Offshore wind works for Block Island, where the economics of fossil fuels no longer makes sense. Can it also be a key part of the energy mix for the coastal United States?
By PHIL McKENNA/InsideClimate News
BLOCK ISLAND, R.I. — The first offshore wind farm in the United States recently connected to Block Island, a small, pork chop-shaped landmass off the tip of Long Island. For Cliff McGinnes, a co-owner of the Block Island Power Co., the transition to wind energy can't come soon enough.
For decades, McGinnes’ company ferried up to a million gallons of diesel fuel a year from the Rhode Island mainland to power this tiny resort community, with a population of about a thousand. The fuel, a particularly costly and dirty energy source whose carbon dioxide emissions are second only to burning coal, lit up four antiquated generators on an island where power outages are common.
Last year, an oil leak at one generator burst into flames, destroying that dynamo and two others. The fire also melted one of McGinnes’ utility trucks and caused rolling blackouts at the height of the summer tourism season, when the Block Island population balloons past 20,000. The company spent more than $100,000 to rent a pair of portable diesel generators. Customers, who already pay more for electricity than anyone in the country — 50 cents per kilowatt-hour (kWh) or more during peak summer months, nearly five times the national average — shouldered the costs.
From now on, Block Island's power will emanate from five wind turbines 3 miles off its southeast coast, each nearly twice the height of the Statue of Liberty. They were built by Deepwater Wind at a cost of about $300 million. The energy they produce will not be cheap. But, at a starting cost of 24 cents per kWh, the new system will save Block Islanders $25 to $30 a month off their electricity bills.
Offshore wind power clearly works for Block Island, a place where the economics of fossil fuels no longer makes sense. Can it also be an important part of the energy mix for the coastal United States? Analysts say it can, though states will have to work with developers to bring the costs down.
For now, fossil fuel-generated power still dominates in New England, where just 3 percent of electricity currently comes from wind and solar. But the Block Island pilot project, capable of powering 17,000 homes, offers the promise of more to come. The environmental group Oceana once dubbed the Eastern Seaboard the “Saudi Arabia of offshore wind” for its strong ocean breezes, shallow waters and close proximity to a densely populated region eager to decarbonize.
Massachusetts and New York have both committed to generating a portion of their power in coming years from offshore wind, and Deepwater Wind is slated to build a larger clone of the Block Island Wind Farm — which began supplying power to the mainland in December — to serve Long Island.
Meanwhile, first-mover Rhode Island is in a position to capture a significant share of the some 11,000 jobs and $50 billion in investment projected for a potential 20-year regional build-out.
Onshore wind power has proved its worth. Electricity from new installations — which are being erected at a pace of roughly one turbine every two and a half hours around the country — sells for less than 6 cents per kWh, a price competitive with natural gas.
Offshore wind is still much more expensive, but that could change. Europe has shown that, when produced on a big enough scale, such power can compete. There, the price has fallen 46 percent in the past five years, to an average of 13 cents per kWh. That figure beats the 16 cents for new nuclear power plants, and is closing in on Europe’s 9 cent price tag for new coal plants, according to Bloomberg New Energy Finance.
“If we could do what Europe is doing, then it would be at market price today,” said Willett Kempton, research director at the University of Delaware’s center for carbon-free power integration.
Block Island’s McGinnes, who has no environmental leanings, is a convert. As chief operating officer of the Block Island Power Co., a position the plain-spoken 82-year-old Rhode Island native relinquished in November, his interest in wind was driven mostly by economics.
“For some people in this world, it doesn't matter what the cost is,” McGinnes said, sitting at his desk last August. “They want to feel green, or they want to have an electric car, or they don't want to get their electricity from a company that burns fuel oil. I have a tendency to be more about cost. That’s just the way I am.”
This offshore energy will flow from the five turbines to Block Island via a subsea cable already connected to the mainland. The turbines will harness a steady offshore breeze that on most days will supply all the island's energy needs and send additional electricity to the mainland.
When the wind isn’t blowing, electricity will flow in reverse, sending electrons from conventional power plants on the mainland to the island. Costs will be subsidized by the larger pool of ratepayers statewide, who will see their electricity bills increase by an average of $1.35 a month when the system is in full operation.
