Financial viability of offshore wind on the Texas Gulf Coast




Hoffman, Cody Scott

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Offshore wind is already a significant component of the electricity generation mix in Europe, and improvements in technology and cost are enabling increased offshore wind penetration in new markets around the world. Thus far, the US has struggled to materially participate in this industry, with only a single 30 MW offshore project in operation. Navigating a complicated regulatory framework, the lack of a coherent national policy, and facing local opposition, the industry has experienced some spectacular failures in recent years. However, the US now has an opportunity to take advantage of the lessons learned from years of (primarily) European development and combine them with excellent offshore wind resources close to transmission-constrained load centers. By far the leader of the US onshore wind industry, and with a long history of offshore oil and gas development, Texas has some major advantages when it comes to offshore wind. Wind resources in the Gulf of Mexico are more than adequate for economic production. With shallow depths and relatively calm seas, the Texas Gulf Coast is also well suited to offshore wind construction. These factors, coupled with a pro-development state regulatory scheme and extended jurisdiction over submerged lands, suggest that Texas is an ideal candidate for offshore wind development. With no currently active projects in the pipeline, this thesis examines the economic viability of offshore wind development on the Texas Gulf Coast at the project level. Using an ideal location and cost data from National Renewable Energy Laboratory (NREL), the Energy Information Administration (EIA), and industry sources, a hypothetical “test project” was developed and evaluated against three cost estimate cases and ten regulatory scenarios. These inputs were fed into a Discounted Cash Flow model to determine potential competitiveness in the Power Purchase Agreement (PPA) market in the ERCOT region. Results indicate that without significant cost reductions or major changes to either market conditions or federal/state incentive schemes, Texas Gulf Coast offshore wind cannot compete with other forms of onshore renewable generation. With ever-decreasing costs, it is not impossible that offshore wind could become viable at some point in the future, but given current conditions, it is not likely that any projects are on the near-term horizon.


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