Monday, May 11, 2009

Offshore Wind Potential

Last month the Interior Department issued its framework for developing the offshore wind potential of the US Outer Continental Shelf (OCS.) In a speech on Earth Day Interior Secretary Salazar highlighted the enormous opportunity that offshore wind represents, tapping a perpetually renewable resource to provide large increments of low-emission electricity, particularly in proximity to the populous East Coast, where the National Renewable Energy Laboratory of the DOE has apparently identified a million megawatts of developable wind potential. Offshore wind could provide an important segment of the renewable energy growth necessary to reduce US greenhouse gas emissions and achieve the ambitious goals of the proposed federal Renewable Electricity Standard. At the same time, it's essential to put this potential into perspective, particularly if the development of offshore wind and offshore oil and gas resources should conflict in the future. While offshore wind offers a somewhat more reliable supply option than its onshore cousin, its energy contribution is still significantly less than that of the conventional sources it is intended to displace.

In remarks early in April Secretary Salazar suggested that a million MW from offshore wind would dwarf the power currently generated by coal-fired power plants. Last year the US generated just under 2 trillion kilowatt-hours of electricity from coal, from power plants with a combined capacity of 336,000 MW. Generating the same number of kWhs from wind at a typical average capacity factor of 33% would require nearly 700,000 MW of wind capacity. So if we ignored the distinction between baseload power and the intermittent output of wind turbines, we might say that the Secretary only slightly exaggerated the potential of offshore wind, which appears to be on roughly the same order of magnitude as coal. But this comparison becomes more suspect when you break down wind's potential contribution into realistic projects, such as the much-delayed Cape Wind project in Nantucket Sound. Cape Wind would consist of 130 turbines with a total capacity of 420 MW. Replacing coal with offshore wind would require no less than 1,642 offshore projects the size of Cape Wind. To put that in perspective, consider that the UK Crown Estate--roughly equivalent to our Minerals Management Service (MMS)--is currently evaluating 40 bids for projects totaling 25,000 MW, to add to the roughly 1,100 MW of offshore wind currently on line or under construction there. That would lead Europe's offshore wind sector. I'll let you draw your own conclusions about the feasibility of replacing coal power with offshore wind anytime soon.

Since the MMS will administer the new offshore wind leasing program in parallel to its long-standing oil and gas leasing on the OCS, we must trust that they also have a firm handle on the relative energy contribution of these resources and would factor this into any future offshore resource conflicts. Consider Cape Wind, again. The approximately 1.2 billion kWh of electricity its 420 MW should generate annually could displace gas-fired power generation consuming roughly 10 trillion BTUs of natural gas per year. That sounds simply enormous, until you convert it to barrel of oil equivalents (BOE). It works out to about 4600 barrels per day, about what a single well on an offshore oil platform might produce. Compare that to Chevron's new Gulf of Mexico platform, Tahiti, which just began production and is expected to ramp up to 137,000 BOE per day. (Disclosure: I am a Chevron shareholder.) Tahiti apparently cost $2.7 billion to build. Wind farms capable of producing a comparable amount of energy (via displacement of natural gas at a gas turbine heat rate of 8,000 BTU/kWh) would cost somewhere on the order of $25 billion.

Now, these comparisons are somewhat simplified, and I've completely ignored the greenhouse gas emissions from the conventional power plants that offshore wind would displace. However, there's no imaginable cost of carbon that could close the value gap between offshore wind and the energy and economic contribution of offshore oil and gas projects. While I'm not suggesting that offshore wind inherently conflicts with oil & gas, I do think it would be helpful for the administration to temper some of its hyperbole on renewable energy with the kind of pragmatic, numbers-based analysis of which the staffs at both the Interior Department and the Department of Energy are capable. Offshore wind promises to be a useful element of our future energy mix, but it is still a very long way from replacing the primary energy sources upon which we rely today.

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