Questions Regarding Costs for the SFWF

Question:  how would the decreasing cost of Wind Power in general affect the SFWF (South Fork Wind Farm) project and the resulting per cost/kw to LI ratepayers?

Answer: It does not affect the cost of the SFWF as the cost is agreed upon for 20 years in the contract between LIPA and Orsted. But the average cost of offshore wind power in the LIPA portfolio is likely to continue to drop as newer and much larger projects are procured and the U.S. offshore wind industry grows. LIPA has said that they plan to buy another 90 MW and then some 800+ MW in the future as part of the NYSERDA solicitations for 2400 MW (see the LIPA fact sheet on this blog: page 3 top right graphic).

Question: Isn’t that an argument for waiting and getting our energy from the larger future projects on Long Island, west of the South Fork, that will be cheaper?

Answer: it’s important to remember that the rate impact is spread across all LIPA ratepayers, so while the cost of the SFWF may be higher, this will be shared with all LIPA customers, and we will benefit from the lower cost of future projects together with all LIPA customers. See LIPA fact sheet.

All of LIPA’s power supply and transmission cost (and almost all distribution costs) are spread over LIPA’s 1.1 million customers. That is all over Long Island. So we all benefit from future projects having lower prices.

It is also important to remember that as a result of spreading costs over a large number of customers the average residential ratepayer impact is minimal. As per LIPA’s fact sheet:”The South Fork Project Portfolio, which includes New York’s first offshore wind farm, two utility-scale battery storage systems, and new energy efficiency programs will cost an average residential customer on Long Island between $1.39 and $1.57 per month.”

In addition, we benefit from lower price risk. In comparison with LIPA’s conventional power supply which includes contract provisions requiring payment of all future fuel cost (of unknown amounts), renewable power supply has no fuel cost and does therefore not expose ratepayers to the risk of fossil fuel price uncertainty for the typical 20 year term of the contract.

Lastly, regarding LIPA’s anticipated South Fork transmission upgrades: 
With it’s 2015 South Fork RFP selection, LIPA used a “combination of transmission, demand reduction, storage, and offshore wind projects and meets the reliability needs of the South Fork at least through 2030”. In other words, had LIPA not selected the SFWF along with energy storage and demand reduction programs (called South Fork Peak Savers) the need for transmission upgrades would be greater and needed sooner.

Below is LIPA’s anticipated schedule (which is subject to change). The anticipated cost (in 2015 dollars) is $513 million.
Source: South Fork RFP LIPA Board of Trustees REV Committee Briefing, September 21, 2016, page 13: https://www.lipower.org/wp-content/uploads/2019/02/2017-01-South-Fork-Board-Material.pdf

LIPA’s anticipated schedule


(With input from Gordian Raacke)

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