South Fork wind farm more costly than larger state projects, LIPA says

By Mark Harringtonmark.harrington@newsday.com MHarringtonNewsOctober 28, 2019

Energy from an offshore wind farm that LIPA contracted with in 2017 to supply power to the South Fork will cost slightly less than double that of two larger projects recently awarded by the state, according to information released Monday by the authority.

LIPA in a briefing paper said the 20-year average cost for energy from the 130-megawatt project will be 14.1 cents a kilowatt hour, compared to 8.3 cents from the state-contracted projects that will deliver some 1,700 megawatts. The LIPA figure appeared in a footnote of a comparison of costs for various projects, including the nation's first, the Block Island wind farm, at 37.6 cents a kilowatt hour, LIPA said.

Monday's release marks the first time LIPA has disclosed the project's specific cost of energy, which was the subject of a lawsuit earlier this year by an open-government group and a Wainscott resident who opposes a cable for the project landing at a nearby beach. The landing site for the cable remains a subject of bitter contention in East Hampton.

LIPA has previously said the South Fork wind contracts and related battery and demand reduction programs would hike average consumer bills by $1.39 to $1.57 per month, by the time the project comes in service by late 2022. The state projects will increase average residential customer monthly bills by 73 cents statewide when they are completed in 2024, officials have said.

In its briefing paper, LIPA said the first-year price for the South Fork project, which was initially 90 megawatts, was 16 cents a kilowatt hour, with an annual increase of 2 percent. LIPA last year signed a contract with developer Orsted/Deepwater Wind to expand the project by 40 megawatts to 130 megawatts, with costs from the additional 40 megawatts amounting to 8.6 cents a kilowatt hour. The combined 14.1 cents listed by LIPA as the 20-year levelized cost includes a 6.5 percent "discount rate" that LIPA said it employed to make the figure apples-to-apples comparable to other states' project costs. On an actual basis, the 20-year price would be higher than 14.1 cents, LIPA said.

Assemb. Fred Thiele (I-Sag Harbor) said LIPA should have released the cost details two years ago.

"There was no legal basis for keeping this information hidden from the public," he said. "Unfortunately, this lack of transparency did substantial damage to gaining public trust for the extremely laudable goal of renewable energy."

Thiele blamed the delay for creating "division in the East End community and the commercial fishing community which has hindered the progress of the South Fork Wind Farm," adding that he was "pleased" LIPA learned a lesson from the state, which released its pricing information last week.

Excluding the discount rate, LIPA said 20-year cost for energy for the wind farm is 16.9 cents per kilowatt hour for the 130 megawatt project: 19.4 cents for the original 90 megawatts and 11.3 cents for the additional 40 megawatts.

Si Kinsella, a Wainscott resident who is suing LIPA for the full wind-farm cost information, said the figures released Monday don't go far enough, even while showing that the costs are "not competitive."

"It's a $1.62 billion project that's completely unnecessary," he said, referring to the total ratepayer cost listed on the state comptroller's website for the original 90 megawatts. "No matter how you slice and dice this, it's not a competitive solution" compared to other states' less costly projects.

Kinsella called on LIPA to "disclose the executed contract price" without the discount rate.

In addition to the 130 megawatts for its South Shore project, LIPA also plans to take an additional 90 megawatts of offshore wind from the nearly 1,700 megawatts the state will contract for from Orsted and Equinor.

Tom Falcone, chief executive of LIPA, said those infusions of offshore wind are just the beginning. Over the next 15 years, LIPA may contract for at least another 800 megawatts and perhaps more than 1,000, he said. That will come as New York moves toward a goal of bringing 9,000 megawatts to the state energy grid by 2035.

Falcone made no apologies for contracting the South Fork wind farm at a higher cost. “That pricing was competitive with Long Island renewable energy prices at that time,” he said, referring to costs for utility-scale projects such as large solar arrays, among others. “Had we not bought this [energy from the wind farm], we would have bought something else at 2015 prices,” he said, adding, “We know that prices will continue to decline.” Bids for the project were first solicited in 2015.

At the same time, LIPA is working on a $513 million project to enhance the South Fork electric grid in coming years that will largely solve the problem the wind farm was intended to address. But Falcone noted the wind farm would be ready by late 2022, while the total transmission project is expected to be done by 2027. He said the wind farm is thus needed in the interim, and is saving customers money by deferring the costs of the full transmission upgrade until 2027.

“The need keeps growing,” he said of the South Fork, where the peak summer load is driving demand to a projected 170 megawatts by 2030. The transmission upgrade is expected to cost average residential LIPA ratepayers $2.48 per month by the time it’s complete, LIPA has said.