U.S. Offshore Wind Current Progress and Cost Drivers
Though the offshore wind (OSW) industry in the United States has lagged behind Europe, given the commitment by policymakers to support the development of the industry and allow the realization of economies achieved in Europe, future prospects for the industry appear bright. The purpose of this report is to summarize the short history of offshore wind in the United States, outline the current state of the industry, and then consider the cost drivers that will shape the industry in the future.
European Offshore Wind Cost Reductions & Implications For North America
The cumulative capacity of global offshore wind (OSW) has grown at a dramatic rate in recent years, increasing by 25-40% annually since 2011. Due to increasing industry maturity and the development of a specialized supply chain to support the industry, realization of economies of scale, and other factors, the levelized cost of energy from OSW has decreased significantly, which is an encouraging sign for development of this industry in North America.
This report illustrates how European OSW projects have realized dramatic cost reductions, and how the emerging US OSW industry can benefit from this experience. The European OSW industry started over twenty years ago, and currently has over 12,000 MW in commercial operation, while the US only installed its first 30 MW project late last year. With an installed fleet of 3,589 OSW turbines and larger turbines being offered by OSW turbine manufacturers, European projects are offering prices, before consideration of transmission costs, that are competitive with forecast wholesale market prices, promising a market that is sustainable and not dependent on government policy support.
Massachusetts 83C RFP For Long-Term Offshore Wind Energy Contracts Issued
With approval from the Department of Public Utilities earlier in the week through D.P.U Order 17-103 , the Massachusetts electric distribution companies issued a Request for Proposals for Long-Term Contracts for Offshore Wind Energy Projects on June 29, 2017. This kicks off the first in a series of competitive solicitations under Section 83C of Chapter 169 of the Acts of 2008 for 1.6 GW of offshore wind (OSW) capacity by June 2027.
Power Advisory’s commentary on the final RFP is available below.
Alberta Government Announces Significant Developments in the Power Sector
On November 23, the Government of Alberta announced its intention to create a capacity market within Alberta’s wholesale electricity market, and released a detailed Alberta Electricity System Operator recommendation paper titled Alberta’s Wholesale Electricity Market Transition Recommendation that provides background and support for the changes being made.
The Electricity Market Transition Report can be found here.
Power Advisory’s summary and commentary on the Government of Alberta announcements is available below.
The following day, the Government announced it had concluded agreements with the coal-fired generation facility owners to cease operation by 2030. These developments are part of fundamentally defining a different path going forward for Alberta’s electricity sector than the one it has been following for almost the past 20 years.
The Coal-Fired Generation Agreement Announcement can be found here.
Power Advisory’s summary and commentary on the Capacity Market Recommendation report is available below.
AESO Releases Draft RESA for Comment
Yesterday, the AESO posted the attached draft Renewable Electricity Support Agreement (RESA) term sheet for stakeholder comment.
AESO has invited stakeholder feedback regarding the key provisions of the RESA as indicated in the attached draft term sheet.
All stakeholder comments regarding the key provisions of the RESA contained within the draft term sheet must be submitted the following form template.
The AESO plans to post all received submissions/comments but will not disclose the identity of the author. The AESO may choose to follow up with stakeholders, should clarification on any part of their submission be required. The AESO also intends to post questions and corresponding responses to inquiries related to the key provisions of the RESA as contained within the draft term sheet and the identity of the author posing the question will not be disclosed.
Stakeholders will have approximately four weeks to review the key provisions of the RESA as contained within the draft term sheet and prepare their submissions. All stakeholder feedback must be delivered to the AESO at firstname.lastname@example.org no later than 5:00 pm MST on December 9, 2016.
Power Advisory has reviewed the draft term sheet and will reach out to clients and colleagues within the coming days.
IESO releases the Ontario Planning Outlook
On September 1, 2016, the Independent Electricity System Operator (IESO) released the Ontario Planning outlook (OPO) serving as the IESO’s technical report on the Ontario power system. The OPO represents the IESO’s planning outlook for the 2016 through 2035 period.
The OPO was developed in response to the June 10, 2016 request from the Ontario Minister of Energy for a technical report from the IESO pursuant to Section 25.29 (3) of the Electricity Act, 1998 on the adequacy and reliability of Ontario’s electricity resources in support of the Ontario Government’s development of the Long-Term Energy Plan (LTEP). Plans for the Ontario Government to engage stakeholders on development of the LTEP are expected to be announced in the coming weeks, with the new LTEP (LTEP 2017) likely finalized during the first half of 2017.
