Offshore wind: a huge resource

by Bryan Walker on August 28, 2012

Two wind energy items arrived in my inbox in close proximity recently. One was from the NZ Wind Energy Association (NZWEA) congratulating Meridian Energy on turning the first sod at Mill Creek wind farm in the Ohariu Valley north-west of Wellington. It’s a 60 megawatt farm of 26 turbines. The project will cost $169 million and is expected to be commissioned by mid-2014. It will increase NZ’s installed wind capacity from 623 megawatts to 683 megawatts.

NZWEA’s chief executive made appropriate remarks to accompany the announcement, reiterating the expectation that at least 20% of NZ’s electricity will be generated from wind by 2030 and noting the technology advances in harnessing wind which is now one of the lowest cost options for new generation in New Zealand.

It’s good to see the steady progress in the development of wind energy in NZ, although it seems to arouse little excitement in Government circles who reserve most of their interest for further  fossil fuel development. And a report in Saturday’s NZ Herald was a sobering reminder that the $7 billion invested in the oil and gas sector over the past five years puts it far ahead of any other local sector when it comes to investment in new productive capacity. NZ is hardly on the brink of transition from fossil fuels, hardly, it seems, even interested in the possibility while there’s money to be made from exploiting them.

The second item was from the Earth Policy Institute (EPI), and reported that offshore wind development is picking up pace. Globally wind power now has 238,000 megawatts of capacity installed. Most of that is land-based, but the focus of the article was on the rise in offshore wind capacity, which has expanded nearly six-fold since 2006 to currently stand at 4600 megawatts. The article provides a useful overview of the prospective future development.

More than 90% of the offshore wind installations are in Europe, where the UK leads the way with 2500 MW, over half the world total.  Outside Europe, only China and Japan have operational offshore wind farms. Although its first offshore project was not installed until 2010, China already ranks fourth behind the United Kingdom, Denmark, and Belgium, with 260 megawatts. And China is poised for big development. The government’s goal is 30,000 megawatts of offshore capacity by 2020. This could generate the equivalent of roughly one fifth of China’s current residential electricity consumption. Elsewhere in East Asia, South Korea has big plans for offshore wind, targeting 2,500 megawatts by 2019.

The US by contrast is moving only slowly in offshore development. It trails only China in land-based wind generating capacity but has yet to install a single offshore turbine. After a decade of fending off opposition a proposed 470-megawatt project off the coast of Massachusetts aims to begin construction next year, as do two other East Coast projects. A proposed offshore “transmission backbone” of highly efficient underwater high voltage direct current cables financed by Google and other investors would stretch some 300 miles from New York to Virginia, and could connect around 7,000 megawatts of offshore wind to the Mid-Atlantic’s population centres. It’s now under environmental review and complete construction would take approximately 10 years. The National Renewable Energy Laboratory estimates that wind turbines installed in the shallow waters of the Mid-Atlantic region could add up to nearly 300,000 megawatts of capacity—enough to power 90 million U.S. homes. For the entire Atlantic Coast, including deeper waters, the resource is estimated at 1 million megawatts.

The EPI report claims that nine of the top ten carbon dioxide emitting countries in 2010 have more than enough offshore wind energy potential to meet all their current electricity needs. (Iran is the exception.) Russia’s offshore wind resources, for example, exceed its current electricity demand by a factor of 23. Canada’s current electricity needs could be met 36 times over with domestic offshore wind energy.

It’s clearly an enormous resource, albeit not one that all the countries concerned are racing to exploit. Current leaders in offshore wind are expected to remain the principal sites for deployment, with China, the UK and Germany accounting for more than 70% of new installations.

Lester Brown is founder and president of EPI. His well-known Plan B, to which this article is one of many updates, called in 2009 for a crash programme to develop 3 million megawatts of wind generating capacity by 2020, enough to satisfy 40% of world electricity needs. There’s little in what is reported here to suggest we are on track to that sort of figure. Indeed, this update merely concludes: “As interest grows and technology advances, offshore wind appears headed for a prominent position in the world’s renewable energy mix.”

