Collaborative Procurement of Offshore Wind Energy – A Buyers Network: Assessment of Merits and Approaches

Mark Sinclair, Melissa Haugh, Baird Brown, and Carolyn Elefant for CESA

This report describes the concept of a buyers network for offshore wind energy, essentially a consortium of creditworthy purchasers (including utilities, state and federal agencies, and large private commercial and/or institutional entities) that enter into long-term contracts with a developer(s) for a project’s generation. By creating economies of scale, a buyers network can spread fixed costs, such as transmission lines, over larger-scale wind farms; lower construction costs from efficiencies; reduce concentration of risk; and reduce capital costs, resulting in cost-competitive offshore wind power. The report provides recommendations and an action plan for creating a successful buyers network.

This report confirms the value of a buyers network to achieve significant reductions in the levelized cost of offshore wind energy. Specifically, the report finds that:

  • Use of a buyers network has the potential to reduce the cost of offshore wind power by approximately $35 per megawatt hour.
  • If a buyers network uses low-cost debt in the form of taxable or tax-exempt bonds, the cost could be further reduced by as much as an additional $20 per megawatt hour.
  • The ability to use federal investment tax credits could result in an additional $50 per megawatt hour reduction in cost.
  • The combination of aggregated procurement, low-cost financing, and use of the federal investment tax credit (if extended by Congress) could result in an expected levelized cost of energy for offshore wind of $95 per megawatt hour, on average. This would make offshore wind power highly competitive with other forms of electricity in the U.S.

This report is a collective effort by the Clean Energy States Alliance, Pace Global, Drinker Biddle & Reath LLP, and the Law Offices of Carolyn Elefant.

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Date: September 11, 2012
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