1

Wind Energy R&D Panel

Southeastern Coastal Wind Conference

Charlotte Convention Center

Charlotte, NC

08 March 2012

Virginia Coastal Energy Research Consortium:

History and Updated Results for Offshore Wind Energy Costs and Generation Potential

Virginia Coastal Energy Research Consortium:

History and Updated Results for Offshore Wind Energy Costs and Generation Potential

George Hagerman

VCERC Director of Research Virginia Tech Advanced Research Institute900 North Glebe RoadArlington, VA 22203

Email: hagerman@vt.eduPhone: 757-422-2704

Presentation Outline

Short history of VCERC • SAIC briefs JCOTS Energy Advisory Committee in Oct 2005

• General Assembly creates VCERC in 2006 and funds in 2007-2009

Offshore wind cost of energy• Under presently forecast fuel market conditions, VCERC estimates that

a new offshore wind project owned by Dominion would have same energy cost as a new coal-fired plant of similar capacity (at ~600 MW)

• Future utility electric rate increases due to likely coal price increases make the combination of offshore wind and land-based combined-cycle gas turbine (CCGT) generation a least-cost energy supply portfolio for providing firm, dispatchable power with less environmental impact

Offshore wind potential energy generation• Virginia Call Area has 2,400 to 3,000 MW of potential installed capacity

• Could meet ~10% of state’s electricity demand with newest offshore wind turbines (rated at 5 to 6 MW, with 126 to 150 m rotor diameter)

2

VCERC Created by 2006 General Assembly to Bring Together Universities, State Agencies, and Industry

Integration of marine renewables into Virginia Energy Plan

Ensuring compatibility with other marine uses and coastal resources

Identification of manufacturing job creation opportunities and industry benefits of long-term, price-stable energy supply

Physical, chemical, & geological ocean sciences

Biological ocean sciences

Renewable energy curriculum development

Entrepreneurship development

High-tech workforce training

Virginia Coastal Energy Research Consortium Non-University VCERC Directors

Wind energy engineering

Identification of waterfront development opportunities

Mechanical, electrical, materials, civil, and ocean engineering

Washington, DC area presence

Initial VCERC ProjectsFunded by State Budget in FY2007-08

1. Feasibility-level design and economic assessmentfor a hypothetical reference baseline offshore wind power project

2. Preliminary mapping of offshore areassuitable for offshore wind powerdevelopment, with identificationof military training areas, shipping lanes, commercial fishing grounds, and marine and avian habitats

3. Evaluation of economic development potentialof commercial offshore wind powerdevelopment and associated workforce training needs, and planning for an ocean test bed

4. Feasibility-level design and economic assessmentfor an algae-to-biodiesel cultureand processing system

Paliria Energy, Inc.

3

VCERC Impact

VCERC Offshore Wind Studies Final Report, April 2010; updated results for energy cost and generation potential presented here

Thanks to funding support from the state legislature, VCERC offshore wind studies have led to significant federal regulatory activity, with Virginia being one of four states included in the BOEM “Smart from the Start” initiative for the first round of commercial offshore wind leasing on the U.S. East Coast

VCERC offshore wind studies also have been catalyst for other pre-commercial development activities, including:

• Dominion onshore load flow study and preliminary scoping studyfor offshore “trunk line” to provide shared grid interconnection for multiple offshore wind projects that would connect to shore

• Federal, state, and local collaboration to refurbish and upgrade Chesapeake Light Tower for RD&D of marine renewable energy and offshore environmental monitoring technologies

Offshore Wind Energy Costs andCost Reduction Impact of Domestic Supply

4

Virginia’s Near-Term Offshore Wind Potential

Fentress

VCERC identified 25 MMS lease blocks that appeared to have minimal conflict with existing uses by the Navy, NASA-Wallops, commercial shipping, or commercial fishing. These areall beyond 12 nautical miles offshore and in water depths less than 100 ft, and could support 3,200 MW of wind capacity generating 11 TWh/yr, or 10% of VA’s annual energy demand.