Power Advisory’s summary and commentary is available below.
Massachusetts – Bills H.2881 and H.4336: An Act to Promote Energy Diversity
Power Advisory has reviewed and provided commentary regarding draft legislation in Massachusetts supporting long-term contracts for clean energy resources including Canadian hydroelectric generation. As discussed in the note, we believe that recent developments in the region are providing a favorable environment for the enactment of such legislation.
Power Advisory’s client note is available below.
IESO Updates the Stakeholder Advisory Committee on stakeholder feedback on the Ontario Planning Outlook 2016
On May 11, 2016, the IESO Stakeholder Advisory Committee (SAC) met (see SAC agenda here) and a summary of the stakeholder feedback along with an update from on the Ontario Planning Outlook 2016 (OPO 2016) was presented by the Power System Planning group (see OPO 2016 update here).
Power Advisory is pleased that the IESO has recognized the risks and uncertainty facing the Ontario electricity sector over the planning horizon that we had previously identified. Below is a brief client note summarizing the OPO 2016 update along with Power Advisory’s commentary.
IESO Market Renewal Stakeholder Engagement
On March 23, 2016, the IESO released preliminary details on a forthcoming stakeholder
engagement entitled the Market Renewal Initiative (see here). The purpose of this consultation will be to gather feedback regarding the development of a workplan for renewing Ontario’s wholesale energy market design. The workplan is intended to set out specific market design changes to be
implemented over the coming years and will define target timelines for completing the work. In preparation for the Market Renewal stakeholder engagement, the IESO has published a draft
Market Renewal Stakeholder Engagement Plan (see here).
The note below is Power Advisory’s summary of the IESO’s Market Renewal consultation and draft Stakeholder Engagement Plan.
Update on Cap-and-Trade system design and Climate Change Strategy in Ontario
On February 24 2016, Ontario’s Minister of Environment and Climate Change Glen Murray introduced Bill 172: Climate Change Mitigation and Low Carbon Economy Act, 2016. (see here). The following day, the Ontario Government published a consultation draft of the Ontario Cap-and-Trade regulation (see here).
The report below is Power Advisory’s summary of the updated Ontario cap-and-trade system design and Climate Change Strategy along with associated timelines with emphasis on potential implication’s for Ontario’s electricity sector.
Power Advisory Summary and Preliminary Commentary on Alberta’s Climate Leadership Plan
The Alberta Government has declared policy direction to: 1) establish a price on carbon; 2) phase out coal-fired generation by 2030; and 3) accelerate renewable generation developments. These are the key policies that will impact Alberta’s wholesale energy market within the Alberta Government’s broader Climate Leadership Plan.
This direction will create opportunities and pose challenges for Alberta’s wholesale energy market and the development of renewable generation, as summarized by the high-level points below.
- The to be designed clean power call (i.e., Request for Proposals) must be carefully designed to ensure development of renewable generation in order to meet policy objectives along with successful integration of renewable generation into Alberta’s wholesale energy market.
- New renewable generation will require revenue adequacy from Alberta’s wholesale energy market in addition to contract revenues. Therefore, forward energy prices and their projected energy market revenues will be essential factors in the development of renewable generation.
- There will be complicated and dynamic interdependencies regarding Alberta’s energy supply in the wake of retiring coal-fired generation while renewable generation is being developed. These interdependencies will also impact revenue adequacy from Alberta’s wholesale energy market and contract revenues.
- Overall, existing Alberta wholesale market participants and renewable energy developers looking to participate in the forthcoming clean power call should be very diligent regarding the design of the forthcoming clean power call and contract, future wholesale energy prices and market revenues, and potential need to evolve Alberta’s wholesale market design and market rules regarding the integration of more renewable generation.
Power Advisory has been actively consulting for generators and Government in Alberta for the last several years, in addition to other North American jurisdictions. We combine our knowledge of Alberta’s energy market with our capabilities regarding price forecasting and market analysis, generation procurement processes, generation development, and wholesale market operations.
Power Advisory Commentary of the Proposed Cap-and-Trade system design and Climate Change Strategy
In mid-November 2015, the Ontario Ministry of Environment and Climate Change (MOECC) hosted a series of stakeholder sessions to present an update on the progress of the province’s forthcoming cap-and-trade program design (see here). Following the sessions, the MOECC posted details of the proposal to the Environmental Registry for public comment.
On November 24, 2015, the provincial government announced Ontario’s Climate Change Strategy which provides further support for the development of a cap-and-trade system in Ontario (see here).