It’s not difficult to see the promise in renewable energy, but it is difficult as yet to see sufficient development to suggest we are serious about decarbonising our economies. It can even seem a little foolish to make much of the promise of renewables, given the political strength of climate change denial and the determination of vested interests to hold on to fossil fuel industries. It’s easier to lament the apparent incapability of the world’s political leadership to challenge the disastrous route we are on than to paint hopeful prospects for clean energy. But there is movement, either with or without government support, and it’s important to publicise that and to say over and over again that we do not need to burn fossil fuels to obtain reliable and abundant power.

{ 39 comments… read them below or add one }

AndrewH August 28, 2012 at 9:44 pm

Cue, andyS!

Mr February August 28, 2012 at 9:56 pm

Maybe not.
AndyS has been..um..elsewhere…making his usual factual and helpful contributions over at Frog Blog.

The Edison Energy statement that the NZ Herald quotes from – that $7 billion has been invested in the NZ oil and gas sector over the past five years – that sounds suspiciously like it has been plucked from thin air. And may well be typical resource sector hype.
For $7 billion, or even a much smaller more realistic amount, we could really get some wind farms going.

andyS August 28, 2012 at 10:26 pm

Yes I am glad you enjoyed my contributions at Frogblog and I am heartened that some of the commenters there actually seem to agree with me, which indicates that there is life outside the bubble

andyS August 28, 2012 at 10:36 pm

in harnessing wind which is now one of the lowest cost options for new generation in New Zealand.

which is why NZ windfarms are reporting a record loss

Beaker August 28, 2012 at 10:45 pm

As an outsider looking in, I am surprised that there is no push to incentivize smaller wind farms in NZ. The giant sites are great, but by concentrating on the biggest sites in the windiest locations you appear to be missing out on the opportunity of the smaller sites feeding direct to local distribution grids.
Such schemes may still need the expensive and time consuming appraisal work such as a year plus of ornithological assessment, but are accessible to many more developers accelerating the total deployment of new renewable energy. I know you have some small schemes but from what I have seen, these seem to be done on a shoestring such as Weld Cone. NZ must be heaving with good sites for around five 2MW turbines, and as Germany demonstrates, wind class II and III sites produce plenty of power.
Is there any evidence that the ETS is providing sufficient incentive to such developments?

Mr February August 28, 2012 at 11:58 pm

Beaker,
at the moment I would say the NZETS is providing absolutely zero incentive for wind farm developers of any size!

Beaker August 29, 2012 at 12:31 am

Cheers, I feared that was the case. Is there anything planned incentivise wind farms connecting to the local grids, it looks like a very plump low hanging fruit for NZ.

andyS August 29, 2012 at 7:28 am

Do you have some evidence that wind is the cheapest way to generate electricity?

I thought it was the most expensive by the time you factor in the large capital costs.
In fact the ROI on wind in NZ is pretty marginal without the subsidies that most places in the world get

Macro August 29, 2012 at 3:44 pm
andyS August 29, 2012 at 3:53 pm

A 2011 report by Deloitte used actual data from local projects to examine the cost of wind energy in New Zealand. The report concluded that existing wind farms have been developed with a long run marginal cost of between $78 and $105 per megawatt hour, and that at the lower end of the scale, wind farms are competitive with alternative technologies.

Wind generation will become the lowest cost new generation as cheap geothermal (which is limited) is built out and as wind generation costs continue to reduce.

(My emphasis)

EM6Live http://www.em6live.com/ currently shows a price around $68 per MWh

It hardly suggests that wind is the cheapest form of energy does it?

Macro August 31, 2012 at 2:16 pm

Classic fail in reasoning in andys’s above comment. I’m sure the casual reader will spot it immediately, but as I’m trying not to respond to this commentator (and thereby give him the opportunity to air his lack of appreciation of the subject matter at hand) I’ll just wonder if * – in the highly unlikely event – a thorium power plant was to gain consent for construction at Darfield; to what extraordinary heights the spot price of Electricity would rise, for the people of the Canterbury region?