Hypothetical Offshore Wind ProjectReference Site for Cost & Performance Evaluation

5

Offshore Wind Project Cost Estimated by VCERC Cost Model

Capital cost estimated in March 2008 dollars using NREL parametric model for wind turbine & tower, Virginia maritime supplier bids for foundations & installation, and published data for balance of plant• Plant cost at offshore busbar: $ 1,763 million

• Transmission cost to Fentress: $ 153 million

• Total project investment: $ 1,916 million (~ $3,260 / kW)

588 MW installedrated capacity(7 x 7 turbinesper lease block)

38% annualcapacity factor

20% PJM summercapacity factor(JJA 3pm – 6pm) Vestas V90-3MW

London Array I630 MW

SiemensSWT-3.6-120 Global Tech I

400 MW

MultibridM5000

Thanet300 MW

if fabricated in Hampton Roads

Lincs270 MW

Based on MTH announced

contract value in March 2010

Lincs270 MW

Based on MTH max steel weights if

fabricated in Hampton Roads

VCERC Modeled Costs Compared with Actual European Costs for Turbines and Foundations

European offshore wind turbine

supply would cost~$2,150/kW

for 3 MW to 3.6 MW turbines, and

~$2,300/kWfor 5 MW turbines

6

Cost Benefit of Domestic Turbine & Tower Supply

• Cost of turbine & tower package for U.S. land-based wind projects in 2011: ~$1,250 / kW(source: Fig. 32 of http://eetd.lbl.gov/ea/emp/reports/lbnl-4820e.pdf)

• This reflects ~60% domestic content (see Fig. 15 of above report) and cost would be even less for a 100% domestically produced turbine & tower package

• Adding 20% for marinization (double the percentage assumed by DOE) yields ~$1,500 / kW

• Domestic turbine supply would be $650-800 per kW less than European supply

Manufacturing wage data published by U.S. Bureau of Labor Statistics on 22 Oct 2009(www.bls.gov/fls/prodsupptabletoc.htm, Table 8. Hourly compensation, U.S. dollar basis)

Cost breakdown and labor / material ratios from Dong Energy presentation dated 11 Aug 2009 (www.energirike.no/pub/56/filer/Dong%20-%20EnergiRikekonferancen%20perhp%202009.pdf)

Domestic Offshore Wind Supply Chain would Benefit from Lower US Manufacturing Labor Costs

7

Cost Benefit of Domestic Foundation Supply

London Array I630 MW

SiemensSWT-3.6-120 Global Tech I

400 MW

MultibridM5000

Thanet300 MW

if fabricated in Hampton Roads

Lincs270 MW

Based on MTH announced

contract value in March 2010

Lincs270 MW

Based on MTH max steel weights if

fabricated in Hampton Roads

At ~$430 per kW,domestic monopile foundation supply

would be$230 per kW less

than European supply

VCERC Modeled Costs Compared with Actual European Costs for Submarine Power Cables

London Array I630 MW

Nexans 150 kV50 km offshore

Sheringham Shoal317 MW

Nexans 145 kV20 km offshore

Sheringham Shoal317 MW

81 km, 36 kV

Nordsee Ost288 MW

63 km, 33 kV

VCERC Model588 MW

138 kV28 km offshore

VCERC Model588 MW

168 km, 33 kV

VCERC reference design site is only

29 km offshore, with export cable supply cost of $160 per kW.

At $5.50 per kW-kmexport cable supply

would cost $240 to 370 per kW,

depending on where substation platform

is located in Call Area

Projects in Virginia Wind Energy Area could have export

cable route lengths of 44 km to 68 km

8

VCERC Energy Cost Estimates Compared withRecent National Academy of Sciences Study

VCERC: ~06-07 ¢/kWh

VCERC: ~11 ¢/kWh

VCERC: ~13 ¢/kWh

VCERC: ~10-12 ¢/kWh

Coal costs now increasing; offshore wind would increase price stability of Virginia’s energy supply portfolio; see backup slides

Energy Generation Potential of Virginia’s Offshore Wind Energy Area

9

Nautical Chart View (Mariner’s View) of Virginia WEAPublished 23 Jan 2012 in Call for Information and Nominations

Nautical Chart View (Mariner’s View) of Virginia WEAPublished 23 Jan 2012 in Call for Information and Nominations

10

NREL 5 MW turbine w/ 126m rotor: 30 x 5 MW units perfull lease block = 150 MW per (4.8 km)2 = 6.5 MW per km2

6.5 MW / km2

7.6 rotor diametersN-S spacing

between rows

6.3 rotor diameters E-W spacing between turbines

48

00

m

4800 m

Background plot is capacity density of constructed and planned UK offshore wind projectsSource: www.carbontrust.co.uk/publications/pages/publicationdetail.aspx?id=CTC743