McGinnes likes both the economics and the relative simplicity of wind power.
“Running those diesels is nothing but a headache; there is always something going wrong,” he said. “If it hadn't been for the wind farm and cable, we'd still be running them. It's the best thing that has ever happened to us as a community.”
The struggle for energy security on Block Island goes back centuries. In 1721, the island’s settlers voted in a town meeting to prohibit the construction of fences higher than 4 feet, lest they run out of firewood.
Fast forward 250 years and islanders were still wrestling with the energy issue. In 1973, they set their clocks one hour ahead of the rest of the East Coast, moving to year-round daylight savings time, to try to save energy during the Arab oil embargo.
Following a second global oil crisis in 1979, the Block Island Economic Development Foundation compiled a report that underscored the urgent need for the island to kick its dependence on oil. Its authors considered a number of potential alternatives, including onshore wind, waste incineration, burning peat and a connection to the mainland grid via subsea cable.
Also in 1979, NASA and the U.S. Department of Energy began testing what, at the time, was one of the world’s largest wind turbines, which they erected in the Block Island Power Co.’s back lot. The location provided strong, steady winds and an opportunity to try to pair wind power with the island’s existing diesel generators.
Though small by today's standards — the wind turbine’s blades were less than one-third the length of those installed offshore by Deepwater Wind — the 200-kilowatt-capacity turbine produced as much as 11 percent of the island’s energy needs during off-peak winter months. The years-long test was one of four conducted across the country — Puerto Rico, Block Island, New Mexico and Hawaii — by federal researchers in the late 1970s and early ’80s that some hoped would jump-start a new era of wind energy.
The energy crises of the 1970s, however, gave way to an oil glut in the 1980s, and Block Island’s dependence on diesel continued. When NASA completed its testing in 1984, the agency offered to sell the $2.3 million turbine to Block Island Power at a steep discount, but Franklin Renz, the owner at the time, declined, and the turbine was sold for scrap.
“We didn't have the money we needed to repair and fix it," Renz said. “If we ran into a problem with the computer or some other technical part that we couldn’t handle, we’d have to hire someone, and so I said, ‘no, we wouldn’t take it.’”
Block Island stuck with diesel fuel for another 30 years, despite increasingly loud complaints from residents about power outages and voltage irregularities that made appliances burn out and clocks run fast.
McGinnes, though he profited from ownership of both the power company and one of the trucking companies that transported fuel to the island, finally agreed that the diesel generators had to go.
“We’d have been at the mercy of the cost of fuel and of course the capital expense,” McGinnes said. “Now all of that goes away.”
The question now is whether Block Island's wind turbines and others being planned along the U.S. coast will prove the long-term value of offshore wind power.
For the moment, offshore wind in the United States is only cost-effective in special cases, such as Block Island. And even that project only came to fruition because it was willed into existence by Rhode Island politicians against the objections of various critics. When the Deepwater Wind contract was approved by the General Assembly in 2010, ratepayers on the mainland, the state’s attorney general and the environmental group Conservation Law Foundation all sued, citing the high cost and alleged strong-arm tactics employed to get the project approved.
The state’s Supreme Court approved the project in 2014, but only after expressing hope that the turbines would prove as beneficial for Rhode Island as the controversial 1867 purchase of Alaska, known at the time as Seward’s folly, was for the nation.
For now, the high expense of the new turbines is locked in. To amortize the $300 million price of the wind farm, Deepwater Wind negotiated a contract with National Grid, the utility company that provides electricity for most of the state, that will increase the price of electricity generated by the turbines 3.5 percent annually to nearly 50 cents per kWh in 20 years. The cost will be absorbed by all Rhode Islanders, not just residents of Block Island.
Nevertheless, those who have studied the long-term viability of offshore wind are optimistic. In March 2016, the University of Delaware’s Special Initiative on Offshore Wind published a study on the future cost of proposed projects in Massachusetts based on a survey of industry experts. The study predicted that the cost of offshore wind power would drop from 30 cents per kWh — the average cost of energy from the Block Island Wind Farm, including its subsea cable but not including federal tax credits — to 11 cents by 2027.
