U .S./European Cost Comparison Study Preliminary Results

1. U.S./European Cost Comparison StudyPreliminary 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 89,077 MW 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 2050U.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-102015-4557. Washington, D.C. Accessed May 2015. http://www.energy.gov/sites/prod/files/WindVision_Report_final.pdf

3. U.S. Offshore Wind Market Overview – North Atlantic 30 MW Block Island Wind Farm 2400 MW 1600 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 3500 MW 350 MW • Data Source: Musial, W. et al (2017) “2016 Offshore Wind Technologies Market Report” U.S. Department of Energy Report, August 2017. https://energy.gov/sites/prod/files/2017/08/f35/2016%20Offshore%20Wind%20Technologies%20Market%20Report.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. 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. Initial U.S. Offshore Wind Price PointsProjects with Offtake Agreements All prices are estimated by NREL and may not reflect the actual price negotiated [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

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 walter.musial@nrel.gov Photo Credit : Dennis Schroeder-NREL