Launching New York's Offshore Wind Industry: Phase 1 Report
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Launching New York’s Offshore Wind Industry: Phase 1 Report Final Report | Report Number 19-41 | October 2019 (Revised) NYSERDA’s Promise to New Yorkers: NYSERDA provides resources, expertise, and objective information so New Yorkers can make confident, informed energy decisions. Mission Statement: Advance innovative energy solutions in ways that improve New York’s economy and environment. Vision Statement: Serve as a catalyst – advancing energy innovation, technology, and investment; transforming New York’s economy; and empowering people to choose clean and efficient energy as part of their everyday lives. Cover Image: Courtesy of Ørsted Launching New York’s Offshore Wind Industry: Phase 1 Report Final Report Prepared by New York State Energy Research and Development Authority NYSERDA Report 19-41 October 2019 Abstract The New York State Energy Research and Development Authority (NYSERDA) has published this Launching New York’s Offshore Wind Industry: Phase 1 Report (Report) pursuant to Case 18-E-0071, and the New York State's Public Service Commission's July 12, 2018 Order Establishing Offshore Wind Standard and Framework for Phase 1 Procurement. The Report describes all aspects of the Phase 1 procurement, including the results of the final 1,696MW award group, and considerations to inform future offshore wind procurements for New York State. The Report is accompanied by the executed contracts for Offshore Wind Renewable Energy Certificates (ORECs) with Equinor Wind US LLC for its 816 MW Empire Wind Project and with Sunrise Wind LLC (joint venture of Ørsted A/S and Eversource Energy) for its 880 MW Sunrise Wind Project. Together, the Empire Wind and Sunrise Wind projects have an average all-in development cost of $83.36 per megawatt hour (2018 dollars) with an expected average OREC cost of $25.14 per megawatt hour. The average bill impact for residential customers is estimated to be approximately $0.73 per month. The contracts utilize an innovative index OREC contracting structure where payments rise and fall inversely to a composite average of New York’s energy and capacity market prices, which do not reflect actual project revenues but do provide protection for ratepayers and projects against volatility in utility bills and project revenue, respectively over the contracts' 25-year lifetime. NYSERDA considers the procurement results as a resounding success in all respects. The Phase 1 awards represent the largest single renewable energy procurement by a state in U.S. history and positions New York as a center of gravity for this important new industry. In terms of benefits, the projects are expected to deliver over 1,600 direct new jobs for New York workers, as well as more than $3.2 billion in new economic activity while delivering approximately $700 million of avoided health impact benefits in the form of avoided hospitalization and premature death associated with asthma and respiratory and cardiovascular diseases, demonstrating tremendous value for New York ratepayers and families. The contracts further demonstrate a strong commitment to mitigation plans that actively address the interests of ocean users such as commercial and recreational fishing and environmental stakeholders and ensure that coastal communities will be fully engaged and informed during the development and construction process. ii The Phase 1 solicitation and its results are demonstrable evidence of the global significance of New York’s offshore wind market. Drawing from the highly positive response and results for Phase 1 should strengthen New York’s ability to leverage strong prices, additional economic and infrastructure benefits, and comprehensive proposals in subsequent procurement rounds, thereby supporting New York’s Climate Leadership and Community Protection Act (CLCPA) mandates. Keywords Offshore Wind Phase 1 Report Offshore Wind Renewable Energy Certificates (ORECs) Index OREC Empire Wind Sunrise Wind iii Table of Contents Abstract .....................................................................................................................................ii Keywords ..................................................................................................................................iii List of Figures ..........................................................................................................................vi Acronyms and Abbreviations ................................................................................................vii Summary ............................................................................................................................... S-1 1 Introduction ........................................................................................................................1 1.1 Objective .................................................................................................................................. 1 1.2 Organization of this Report ....................................................................................................... 1 1.3 New York State Policy Status and Background ......................................................................... 1 1.4 Offshore Wind Market............................................................................................................... 3 1.4.1 U.S. Offshore Wind Market ............................................................................................... 3 1.4.1.1 Massachusetts ................................................................................................................. 5 1.4.1.2 Rhode Island .................................................................................................................... 5 1.4.1.3 Connecticut ...................................................................................................................... 6 1.4.1.4 Other New England States ............................................................................................... 6 1.4.1.5 Maryland .......................................................................................................................... 7 1.4.1.6 New Jersey ...................................................................................................................... 7 1.4.1.7 Virginia ............................................................................................................................. 7 1.4.2 Developing U.S. Offshore Wind Markets ........................................................................... 8 1.4.3 Key Takeaways: A Rapidly Accelerating Market ................................................................ 8 2 Phase 1 Procurement ........................................................................................................9 2.1 Procurement Process ............................................................................................................... 9 2.2 Evaluation Process................................................................................................................. 10 2.2.1 Specialist Reviewer Engagement .................................................................................... 11 2.2.2 Proposer Communications .............................................................................................. 12 2.2.2.1 Clarifying Questions ....................................................................................................... 12 2.2.2.2 Proposer Interviews ........................................................................................................ 12 2.2.3 Non-Price Scoring .......................................................................................................... 13 2.2.4 Offer Price Scoring ......................................................................................................... 14 2.2.4.1 Benchmark LNOC Process and Outcome ....................................................................... 14 2.2.4.2 Offer Price ...................................................................................................................... 14 2.2.5 Score Adjustment and Aggregation ................................................................................. 15 2.2.6 Portfolio Assessment and Evaluation .............................................................................. 16 iv 2.2.7 Award Group Portfolio .................................................................................................... 16 2.2.7.1 Federal Investment Tax Credit ........................................................................................ 17 2.2.7.2 Capacity Limitations on Key Interconnection Points ........................................................ 17 2.2.7.3 Regional Competition ..................................................................................................... 17 2.2.7.4 Portfolio Diversity ........................................................................................................... 18 2.2.7.5 Award Group .................................................................................................................. 18 2.2.8 Fixed versus Index OREC Recommendation .................................................................. 19 2.2.9 The Award Group ........................................................................................................... 19 2.2.9.1 Project #1: Equinor Wind US LLC; Empire Wind, 816 MW, Gravity Based Substructure .. 20 2.2.9.2 Project #2: Sunrise Wind LLC, 880 MW .........................................................................