The report below is Power Advisory’s summary of the proposed Ontario cap-and-trade system design and Climate Change Strategy along with associated timelines with emphasis on potential implication’s for Ontario’s electricity sector.
Power Advisory Commentary on IESO Planning Update
Power Advisory has amended our Ontario Generation Outlook Report based on a recently released IESO’s planning update. The report below is Power Advisory’s high-level commentary on the IESO’s planning update.
Overall, Power Advisory agrees that post 2020/21 Ontario will require at least between 2,000 to 3,000 MW of capacity supply but see risks and changing policies/markets that could change and increase the capacity supply need.
We are also working on a high-level commentary of the IESO’s NUG Framework Assessment.
Power Advisory Commentary on Carbon Regulation in New England
On July 23rd Michael Ernst spoke at the New England Energy and Commerce Association’s Annual Environmental Conference on the impact of Carbon Regulation on New England electricity generators.
Power Advisory Commentary on the Announced Cap-and-Trade System in Ontario
On April 13, 2015, Ontario Premier Kathleen Wynne announced that a cap-and-trade system will be
implemented in the province to limit greenhouse gas pollution and to fight climate change. Power Advisory LLC has completed a high-level commentary on the proposed cap-and-trade system in Ontario with potential implications for renewable energy generation.
ISO-New England Forward Capacity Auction #9 Price Forecast
Power Advisory has just finalized our forecast of prices in ISO-NE’s forthcoming Forward Capacity Auction (FCA) #9. Reflecting tightening conditions in the ISO-NE forward capacity market, the implementation of a sloped demand curve, and ISO-NE’s Pay for Performance program, Power Advisory is projecting FCA #9 to clear at the highest prices achieved to date. Adding to the strength shown in FCA #8, a sloped demand curve contributes greater stability to the market. In a market which is relatively tight, this limits the range of plausible prices at which the market will clear.
Planning vs Partiality: A Case Study from PJM on competitive procurement of regional transmission under FERC Order 1000
John Dalton, President of Power Advisory LLC, recently published an article in Public Utilities Fortnightly on competitive procurement for transmission facilities, focusing in particular on PJM’s experience with the competitive procurement process for the Artificial Island Area in New Jersey.
Young Professionals in Energy: Jason Chee-Aloy presents the possibility of a Capacity Market in Ontario
On October 22, Power Advisory’s Managing Director Jason Chee-Aloy provided a presentation on the possibility of a Capacity Market in Ontario. The IESO has initiated a stakeholder engagement regarding potential development and implementation of an IESO-Administered Capacity Market (i.e., Capacity Auction).
CanWEA 2014 Conference: Evidence Regarding Future Declines in the Cost of Wind
On October 28, Power Advisory’s President John Dalton presented evidence of future declines in wind energy costs. The presentation provided recent experiences with cost of wind energy and future cost reductions.
Examining the Future Structure of Ontario’s Electricity Market: Should Ontario Incorporate a Capacity Market or Alternative Structure Framework?
On April 15, Power Advisory’s Managing Director Jason Chee-Aloy presented his expert opinion on the possibility of a future capacity market in Ontario. The presentation reviewed what a capacity market is; the current arrangement to ensure capacity in Ontario; and key aspects that stakeholder consultation should consider.
The Independent Electricity System Operator (IESO) has issued a Request For Proposal (RFP) for 35 MW of Energy Storage projects providing regulation, reactive support and voltage control services. Power Advisory has summarized the key components of the RFP and provided an assessment of opportunities offered by the RFP.
On December 17, 2013, the Ontario Power Authority (OPA) hosted a webinar to discuss the development of the Large Renewable Procurement (LRP) and next steps. This note provides Power Advisory LLC’s high-level summary of the LRP webinar and commentary on key elements of the LRP as discussed by the OPA.
Power Advisory’s expert team has completed a high-level review and commentary on the updated Long-Term Energy Plan (LTEP) that was released by the Minister of Energy on December 2nd. This review identifies the key elements of the updated LTEP, provides Power Advisory’s expert commentary and draws conclusions on the impact of the LTEP on the future for the Ontario energy sector.
Ontario Electricity Market Quarterly Assessment Report
This report provides Power Advisory’s perspective on major developments in Ontario’s wholesale and retail power markets, offering valuable insights on opportunities and
IESO engagement activities, government policy developments, OEB regulations and federal initiatives are reviewed as well as neighboring jurisdictions . With this focus, the report is targeted toward parties that are considering or have made long-term investments in the market. As such, the report is likely to be of interest to generators, project developers, policy-makers and large industrial consumers.