depending on market conditions when the final permits for the projects are approved by the federal government. Bidders are also offered federal tax breaks because of the Inflation Reduction Act, which provides incentives for the adoption of clean energy. Bold Added
This means the cost of offshore wind electricity will increase but not its reliability.
Off shore wind pricing from the supplier is called the strike price and is negotiated with the state. The pricing time frame is 20-25 years and includes an annual escalator clause The strike price for Orsted Ocean Winds complexes was $84.03 ME/hr with a 2% annual increase (20 years) raising the price to about $162 MW/hr. This price was too low for Orsted.
What is the required strike price to restart the Ocean Winds projects? Based the renegotiation pricing with wind developers in New York, the strike price must be increased by 27 to 62 percent.
Sunrise Wind – Negotiated Price $110.37 MW/hr. The requested renegotiated price is $139.99 MW/hr a 27% increase (2)
Empire Wind 1 – NP $118.38 to $159.64, a 35% increase (2)
Empire Wind 2 – $107.50 to $177.84, a 66% increase. (2)
South Fork – Not available (3)
Atlantic Shores strike price was initially reported as $86.62 MW/hr with a 2.5% annual increase. It now reported as not being publicly disclosed (4)
This pricing means the electricity from the supplier will be about 15 cents per kilowatt hour before escalation and excluding transmission lines to land, substations and connections to the grid costs. To provide reliable electricity, batteries are required and their cost are very high and excluded. Based upon Germany, Denmark and UK history, the electricity cost will reach about 30-50 cents per kilowatt hour. ($300 -500 MW/hr)
A gas turbine can generate the electricity for about $50 MW/hr.(2) with no battery costs and minimal transmission line modifications.
With massive battery installations, offshore wind can provide electricity reliably for about (8) hours. It will be very expensive electricity.(5)
References
(1`)https://www.njspotlightnews.org/2024/09/orsted-abandoned-major-nj-offshore-wind-plans-now-set-sell-ocean-leases/
(2`) https://wattsupwiththat.com/2023/10/06/update-on-offshore-wind-projects-off-the-mid-atlantic-and-new-england/
(3`) ChatGPT – The strike price for the South Fork Wind Farm is tied to a deal made by the Long Island Power Authority (LIPA) back in 2017. —– Unfortunately, detailed strike price specifics are not public, but such costs are typically part of broader energy contracts with built-in pricing mechanisms related to market conditions, inflation, and other project costs.
(4`) ChatGPT The strike price for the Atlantic Shores 1 and 2 offshore wind farms has not been publicly disclosed as of recent reports.
(5`) https://wattsupwiththat.com/2024/08/31/offshore-trojan-horses/
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