Good heavens – wind farms will all have to be completely replaced in 20 years time! And to think that I just drove over one of the 50+ year old Mighty River dams that our Gov’t is so anxious to flog off at knock down prices (now I can see why!) I hope I didn’t put a crack in it!

*(in accordance with andys dream for the future)

andyS August 31, 2012 at 2:33 pm

Which line of reasoning? I took a random snapshot from em6live, which is the best I can do as the raw data are not available to the public.

The NZ Wind press release contradicts itself and your statement too. Wind is currently not the cheapest form of energy in NZ.

Macro August 31, 2012 at 4:49 pm

See what I mean!

tra la la la la….

Andy thinks that “spot price” is equivalent to “Establishment Cost”…..

Whereas the cost of instillation will have a bearing on the subsequent spot price, that is not all there is to the matter.

andyS August 31, 2012 at 4:59 pm

“The subsequent spot price will have little impact …”

So how the hell do you expect these guys to make any money, if the long run marginal cost of wind is so high?

In the UK they have this funny money called ROCs. How do NZ wind energy companies make any money if installation costs are so high and spot prices are so low (As you claim, without any evidence)

andyS August 31, 2012 at 5:07 pm

Furthermore, the link you cited stated that wind was competitive “at the lower end of the range”

Offshore wind in NZ is a complete non-starter. The ROCs for offshore in the UK are massive and they need to be because offshore wind is so expensive. There is a lot of shallow water too, around the Dogger bank and North Sea and the Bristol Channel where they are propsing that Atlantic Array I am about ot object to on environmental grounds.

I don’t think NZ has so much continental shelf type of seabed conditions as far as I know

Beaker August 31, 2012 at 10:43 pm

andyS “How do NZ wind energy companies make any money if installation costs are so high and spot prices are so low …” Perhaps a useful first step for you would be to go and read up on the subject before commenting, or intemperately demanding that others here take time to educate you, again and again. Go on, off you trot to read up on electricity markets.
“…and the Bristol Channel where they are propsing that Atlantic Array I am about ot object to on environmental grounds…” Oh joy! Will you use your own name, or perhaps yours and several others! Please post a link to your objection on an open thread here to save me the bother!

Thomas August 29, 2012 at 4:23 pm

Well, think again. In fact, science works though evidence, not presumption! So check the facts – and that does NOT mean to read about it in your anti-wind lobby circles or their most willing mouth pieces of the UK gutter press.

Perhaps actually read the link Marco provided!

I visited Genesis Huntley power station a short while ago. One of the managers discussed power prices. They admitted that coal can no longer compete with wind which is why soon one of the four coal burners there will be retired. The cost at which wind produces energy in NZ is simply highly competitive, too competitive, to allow investment in refurbishing the coal burners at Huntley once they get past a certain age.

If you today had to make a decision to invest $100 Million into power generation, which would you choose? A plant with no future fuel cost (Wind) and no fuel exhaust stream and no current and future liabilities that would create
- or –
a plant that requires you to purchase fuel forever from a market with a shrinking resource base and with the need to dump the waste stream of your fuel burning into the environment with the people demanding that you pay for the damages that this causes.

andyS August 29, 2012 at 4:27 pm

I already responded above with facts but my comment is in moderation.
If I invest in wind, and my plant has a 20 year lifetime, then I’d hope to get a ROI on that investment within 20 years.

The Deloittes report suggested that this is pretty marginal.

At the end of that time, you have to decommission the plant and build a new one. It’s a bit more complicated than “wind is free”

Lionel A September 1, 2012 at 4:47 am

Andy S

I don’t think NZ has so much continental shelf type of seabed conditions as far as I know

Rather than pleading from ignorance why not try using GeoMapApp where you could find this:

http://lionels.orpheusweb.co.uk/Misc/NZprof1.jpg

and this:

http://lionels.orpheusweb.co.uk/Misc/NZprof2.jpg

What do you see under that sea?

