Interior's “Smart from the Start” is Likely “Dead in the Water”

What is the Department of Interior’s (DOI) “Smart from the Start” program and why is it “Dead in the Water”? The “Smart from the Start” program is DOI’s attempt to encourage the development of offshore wind technology in this country.[i] And, it is “Dead in the Water” because offshore wind energy is 3.4 times more expensive than onshore wind energy, making it not a prudent investment compared to other renewable alternatives for electricity generation. Furthermore, wind produces a lot less energy than an equivalent natural gas project.

DOI’s Offshore Wind Program

DOI has opened up tracts of areas off the U.S. East Coast to wind development, although it refuses to do so for oil and natural gas development. The federal government will be auctioning 2,434 square miles of the continental shelf in the Atlantic Ocean before the end of this year. If wind developers can overcome the high cost of offshore wind, their wind farms will be located 10 miles offshore. The area to be leased is about the size of Delaware, including 125 square miles off the coast of Maryland, 161 square miles off Delaware, and 176 square miles off Virginia. Although leases will also be auctioned off the coast of New Jersey and Rhode Island, the largest amount will be off the coast of Massachusetts — 1,161 square miles.

DOI wants to avoid the challenges faced by Cape Wind –an offshore wind project off the coast of Cape Cod that has been in the planning for 11 years and still has not been constructed.[ii] Opponents to Cape Wind cited spoiled views, potential hazards to birds, marine life and underwater archaeological sites, among other objections. So DOI is anticipating those issues as part of its “Smart from the Start” leasing program. Some of the avenues DOI is pursuing are:

• Leasing areas to offshore wind development that are 10 miles or more offshore compared to 5 miles for Cape Wind, hoping to avoid the contentious issue of spoiled views
• Studying the distribution and behavior of federally protected bird species such as red knots, roseate terns, piping plovers, and diving birds that are predominant on the continental shelf. Birds are being surgically implanted with satellite transmitters to determine their habitat —a $1.4 million project led by the Fish and Wildlife Service.
• Reducing the originally proposed leasing area off the Massachusetts coast of more than 3,000 square miles to 1,161 square miles to protect long-tailed ducks that forage in the area.
• Studying the effects on sharks and rays of electromagnetic fields generated by undersea cables that connect the individual wind turbines.
• Studying the effects of pile-driving and turbine noise on whales, sea turtles and fisheries.
• Inventorying possible submerged archaeological sites to avoid Indian tribes from suing due to the destruction of submerged cultural tribal resources.

Onshore and Offshore Wind Costs

But, the real killer of the program is its cost. According to the Energy information Administration, the annualized cost of an offshore wind farm is 33.06 cents per kilowatt hour compared to 9.68 cents per kilowatt hour for onshore wind, making it 240 percent higher. The Cape Wind project is estimated to cost $2.5 billion and would consist of 130 3.6 megawatt turbines. National Grid is to buy half of Cape Wind’s power, which will start at a cost of 18.7 cents per kilowatt hour, and increase annually at 3.5 percent in a 15 year deal.[iii] That is about twice what the utility pays for power from conventional sources, and almost twice the average U.S. cost of electricity—9.99 cents per kilowatt in 2011.

NSTAR, another Massachusetts utility, originally felt that it was imprudent to buy power at this cost and had opted to purchase onshore wind-generated electricity to meet the state’s renewable standard of 15 percent renewable generation by 2020. NSTAR has a 10-year contract with TransCanada for onshore wind at 10.5 cents per kilowatt hour, about 5 percent higher than the average U.S. price of electricity, but significantly less (44 percent less) than the starting price of Cape Wind. However, NSTAR is now slated to buy 129 megawatts from Cape Wind as a Massachusetts condition of its merger with Northeast Utilities, the parent company of Public Service Company of New Hampshire.

Construction of the Cape Wind project is expected to begin in 2013 and it is expected to be producing power by 2015.[iv] However, there are still legal and Congressional challenges that may hold up these anticipated dates including whether the Federal Aviation Administration believes it is a risk to aviation.

Picture Source: Washington Post, http://www.washingtonpost.com/national/health-science/offshore-wind-farms-will-be-encouraged-in-tracts-along-the-east-coast/2012/07/23/gJQAD2Pu4W_story.html

Wind vs. Natural Gas Offshore Development

The Institute for Energy Research (IER) compared the specs of the Cape Wind project to a natural gas project—the Manteo project—proposed off the coast of North Carolina. The Manteo Prospect is an exploratory natural gas offshore field estimated to contain as much as five trillion cubic feet of natural gas (TCF)[v], potentially the largest domestic find of conventional natural gas since Alaska’s Prudhoe Bay in 1968.[vi]

Using the performance statistics of the Independence Hub in the Gulf of Mexico[vii], which can access an estimated two TCF in proven natural gas reserves, IER estimated the natural gas output of the Manteo Prospect and compared it to the output of Cape Wind. The Independence Hub consists of multiple subsea wells that are tied back to one centrally-located host platform producing approximately 850 million cubic feet of natural gas per day. If the Manteo Prospect produced as much natural gas as the Independence Hub, it would supply 320 trillion British thermal units (Btu) of energy annually, while the Cape Wind project would supply 5.4 trillion Btu.  Therefore, it would take about 59 Cape Wind developments to equal the energy output of the Manteo project. Click here for the calculations.

Conclusion

President Obama’s Department of Interior is spending federal funds to research the potential challenges of offshore wind development and will be auctioning off lease tracts off the coast of 6 states in the Atlantic Ocean for offshore wind development. Unfortunately, offshore wind is expensive, costing over 3 times that of onshore wind to generate electricity. Using Cape Wind and the Manteo Prospect as an example, the energy output of the natural gas in the Manteo Prospect is 59 times greater than the energy output of Cape Wind. So, why isn’t the Obama Administration proceeding with offshore oil and natural gas development, which the state of Virginia is interested in pursuing, rather than pushing expensive offshore wind?