NEPOOL Participant,

Thank you for your support last month of what it is now the NEPOOL Markets Committee recommended proposal that contains RENEW’s pro-consumer amendments for renewable energy resource participation in the ISO New England capacity market.

In an update this week from Concentric Energy Advisors to its report concerning Offer Review Trigger Price parameters, it states its high offshore wind capital cost assumption for New England projects was “largely based on benchmarking against large scale projects in the North Sea in which Mott MacDonald has been directly involved.” This new fact goes a long way to explaining why ISO New England’s estimated capital cost for offshore wind is grossly inflated.

One of the projects in the North Sea that we know involved close work by Mott MacDonald is the Gemini project that is 53 miles off the coast of the Netherlands according to Mott MacDonald’s website. According to Mott MacDonald’s website, the total cost for that project was $3.2 billion, which appears to be the expected project cost from 2014 when Gemini’s project financing closed. For this 600-megawatt project, that works out to a capital cost of $5,333/kW. While exact details on what costs this number covers are not provided on its website, it is close to ISO’s current proposal of $5,358/kW. For comparison, the Cape Wind project’s reported costs were closer to $5,896/kW.

Significant cost differences exist between the Gemini project, which came online in 2017, and other recent projects in the North Sea compared to the ISO’s FCA 16 reference unit having a commercial operation date of 2025. For one, the Gemini project uses a now obsolete 4-megawatt turbine, which is like the 3.6-megawatt turbine the Cape Wind project had planned to use. As announced yesterday by GE and Vineyard Wind the industry is offering for 2023 a 12 to 13-megawatt turbine for use in the United States.

Technological advances in construction and turbines appears to be evolving so quickly that even a project completed in 2017– 8 years prior to the capacity market reference year at issue– is out of date compared to the latest technology. Concentric adds in its report that “reasonable adjustments [to the cost of the North Sea projects Mott MacDonald was involved in] were made to account for US-specific requirements” but has not provided any detail on that or considered how today’s super-sized turbines lower capital costs. It claims to have benchmarked costs against projects but, as noted above, the projects used appear to be old European projects and not based on prevailing market expectations for offshore wind in 2025.

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By contrast, RENEW’s methodology for estimating expected capital costs is rooted in actual commercial commitments made by the winning projects in the Northeast and was extensively benchmarked against recent independent analyses conducted by federal agencies and for state governments like New York. Concentric offers no information on whether it or its consultant partner has had experience working with any of the winning large-scale projects in more recent New England solicitations and whether it has the latest local cost trends in this quickly evolving industry.

This week’s information from Concentric further validates the NEPOOL recommended proposal on the Offer Review Trigger Price for offshore wind. I respectfully urge you tomorrow to vote in favor.

Sincerely,

Francis Pullaro
Executive Director

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