Thomas September 1, 2012 at 10:42 am

Andy’s stance against wind energy is entirely pathological and indefensible drivel.

Wikipedia has a good summary on various estimates on power generation costs. Onshore Wind, also in the UK, turns out to match traditional generation cost generally.
http://en.wikipedia.org/wiki/Cost_of_electricity_by_source

Further: As far as Nuclear goes, nobody has solved the long term nuclear waste storage problem and hence the cost of that are hard to figure. Further: We only now come to the age where growing numbers of existing nuclear power stations reach their service life and need to be decommissioned. I sincerely doubt that any of these installations have accumulated the deep pocket savings accounts that will be needed to pay for the deconstruction and removal of a hot power plant! The cost of decommissioning are quite possible much higher than the cost of building nuclear power plants and the process to break one down can take decades to complete.

Coal and Gas: Nobody at the moment factors to the true cost of CO2 emissions into the power generated by these. The cost of a 2m sea level rise, what would that amount to when paid for by the kWhs generated by coal and gas fired stations today??! Would it double our power cost? Triple perhaps?? What about the other cost of AGW besides sea level rise? I doubt that Andy has any clue as how he would pay for that!

Thorium: Show me a working reactor or two and I tell you what I think about the prospects of this contributing at a scale comparable to the current global wind energy output.

Overall: We have been lulled into a completely false sense of economy by our exuberant use of fossil fuels over the last century. This has been one great party without looking at any of the consequences. We have betrayed ourselves by selling the one-off planetary inheritance of fossil energy resources at fire sale prices as if the supply was infinite and the consequences of burning it zero. The truth is entirely different and the pay day for our folly is coming.

Wind at any rate will look as a cheap and admirable source of KWhs in our power grids when the true cost of the other fuels were actually counted.

Richard Christie September 1, 2012 at 11:44 am

We have betrayed ourselves by selling the one-off planetary inheritance of fossil energy resources at fire sale prices as if the supply was infinite and the consequences of burning it zero.

Our children’s children and their children will curse us.

Lionel A September 3, 2012 at 10:53 pm

Of course the ‘interesting’ geology of that area is another matter with an indicator in that near shore sea-floor dip just off the East coast of South Island which is not that far from Christchurch.

Macro August 29, 2012 at 12:27 pm

Absolutely true! But our Government’s cannot see beyond large scale foreign investment (our current lot in particular) :( .

Beaker August 29, 2012 at 7:28 pm

Beyond the competitive cost of deploying wind power in response to power demand, there are economic advantages of deploying more wind power than that. As intermittent renewables (and nuclear) have such low marginal cost, they always displace the higher marginal cost generation, and this is the peaking plant. Fewer MWh generated by the highest marginal cost generator equates to lower consumer power costs – this adds to the economic benefit that wind, other intermittent renewables and yes, nuclear offer by hedging against future fuel price uncertainty.
The economic benefit of the intermittent renewables over nuclear is the entry threshold and end of life liability. Renewables can deployed one turbine or solar PV at a time cf nuclear’s massive money pit for each individual plant.
Thats why I think that NZ lack of any meaningful incentive for wind and solar deployment is damaging, an area of market failure that should be addressed. The giant wind farms are good, but you need to get going on the good smaller sites.

Macro August 29, 2012 at 8:08 pm

I agree entirely with what you say Beaker, but there is a complete lack of vision within the Administration in this country. We would rather spend $NZ12 Billion building roads of “national significance” funded (in a round about manner) by selling our Hydro dams off shore at a knock down price.