Federal tax credits for both onshore and offshore wind are slowly being drawn down and are set to expire in 2020. Aside from Block Island and a second larger Deepwater Wind project now in the works, offshore wind development in the United States isn’t expected to benefit from federal subsidies.
“When we came out with the study,” said Willett Kempton, lead author of the University of Delaware review, “some said, ‘You are crazy, you are saying the price is going to be way lower than what we are seeing. You are just going to mislead people.’”
Yet soon after Kempton's study came out, winning bids for offshore wind projects in Europe had already come in at or below his 2030 estimates with subsidies. Last July, Denmark-based DONG Energy, the world's largest developer of offshore wind, won a contract to build a new wind farm off the coast of the Netherlands and to sell the electricity it generated for 8 cents per kWh.
Last September, Swedish power company Vattenfall won the right to build two offshore wind projects in the Danish North Sea for 7 cents per kWh. In April, DONG Energy got the green light to build the third and final stage of an existing wind farm off the northern coast of Germany, after agreeing to a price of 6 cents per kWh for the electricity it generated.
“Now our numbers are looking too high based on what industry is already able to do,” Kempton said.
To catch up with Europe and benefit from economies of scale, the United States needs to develop purpose-built infrastructure and a well-trained workforce, Kempton said. The lack of such resources substantially increased the cost of building the Block Island Wind Farm. For instance, since no U.S. ship was capable of hoisting the 400-ton generators 330 feet to the tops of the turbine towers, Deepwater Wind had to lease a Norwegian vessel to do the job. The ship had to steam across the Atlantic to Rhode Island, a trip that took two weeks each way. Costs for such specialty vessels range from $140,000 to $250,000 a day.
The cost problem will resolve itself if federal and state government mandate a shift from fossil fuel to renewable electricity generation, Kempton said. In August 2016, for example, Massachusetts passed legislation requiring local utility companies to get 1.6 gigawatts of their electricity from offshore wind farms in the coming decade. That’s the equivalent of the energy output from three average-sized coal-fired power plants.
New York went one better in January, when Gov. Andrew Cuomo committed to developing 2.4 gigawatts of offshore wind by 2030. Taken together, the states’ plan to produce 3 gigawatts of offshore wind capacity is 100 times larger than the 30 megawatt capacity of the Block Island Wind Farm.
The Massachusetts law envisions a steady, sizable build-out, equivalent to one large wind farm every two years over an eight-year period. Details of the New York commitment are still being worked out but will likely do the same thing.
“That’s really different from building one wind farm, because now it makes sense to invest in factories, it makes sense to invest in specialized vessels,” Kempton said. “If we have policies that provide a pipeline of projects, then you get the price down to market price. You aren’t paying a premium for renewable energy anymore.”
Efforts by Massachusetts and New York, however, may not be enough to entice industry to make the kinds of investments that are necessary to drive down the price of wind to the low levels seen in Europe.
“It will take a number of projects and a number of waves of projects before we get to anywhere near what we see in Europe in terms of price,” said Tom Harries, an offshore wind energy analyst with Bloomberg New Energy Finance.
Days after New York committed to its offshore wind build-out, Deepwater Wind won its second contract, this time to build a 15-turbine wind farm that will connect to Long Island. The company has agreed to sell electricity from this project at an estimated 22 cents per kWh averaged over a 20-year agreement. The cost is still far more than that of offshore wind in Europe, but significantly less than the 24 cents to nearly 50 cents per kWh on Block Island.
Back on Block Island, the transition to renewable energy was underway even before the electricity began flowing. The ferry operator that used to haul McGinnes’ diesel trucks to the island now runs sightseeing tours to the offshore wind farm.
McGinnes seems humbled. In November, his two co-owners sold their shares of the Block Island Power Co. to the town, which finally fulfilled an aspiration of ownership that had been around for decades.
McGinnes resigned from his position as the plant’s chief operating officer as part of the transition. He and his wife still retain their one-third stake, though he said it may only be a matter of time before they are forced to sell as the private company reorganizes under town ownership.
Though opposed to the town takeover of his company, McGinnes is upbeat about the switch to wind power. “From a business standpoint, it's a real win for us,” he said.