Offshore wind gets pricey

An offshore wind project in New York is dead in the water this week after the chairman of the Long Island Power Authority called the plan too expensive.

The power authority released an independent report on the 140 megawatt project yesterday which estimated costs of over $800 million, including the price tag for the transmission cable to bring the power to shore.

LIPA chairman Kevin Law said he would recommend canceling the project.

"One of the reasons why the cost escalated so much was because of increased material costs," LIPA spokesman Bert Cunningham told the Cleantech Group.

Costs for offshore projects are generally two to three times the cost of onshore wind farms.

In June, a 500 MW offshore project in Texas was dumped because of money.

Australian investment bank Babcock & Brown said the multibillion-dollar project, which would have been the nation's largest, didn't make economic sense.

LIPA needs to come up with alternatives to comply with the state's renewable portfolio standard, which calls for electric utilities to get 25 percent of their energy from renewable resources by the year 2013.

The power authority's board of trustees are set to discuss the wind project and possible alternatives at a Sept. 25 meeting.

FPL Energy spokesman Steve Stengel said, "We have not received any notice from LIPA of their intentions." But he added that, "cost has been an issue of concern for some time."

FPL Energy, part of Florida's FPL Group (NYSE: FPL), was set to construct the 40 turbine offshore wind farm.

"We provided a cost estimate based on our experience, and working with numerous vendors," said Stengel. "The case study verified that the costs were reasonable," he said, referring to the independent report.

First proposed in 2003, original estimates for the wind farm were between $150 million and $200 million.

In 2004, FPL won the right to build the project with a bid of $356 million, but raised its estimate to almost twice that amount at the end of 2006.

Even without this project, FPL should have enough to keep it busy.

"We've got more than a 1,000 megawatts of wind projects currently under construction," said Stengel.

The company announced in July that it plans to add 8,000 MW to 10,000 MW of new wind projects to its portfolio by 2012 (see Wind power going strong down south).

Cape Wind president Jim Gordon, who considered a bid on the Long Island project back in 2003, reportedly wrote a letter to LIPA saying his company determined that the sea conditions there were "unacceptable."

Cape Wind's 130 turbine offshore project in Massachusetts has its share of vocal opponents, including, most prominently, U.S. Sen. Ted Kennedy.

The cost of the 468 MW Cape Wind project will reportedly top $1 billion, but the company has yet to disclose financial details.

The failed Long Island wind farm had at least one advantage over Cape Wind, according to LIPA's Cunningham. "As the local utility, we put out the request and we were going to be willing to buy the power."

Cape Wind has not announced any power purchase agreements.

Cunningham said he expects LIPA, which is already importing about 100 MW of hydro power from Massachusetts, to look at local and imported options for its renewable energy needs.

The utility has five land based turbines in different locations that generate 100,000 kilowatt hours of electricity annually.

"The primary reason why we went offshore was that we didn't think that a large scale, land-based wind turbine project would be acceptable because of the amount of land that would be needed."

For LIPA, it could be an uphill battle to find a local program that would be acceptable.

"Undeveloped land is getting scarce here on Long Island," said Cunningham.

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