At the moment, offshore wind farms are the best way to create very large scale renewable energy, both because the technology is pretty robust and because sticking them in the ocean reduces the NIMBY problem that bedevils any large-scale construction. (Onshore wind farms are another matter.)
Greentech Media reports (read the whole thing here) that the big offshore wind farm furthest along in pre-production, south of Marthas Vineyard off the coast of Massachusetts, unveiled its long-term bid into the electricity market and the price was pretty low:
Joint developers of the 800-megawatt Vineyard Wind project, Avangrid and Copenhagen Infrastructure Partners, published pricing for Phase 1 the project this week at $74 per megawatt-hour in year one, escalating 2.5 percent each year over a 20-year period. The price represents both energy and renewable energy credits (RECs).
In Phase 2, the long-term contract price for energy and RECs begins at $65 per megawatt-hour, with a 2.5 percent annual increase. The 20-year average cost of the two long-term contracts is $84.23 per megawatt-hour in levelized nominal dollar terms. …
The Massachusetts project bid came in well below analyst expectations and set a new U.S. record for offshore wind.
Electricity pricing is not straightforward. There’s no such things as a “free market” for a natural monopoly that society depends upon, and despite deregulation the electricity market remains tightly constrained (and rightly so, may I add).
Figuring out what exactly goes into company’s decisions about pricing and income and costs and taxes and energy credits and rebates and other stuff like that is difficult, especially since rebates and credits for long-established technologies no longer seem like rebates and credits but seem like natural market forces. Add in the subjective value of things like intermittency and pollution reduction, and it can be hard to judge even something as straightforward as a bid price.
Even with that proviso, however, this pricing is an impressive sign of how technology is upending the stodgy old energy system.