AndrewH August 29, 2012 at 9:47 pm

No recent NZ government appears to give any thought to incentivising wind and in contrast to other countries the industry isn;t asking for it.
I understand the govt reasoning to be that we can get to 90% renewables without incentives (I’m not so sure).
As for industry – I think the big players think that they can do it without and maybe that gives them an edge on the competition. Having said that both Meridian and Trustpower are building in Australia now (so maybe they do like a bit of incentive occasionally.
For me I think some sort of guaranteed minimum price will be necessary at some point – doesn’t need to be high, it will just make smaller projects more bankable.

Beaker August 30, 2012 at 6:28 am

A minimum floor price for renewables is good. The trouble with introducing a FiT or ROC type scheme to the NZ market is that you end up giving unnecessary incentive to the big hydro, wind and geothermal that are currently being progressed without it.

Beaker August 30, 2012 at 3:33 am

As a demonstration of the economic benefit of ‘subsidy’ to incentivize more renewable power, the following article is quite interesting.
http://conservativehome.blogs.com/platform/2012/06/adam-bruce-contrary-to-popular-opinion-wind-energy-cuts-electricity-bills-and-boosts-economic-growth.html

Mr February August 30, 2012 at 10:08 am

From thinking about it and a bit of googling, the growth of NZ’s wind generation capacity from the late 1990s seems to have been incentivised by several firm policies that were in place several years before it became clear how weak the incentives under the NZ ETS would be.

The Clark Labour Government had much stronger pro-renewable policies.

They more or less instructed the 4 state-owned generators not to construct any new fossil thermal stations. Then they included the thermal ban in the first ETS bill to catch privately owned Contact Energy. For much of Labour’s three terms, intended carbon pricing policies were on the books (either ETS or a CO2 tax). Prices being discussed were short term $NZ30 or $NZ25 per tonne and longer term (50 to 100 years) $NZ50 to $NZ 100. They also directly subsidised several early wind farms through the PRE (Programme to Reduce Emissions) where the generators were allocated carbon credits.
So their top-line goal of 90% renewable electricity was more credibly backed up by these policies. And the newly created SOE generators heard the message and understood the incentives and built wind farms.

I don’t think anyone in say 2002 would have thought that in 2012 there would be a domestic ETS where units can be purchased at less than $NZ5 a tonne!

I also found a 2009 presentation from the NZ Wind Energy Association where they say the 2009 NZETS “fixed price $12.50/t – unlikely to be enough to drive immediate investment”

AndrewH August 30, 2012 at 10:06 pm

Well maybe I was a bit harsh on Labour – but then they pulled the PRE scheme too and a long time before the ETS came into force. I was also thinking of a discussion with David Parker who made it clear that a feed in tariff was not an option for NZ

On the positive side of the ledger for National is the National Policy Statement for Renewable Electricity Generation.

But, in more interesting news we now see Australia linking with Europes ETS. Will NZ follow I wonder (and will Europe get its carbon market in order too?.

John ONeill August 30, 2012 at 5:31 pm

The forced sale of locally owned generation assets under Max Bradford’s watch in 1998 probably prevented a few small wind initiatives. I went to the opening of a small wind farm near Lawrence recently; Pioneer Generation is one case where a local authority, tasked with selling either its retail business or its generation assets, kept the dams. They have since supplemented their hydro plants by first getting three second hand turbines from Europe, and when that worked out, setting up nine medium sized ones from Gamesa.( If there’d been any sheep within a mile, I don’t think they’d have been too stressed out by noise.)
Selling a quarter of New Zealand’s generation assets to an Australian natural gas company won’t have done much for wind developments either.
And most recently, news that the Bluff aluminium smelter is threatened with closure will put a damper on all new generation prospects. That would dump 20% of current output back onto the market.

Mr February August 30, 2012 at 11:04 pm

Now it seems that New Zealand Aluminium Smelters is sacking – oh I mean trying to withdraw from funding the Kakapo breeding programme.

If the smelter does close permanently, yes the Manapouri power capacity is freed up and will nudge up supply and nudge down price.
A sensible response through the NZETS would be to adjust free allocation of emission units to industry who use fossil fuels either thermally or in processes or who are deemed electricity intensive.

