Madaket Wind Turbine Project
ABOUT THE ESC SUBCOMMITTEE ON WIND TURBINE RISK ASSESSMENT:
In January 2012, the Energy Study Committee formed a subcommittee on risk assessment, in an effort to more closely examine the economics and risks associated with the proposed Madaket Turbine.
The Subcommittee on Wind Turbine Risk Assessment, comprised of nine volunteers, met weekly between January-March 2012 to:
- Review and discuss the basis for projecting potential revenues and costs of the Madaket Wind Turbine project to the Town.
- Identify the key input variables that, if different from the projections, might have substantive impacts on potential revenues and costs.
- Perform analyses to assess the impacts of reasonable variations in the values of the key input variables.
- Report on findings to the Town Finance Committee and Board of Selectmen.
Committee meetings have focused on, among other things, the basis for assessing wind speed at the Madaket site; the amount of electricity that might be generated on a net basis given the wind speeds and characteristics of the wind turbine; future electricity prices; turbine capital costs; and turbine operating costs.
Peter A. Morrison, Chairman
Ian Golding, Secretary
George Aronson, CRMC
Lauren Sinatra, Town of Nantucket
David Strong, SED
KEY RESOURCES & MATERIALS
The proforma is an Excel spreadsheet that illustrates the projections of revenues, operating costs, capital costs, debt service and net cash flow for the Madaket Wind Turbine project. The spreadsheet, which is available without any password protection, can be downloaded and used by the public as a basis for performing their own economic projections and analyses. Includes: the base cases for a 900-kW wind turbine at P50 and energy costs with escalation of delivery only, assuming (a) operation at 900 kW; and (b) operation limited to 800 kW.
Memo detailing the meeting on 1/26/12 with the Mass DPU and Nantucket regarding Net Metering
This memo defines and describes the creation, sale and pricing of renewable energy credits (RECs) in the context of the economics of the Madaket Wind Turbine project. Additional information on RECs can be found online here.
ESC SUBCOMMITTEE: Wind Turbine Risk Assessment
Spreadsheet identifying the issues and feasible evaluations for subcommittee decision making
Prepared by SED with WINDPRO software
Prepared by Frank Kaminsky and Peter A. Morrison on 2/3/12
This document transmits the final results of an inquiry by the ESC Subcommittee on Wind Turbine Risk Assessment into the financial risk factors associated with the proposed Madaket Wind Turbine Project. This final report presents our results and conclusions, intended to inform the BOS and FinCom deliberations and the citizens of Nantucket prior to Annual Town Meeting. Excerpts copied below:
Report from SED regarding the net electrical output results. Note that the P50 case for the 900-kW turbine has been revised down slightly from previous estimates as the result of updated survey data and topographical modeling. This report has been done with a higher level of modeling (WAsP), and reflects a more conservative approach.
At its February 27, 2012 meeting, this Subcommittee unanimously adopted the following Statement for transmitting this Final Report to the Board of Selectmen and also to the Finance Committee:
“This Subcommittee (reporting on behalf of the Town’s Energy Study Committee) is highly confident that the information set forth in this Final Report furnishes an accurate and reliable basis for decision making. We do foresee continuing minor refinements going forward as data are updated, and we stand ready to update this Report as appropriate, but such refinements will not alter our conclusions and recommendations to you, as follows:
We have used a statistical analysis of wind speed data and computer software to produce an estimate of annual energy from the power output curve of the POWERWIND-56 (900 KW) turbine. Best practices analysis provides a strong basis for anticipating that a wind turbine at the Madaket site can produce the requisite performance characteristics and reliability that will produce positive cash flows throughout the project’s 20-year planning horizon. We base this conclusion on our analyses of projected cash flows under various combinations of assumptions (scenarios). These combinations range from “worst case” scenarios to “probable” ones.
The project’s inherent economic uncertainties pertain not to whether the project will produce a positive cash flow, but rather to the magnitude of that positive cash flow. These inherent uncertainties as to magnitude might trouble large-scale investors seeking a tightly estimated “risk-reward” metric. The Town, by contrast, needs assurance that this project will produce positive cash flows throughout its projected twenty-year project life; their magnitude is secondary.
The Subcommittee has reached unanimous agreement that a Madaket Wind Turbine with a certified power production curve and verifiable field operating experience in a similar environment will produce significant positive cash flows throughout its projected 20-year project life. That certified power production curve and a verifiable record of field operating experience, which would be ascertained through the RFP process, are mandatory prerequisites for the project to go forward with Board of Selectmen approval.”
KEY RESOURCES & MATERIALS
In a nutshell, how were the economic figures estimated? They look too good to be true, and how does capacity factor weigh into this?
FREQUENTLY ASKED QUESTIONS:
The average annual output used for the wind turbine in the P50 case is 3,464 MWh per year from a 900 kW turbine. This output is derived by (a) taking the actual wind data from the radio tower; (b) adjusting the actual wind data downward on the basis that the year in which the data were taken was slightly windier than experienced at a nearby buoy for which there is many years of data; (c) converting the wind data to gross electric output in each time interval, assuming that wind energy is converted to electricity based on the curve supplied by the manufacturer, then summing up output in each interval over the year; and (d) converting from gross output to net output by accounting for losses, down-time for scheduled and unscheduled maintenance, discounting of the actual performance of the machine vs. the theoretical curve, and a few other factors.
Capacity factor is not an input to this calculation; it is an output that is easily misinterpreted. It is better to focus on questions related to the wind speed data, the conversion of wind to electricity, and the basis for calculating losses.
Note also that revenues come from two sources: electricity costs avoided through the net metering program, and sales of Renewable Energy Certificates (RECs). For the latter, the pro forma assumes that sales are at $30/MWh. Note that CRMC is in the process of registering the High School turbine for REC sales -- and that the High School recently got an offer to purchase those RECs for $55/MWh -- which indicates that the prices in the pro forma that are the basis for REC revenues are significantly below prices in the current market.
Attached is a file with a summary table of the results of 10 of the many economic sensitivity cases that were run for the Town. All show significant positive net revenues, even when (a) electric output is reduced to account for a low-wind (P90) year; (b) REC prices decline to $20/MWH; (c) O&M costs are 50% higher than the base case estimate; (d) all of the above; and (e) the same 5 cases, but assuming that the wind turbine is limited to 800 kW output to qualify under one of the Town's options for the net metering program with National Grid. All cases assume that electricity commodity costs are flat over 20 years at current rates --- an extremely conservative scenario for those of us that remember the oil price shocks of the 1970s and that follow the current rhetoric involving Iran's threats to close the straits of Hormuz.
Town of Nantucket Energy Office
Mooney Building; 3rd Floor
22 Federal Street
NOTE: The Madaket Wind Turbine Project (Article 13) was defeated in the 2012 Annual Town Meeting on March 31. 2012. This website is retained for archival and reference purposes.