419 km2

~ 2,720 MW

320 km2

~ 2,080 MW

566 km2

~ 3,680 MW

20 blocks= 3,000 MW = 600 WTGs

NREL: 6.5 MW / km2 and 7.5 D row spacing, use 89.5% array efficiency

= 10.1 million kWh / year

Factoring in Wake Losses, Annual Energy Productionwould be ~10 TWh (vs. Original VCERC 11 TWh Estimate)

See backup slides for basis of individual turbine capacity factor and array efficiency estimates

11

Background plot is capacity density of constructed and planned UK offshore wind projectsSource: www.carbontrust.co.uk/publications/pages/publicationdetail.aspx?id=CTC743

4800 m

Alstom 6 MW turbine w/ 150m rotor: 20 x 6 MW units perfull lease block = 120 MW per (4.8 km)2 = 5.2 MW per km2

5.2 MW / km2

8.0 rotor diametersN-S spacing

between rows

6.4 rotor diameters E-W spacing between turbines

48

00

m

419 km2

~ 2,180 MW

320 km2

~ 1,660 MW

566 km2

~ 2,940 MW

20 blocks= 2,400 MW = 400 WTGs

Alstom: 5.2 MW / km2 and8.0 D row spacing, use 90.5% array efficiency= 9.9 million kWh / year

Factoring in Wake Losses, Annual Energy Productionwould be ~10 TWh (vs. Original VCERC 11 TWh Estimate)

See backup slides for basis of individual turbine capacity factor and array efficiency estimates

12

Thank You!

Any questions?

Email: hagerman@vt.edu

VCERC Offshore Wind Studies Final Report, April 2010:www.vcerc.org/report.htm

Offshore Wind Cost of Energy andCost Reduction Impact of Domestic Supply

BACKUP SLIDES

13

VCERC Fixed Charge Rate based onOwnership & Financing by Dominion Virginia Power

Composite income tax rate: 38.8% (35% Federal, 5.85% State)

General depreciation declining balance is used• GDS life of 15 years for coal- and gas-fired generation

• GDS life of 5 years (bonus depreciation) for wind generation

100% of project is financed up front• 43.2% Debt and 56.8% Equity

• Debt real rate of return 5.586%

• Equity real rate of return (13.75% common, 7.174% preferred)

• Includes 3-year construction loan (7.5% real debt rate)

Debt is paid monthly, equity return paid quarterly

Service life: 25 years for wind , natural gas; 50 years for coal

Levelized annual fixed charge rate (FCR):• Real (constant dollars): 7.55% for wind, 10.50% for gas; 9.06% for coal

• Nominal (current dollars, assuming 2.5% annual inflation rate):9.55% for wind, 13.07% for gas; 10.06% for coal

Wise County Coal-Fired Project

Capital cost basis• As published in PUE-2007-00066 (filed 31 Mar 2008)

& PUE-2007-00111 (filed 03 Dec 2007)

• Plant cost: $1,800 million

• Transmission cost: $ 23 million

• Total project investment: $1,823 million (~ $3,120 / kW)

585 MW rated capacity

90% annual capacity factor

Plant heat rate: 10.00 MMBtu per MWhr

Coal heat content: 15.4 MMBTU per short ton

Actual in-service date: 2013(used 2012 for all projects)

Virginia City Hybrid Energy Center

14

Recent Delivered Coal Prices

Source: Edison Electric Institute: Q2 2010 Financial Update: Fuel(www.eei.org/whatwedo/DataAnalysis/IndusFinanAnalysis/Documents/2010_Q2_Fuel_Final.pdf)

Assumed price range in first year (2012)

Coal prices are rebounding more quickly than assumed in original VCERC report

Near-Term Forecast ofCentral Appalachian Coal Spot Market Prices

Source: Edison Electric Institute: Q2 2010 Financial Update: Fuel(www.eei.org/whatwedo/DataAnalysis/IndusFinanAnalysis/Documents/2010_Q2_Fuel_Final.pdf)

6% nominal annual escalation rate

15

Updated fuel market scenario2012 price: $60-80 per short ton4% to 6% real annual escalation(from EEI 2010-Q2 projections)

Cost of Energy Comparison BetweenOffshore Wind and New Coal-Fired Generation

European turbine supply

Domestic turbine supply

Cost of Energy Comparison BetweenOffshore Wind and New Coal-Fired Generation

16

PJM Cost of New Entry (CONE)Combined Cycle Gas Turbine (CCGT) Project

Capital cost basis• Based on 660.9 MW PJM CONE (29 Aug 2008 update) applied to

Dominion’s Bear Garden project in Buckingham County

• Plant cost: $ 775 million

• Transmission cost: $ 5 million

• Total project investment: $ 780 million (~ $1,340 / kW)

