1. U.S./European Cost Comparison Study Preliminary Results
Walt Musial
Principal Engineer
Manager of Offshore Wind
National Renewable Energy Laboratory
March 6, 2018
Offshore Wind Industry Update Briefing

2. U.S. Wind Vision Study - 35% of Electricity From Wind by 2050
Today
Offshore
35% US Wind Electricity
Offshore – 86 GW
Land-based – 318 GW
Land-based
Land-based Wind Cost
Offshore Wind Cost
Declining
Offshore Wind is 20% of Total U.S. Wind Energy by 2050 U.S. Wind Vision Study Scenario Estimates 86 GW from Offshore
DOE. 2015a. Wind Vision: A New Era for Wind Power in the United States. U.S. Department of Energy Office of Energy Efficiency and Renewable Energy. DOE/GO Washington, D.C. Accessed May

3. U.S. Offshore Wind Market Overview – North Atlantic
30 MW Block Island Wind Farm
2400 MW
1600 MW
3500 MW
350 MW
Market Evidence
13 offshore lease areas with exclusive site control
13.3 GW of capacity potential in leased areas
4 states with specific offshore wind “above market” off- take policies (Massachusetts, New York, New Jersey, and Maryland)
4 new lease areas requested – new areas may be deeper
Data Source: Musial, W. et al (2017) “2016 Offshore Wind Technologies Market Report” U.S. Department of Energy Report, August Offshore%20Wind%20Technologies%20Market%20R eport.pdf
Estimated Market – 5.45 GW
(MA, NY, and MD have all proposed further increases)

4. Adjusted European Strike Prices Show 65% Reduction
Why are costs coming down?
Technology improvements
Lower risk
Maturing supply chains
Increased competition

5. Preliminary Results From:
Key Questions
Where will offshore wind prices end up?
What are the risks that may prevent these prices from being economically viable?
How will these prices/costs translate to initial projects in the United States? (see pending publication)
Can the United States eventually achieve the same price point as Europe (or better)?
What new technology, infrastructure, or domestic policies are needed to gain parity?
Preliminary Results From:
P. Beiter, P. Spitsen, W. Musial, E. Lantz, Assessing Initial U.S. Offshore Wind Project Costs, National Renewable Energy Laboratory, Publication Pending

6. Long Island Power Authority
Initial U.S. Offshore Wind Price Points Projects with Offtake Agreements
All prices are estimated by NREL and may not reflect the actual price negotiated
Block Island
Wind Farm
South Fork
US Wind
Skipjack
Developer
Deepwater Wind
Project Location
Rhode Island
New York
Maryland
Delaware
Size
30 MW
90 MW
248 MW
120 MW
Nominal Price
(Year $)
$244/MWh
(2013)
$160/MWh
(2017)
$131.93/MWh
(2012)
Real Price
(2016$)
$251.38/MWh
$155.68/MWh
$137.91/MWh
Year Signed
2010
2017
Project COD
2016
2022
2023
Contract Length
20 years
Type
PPA
OREC
Counterparty
National Grid
Long Island Power Authority
Maryland Utilities
[1] The exact details of the power purchase agreement between Deepwater Wind and LIPA have not been made public. The estimate price included in this analysis come from Cardwell (2017).

7. US Offshore Wind Price Point Takeaways
Number of projects too small for meaningful estimate
Average project size below commercial optimum, prices may be high
All prices are preliminary: NREL estimates may not reflect the actual price
$137.9 MWh may be the price point to beat set by Maryland ORECs
Next price point likely to come from Massachusetts

8. Estimating LCOE for Initial U.S. Projects
NREL approach for market-based derivation of LCOE for early, commercial-scale offshore wind projects in the U.S. with a hypothetical commercial operation date in 2025
Select reference sites to compare U.S. and German projects
Estimate German reference LCOE from price data
Assess key similarities and differences between U.S. and German reference projects
Develop driving assumptions and estimate cost differences for each cost category
Estimate LCOE for Initial US Projects

9. Key Assumptions for Cost Comparison
Same Turbine rating: 10 MW for both German and U.S. projects – no adjustment
Jackets substructures fabricated domestically – no adjustment
Nacelle imported from Europe for U.S. project - Added mobilization costs
Tower imported from Europe for U.S. project - Added mobilization costs
Blades imported from Europe for U.S. project - Added mobilization costs
U.S. developer is fully burdened with grid connection costs
Higher contingency and procurement prices for U.S. project due to higher risk
Less favorable financing conditions for U.S. project due to higher risk
Lower capacity factor for U.S. project (based on actual wind speeds)
Note: U.S. capacity factor based on the average BOEM lease areas in the Northeast. The German project was based on the average capacity factor of the four German projects from first offshore wind auction.

10. Key Finance Parameters for German and U.S. Reference Sites
German reference site
U.S. reference site
Inflation rate (%)
2.5
Interest rate (nominal) (%)
4.4
Project useful life (years) 30
Interest during Construction (%)
8.0
12.0
Construction Finance Factor (%)
107.5
109.8
Share of debt (%)
75.0
70.0
Target after-tax IRR (nominal) (%)
6.0
Effective income tax rate (%)
40.2
Source: Green Giraffe (2016) and NREL research

11. Cost Differences Between the U.S. and German Reference Sites

12. Key Opportunities for US Offshore Wind Cost Reduction
Grid infrastructure – Grid aggregation accounts for 20% of the cost premium at US site.
Marine Operations – Immature/insufficient access to vessels, ports, and construction support capabilities account for 15% of cost premium
Risk and Financing – Actual and perceived risk for offshore may be contributing 33% additional cost over European projects
Site Selection – Higher wind speed at selected European sites account for 32% of the additional cost to US projects
US Offshore Wind Industry has the potential to mitigate most of the observed cost differential between current European bids and future US Projects placed in BOEM lease areas

13. Thank you for your attention!
Walt Musial
Offshore Wind Manager
National Renewable Energy Laboratory
Photo Credit : Dennis Schroeder-NREL