Long Island Power Authority Releases Pace Study on Offshore Wind Project Costs

Uniondale, NY – August 23, 2007 – The Long Island Power Authority (LIPA) today released a study prepared by Pace Global Energy Services evaluating the economics of its proposed 140 megawatt (MW) Offshore Wind Park.

Pace estimates that the project’s cost could reach $811 million, which includes the construction and financing costs, and the cost for the transmission cable needed to bring the power produced by the wind turbines to a land-based LIPA substation.

When compared with the cost of Long Island-based combined cycle natural gas-fired generating plant, the Pace study concludes that the “levelized green premium” for wind-generated power, when spread out over a 20-year period, would come to about $66 million per year or about $2.50 per month for the typical residential consumer who uses 775 kilowatt hours per month.

The “green premium” for wind power is calculated by taking the difference between the cost of a megawatt hour (MWh) of electricity produced in a combined cycle natural gas power plant on Long Island, which is about $137 per MWh, and an MWh of power produced by the Offshore Wind Project, which could be $291.  The “green premium” of $153 per MWh when annualized and spread over a 20-year power purchase agreement projects the “levelized green premium” to be about $66 million per year in 2010 dollars.

The Pace study, found that the costs for the proposed offshore wind project are in line with market expectations for North American offshore projects given the early stage development of such a market and the overall lack of a well-defined national energy policy to support these kinds of projects.  Costs for developing offshore wind projects in Europe are considerably lower due to the experience in building such projects there and the government incentives offered for such alternative energy resources.

LIPA requested the study after FPL Energy had given the Authority an updated cost estimate of $697 million, as of the end of 2006, to construct the 40 wind turbines that would generate about 140 megawatts of renewable wind energy for Long Island.  FPLE’s cost estimate did not include the financing and transmission cable costs.

“Obviously, there is a premium for building an offshore wind project when compared to conventional energy projects,” said LIPA CEO/President Richard M. Kessel.  “Long Island must decide where it wants to go with its energy future.  Should we continue on as we have in the past by adding more and more fossil fuel power plants or do we give a large-scale renewable energy project a chance to help break the grip of oil and natural gas as the primary fuels used to keep our lights on?”

LIPA’s Board of Trustees will discuss the proposed Offshore Wind Project and possible alternatives at its September 25 meeting.

The Pace study can be downloaded from LIPA’s Web site: www.lipower.org.

LIPA, a non-profit municipal electric utility, owns the retail electric Transmission and Distribution System on Long Island and provides electric service to more than 1.1 million customers in Nassau and Suffolk counties and the Rockaway Peninsula in Queens. LIPA is the 3rd largest municipal electric utility in the nation in terms of customers served and the 6th largest in terms of electricity delivered.  In 2006, LIPA outperformed all other overhead electric utilities in New York State in all three major reliability categories.  LIPA does not provide natural gas service or own any on-island generation assets. More
information about LIPA can be found online at: http://www.lipower.org.

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