580 MW rated capacity

90% annual capacity factor

Plant heat rate:GE Frame 7FA CCGT7.315 MMBtu per MWhr

Actual in-service date: 2011(used 2012 for all projects) Possum Point #6

Near-Term Forecast ofHenry Hub Natural Gas Spot Market Prices

Source: Edison Electric Institute: “Q2 2010 Financial Update: Fuel”(www.eei.org/whatwedo/DataAnalysis/IndusFinanAnalysis/Documents/2010_Q2_Fuel_Final.pdf)

4% nominal annual escalation rate

Assumed price range in first year (2012)

17

Cost of Energy Comparison BetweenOffshore Wind and New Gas-Fired Generation

Updated fuel market scenario2012 price: $5.50-6.00 per MMBTU2% to 4% real annual escalation(from EEI 2010-Q2 projections)

European turbine supply

Domestic turbine supply

Cost of Energy Comparison BetweenOffshore Wind and New Gas-Fired Generation

18

Energy Generation Potential of Virginia’s Offshore Wind Energy Area

BACKUP SLIDES

419 km2

~ 2,720 MW

320 km2

~ 2,080 MW

566 km2

~ 3,680 MW

Delmarva Offshore Wind Potential using 6.5 MW /km2

Notional Capacity Density for NREL 5-MW Turbine

20 blocks = 3,000 MW 5 x 600 MW per phase

at full build-out of WEA

19

419 km2

~ 2,180 MW

320 km2

~ 1,660 MW

566 km2

~ 2,940 MW

Delmarva Offshore Wind Potential using 5.2 MW /km2

Notional Capacity Density for Alstom 6-MW Turbine

20 blocks = 2,400 MW 4 x 600 MW per phase

at full build-out of WEA

VCERC Analysis of two Turbine Fleetsfor Productivity as a Function of Rotor Swept Area

Enercon fleet represents direct-drive permanent magnet generator

Vestas fleet represents multi-stage gearbox drive

20

VCERC Analysis of two Turbine Fleets forProductivity as a Function of Rotor Swept Area

Enercon fleet represents direct-drive permanent magnet generator

Gearbox TG requires 16% greater rotor swept area for 50% annual capacity factor

Estimated Turbine Capacity Factor off Virginia forNew Offshore Turbine Designs with Large Rotors

Vestas3 MW with 112 m diameter rotor= 3,284 m2 swept area per MW

Vestas7 MW with 164 m diameter rotor = 3,018 m2 swept area per MW

Alstom 6 MW with 150 m diameterrotor = 2,945 m2 swept area per MW A

VCERC baseline design: Vestas3 MW with 90 m diameter rotor

C

B

NREL reference turbine design: 5 MW with 126 m diameter rotor

21

419 km2

~ 2,720 MW

320 km2

~ 2,080 MW

566 km2

~ 3,680 MW

Annual Energy Production in Virginia Wind Energy AreaBased on Estimated Capacity Factor for Individual Turbines

20 blocks= 3,000 MW

capacity

NREL 5-MW at 43% turbine capacity factor= 11.3 million kWh / year

419 km2

~ 2,180 MW

320 km2

~ 1,660 MW

566 km2

~ 2,940 MW

20 blocks= 2,400 MW

capacity

Alstom 6-MW at 52% turbine capacity factor

= 10.9 million kWh / year

Annual Energy Production in Virginia Wind Energy AreaBased on Estimated Capacity Factor for Individual Turbines

22

Mainstream Renewable Power EWEC 2010 Paper: “Modeling ofWake Loss Sensitivity to Wind Rose in a Large Offshore Wind Farm”

Assumptions

Siemens 3.6 MW turbine with RD = rotor diameter = 120m

Project capacity of 259.2 MW(72 turbines)

Elliptical turbine packing layout (above example shows 10 RD spacing between rows, along prevailing wind direction)

UNI-directional Wind Rose

OMNI-directional Wind Rose

Mainstream Renewable Power Estimates ofWake Loss as Function of Along-Wind Turbine Spacing

UNI-directional Wind Rose

OMNI-directional Wind Rose

NREL 5-MW turbinepacked at 6.5 MW / km2

with 7.5 D row spacing= 10.5% wake loss

ALSTOM 6-MW turbine packed at 5.2 MW / km2

with 8.0 D row spacing= 9.5% wake loss