Have a scroll through this MfE list of industries who have been allocated free emissions units. For example look at the list of export horticulturalists.

The greenhouse cucumber capsicum and rose growers. They are being given a handout of emissions units because they have coal or oil boilers in their greenhouses! This free allocation incentivises maintaining or even expanding their boilers instead of switching to some of the Manapouri electricity! Madness again!

John ONeill August 30, 2012 at 11:25 pm

The guy running the boilers at the uni here reckoned process heat from west coast coal could get down to about a cent per kwatt/hr. You’d need a pretty heavy carbon tax to counter that. He seemed to think wood pellets would be a good alternative, but Solid Energy’s getting out of that too, as uneconomic.
Are those pollution credits tradeable or bankable, like fish quota?

Mr February August 31, 2012 at 11:25 pm

John, yes the emission units in the NZETS are very much like fishing quota and are tradeable and bankable.

There are some huge differences.

Fishing: there is only one type of NZ fishing quota. And the total number issued is capped.

NZETS: there are at least 4 very different carbon credits/units that can be used domestically in the NZETS. There are local NZUs, and international AAUs, CERS, ERUs and RMUs. The potential supply is practically unlimited. E.g. there are about 900 million CERs issued by the UN Clean Development Mechanism. So unlimited importing equals no cap.

Mr February September 4, 2012 at 2:21 pm

Beaker,

I am afraid after a bit more reading, I am revising my view on the positive role of the Labour Government’s policies in driving expansion of NZ’s wind power generation.

Have a read of Kicking the Fossil-Fuel Habit: New Zealands Ninety Percent Renewable Target for Electricity by Geoffrey Bertram and Doug Clover.

It is Chapter 14 in a book “Generating Electricity in a Carbon-Constrained World”, Doi: 10.1016/B978-1-85617-655-2.00014-6. Ed. Sioshansi, 978-1-85617-655-2

Bertram is also the author of the book on the NZETS “The Carbon Challenge” which Bryan has reviewed.

First timing. Bertram and Clover say that the 2007 Energy Strategy and the thermal power plant ban of 2007 was too late in terms of timing. The wind farm planning would have started at least 5 to 10 years earlier than that.

Bertram and Clover say that in order to meet growing demand for power in the late 1990s the generators had to plan to move back to expanding NZ’s traditional renewables, wind, hydro and geothermal.

NZ had ‘feasted’ on cheap natural gas from the Maui field from the 1970s onwards. Price of Maui gas was unlinked to the world price. There was no infrastructure for exporting it. And the Government had signed a long-term take-or-pay contract.

By the 2000s, Maui gas was running out and any new NZ gas fields would not be as cheap.

This is reflected in the fact that of three early 2000s proposals for Combined Cycle Gas Thermal plants, Otahuhu C, Rodney and Huntly E3P, only the Genesis Huntly E3P CCGT went ahead in 2003-4 with the Government underwriting the risk of gas price changes.

In 2002, Contact Energy got consents for the Otahuhu C project and within months announced that construction would be deferred due to ‘uncertainties’ over gas prices. Contact has since then consistently expanded its wind farms and the Otahuhu C plan is still paper only.

So Labour’s policies were a bit after the fact.

Beaker September 6, 2012 at 1:43 am

Thanks for that Feb.
Not a very optomistic situation is it when instead of incentivising more wind to displace fossil fuel use, wind development effectaively follows increases in demand subject to the NZD Euro exchange rate.

AndrewH September 4, 2012 at 10:05 pm

I have seen charts showing windfarm capacity additions and Euro/NZD rates – there is a strong inverse correlation (until recently that is)

btw – Doug Clover used to comment here a bit. I’ll have a read up of that pdf.

Tony September 5, 2012 at 10:56 am
andyS September 5, 2012 at 11:00 am

I think that is what is colloquially known as putting lipstick on a pig

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