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UNITED STATES OF AMERICABEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Atlantic Grid Operations A LLC
Atlantic Grid Operations B LLC
Atlantic Grid Operations C LLC
Atlantic Grid Operations D LLC
Atlantic Grid Operations E LLC
Docket Nos. EL11-____-000ER11-____-000
DIRECT TESTIMONY OF
JOHANNES P. PFEIFENBERGER AND
SAMUEL A. NEWELL
ON BEHALF OF
THE AWC COMPANIES
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TABLE OF CONTENTS(Exhibit AWC-400)
I. INTRODUCTION ................................................................................
II. PURPOSE AND SUMMARY OF TESTIMONY..............................
III. BACKGROUND: STATE RPS REQUIREMENTS AND ECONOBENEFITS OF OFFSHORE RENEWABLE POWER DEVELOP
1. State Renewable Energy Policy Requirements ......................
2. Production Cost, Energy Price, and Emissions Benefits ......
3. Employment and Economic Stimulus Benefits .....................
IV. AWC PROJECT CONFIGURATION AND COSTS .......................
V. PUBLIC POLICY BENEFITS ASSOCIATED WITH THE AWC
VI. RELIABILITY AND OPERATIONAL BENEFITS ........................
VII. CONGESTION RELIEF AND OTHER ECONOMIC BENEFITSAWC PROJECT RELATIVE TO A RADIAL ALTERNATIVE ...
1. Congestion Relief and Related Benefits .................................
2. Capacity Value ........................................................................
3. Reduced System Operating Costs ...........................................
4. Emission Reduction Benefits..................................................
Qualifications of Johannes Pfeifenberger (Exhibit AWC
Qualifications of Samuel Newell (Exhibit AWC
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UNITED STATES OF AMERICABEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Atlantic Grid Operations A LLC
Atlantic Grid Operations B LLC
Atlantic Grid Operations C LLC
Atlantic Grid Operations D LLC
Atlantic Grid Operations E LLC
Docket Nos. EL11-____-000ER11-____-00
DIRECT TESTIMONY OFJOHANNES P. PFEIFENBERGER and SAMUEL A. NEWELL
I. INTRODUCTIONQ. PLEASE STATE YOUR NAMES, EMPLOYER, TITLE, AND BU1
ADDRESS.2
A. My name is Johannes P. Pfeifenberger and my name is Dr. Samuel A3
We are both Principals ofThe Brattle Group, an economic consulting 4
offices in Cambridge, Massachusetts; Washington, D.C.; San Francisco5
Brussels; and Madrid. Our business address is 44 Brattle Street, C6
Massachusetts 02138.7
Q. ON WHOSE BEHALF ARE YOU TESTIFYING?8
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A. I am an economist with a background in power engineering and over 21
work experience in the areas of regulated industries, energy policy, and 2
received a M.A. in Economics and Finance from Brandeis University a3
in Electrical Engineering with a specialization in Power Engineering an4
Economics from the University of Technology, Vienna, Austria. I 5
Brattle Groups utilities practice area and am the author and co-6
numerous articles, reports, and presentations on subject areas relat7
economic benefits of transmission investment, planning, market design8
allocation.9
I have filed testimony before the Federal Energy Regulatory Co10
(the Commission or FERC) and numerous state regulatory commis11
range of subject areas, including the economic benefits of tra12
investments. For example, I filed testimony with the Public Service Co13
of Wisconsin on behalf of American Transmission Company LLC 14
Management Inc. in Docket No. 137-CE-149 discussing the economic b15
the Paddock-Rockdale Transmission Project, which was the first e16
transmission project evaluated by the Wisconsin commission. On 17
Southern California Edison Company, I testified before the Arizona Po18
and Transmission Line Siting Committee in Docket No. L-00000A19
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analysis of the economic stimulus benefits associated with the const1
proposed SPP transmission and wind generation, which SPP filed 2
Docket No. ER10-1069 in support of the proposed Highway/Byway tra3
cost allocation methodology. I also filed with the Commission (co-auth4
colleagues on behalf of ourselves) comments in Docket Nos. AD5
RM10-23 on regional transmission planning and cost allocation, and 6
testimonies on transmission tariff design, the costs and benefits of a7
transmission access charge methodologies, and regional transmission org8
(RTO) scope and configuration issues on behalf of variou9
Exhibit AWC-401 to our testimony contains a more complete descript10
qualifications and expert witness experience.11
Q. DR. NEWELL, PLEASE DESCRIBE YOUR BACKG12
EDUCATION, AND PROFESSIONAL EXPERIENCE AS IT R13
TO THIS DIRECT TESTIMONY.14
A. I am an economist and engineer with 12 years of work experience in the15
and analysis of electricity markets and their relationship to the tra16
system. I received a Ph.D. in technology management and policy 17
Massachusetts Institute of Technology, a M.S. in materials sci18
engineering from Stanford University, and a B.A. in chemistry and phy19
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author or co-author of numerous articles, reports, and presentations o1
range of subject areas related to wholesale electricity markets and transm2
I have submitted testimony with FERC in RTO-related cases and3
expert reports for PJM, other RTOs, and transmission clients that have 4
with both state regulatory commissions and the FERC. For example, I w5
the co-authors of a report filed by American Transmission Company 6
the Public Service Commission of Wisconsin in Docket No. 137
discussing the economic benefits of the Paddock-Rockdale Transmissio8
My role was to advise staff at American Transmission Company LLC 9
of PROMOD IV simulations, to compute customer benefits, and to10
several categories of benefits outside the scope of the model. Recen11
testified on behalf of Connecticut Light & Power and The United Illu12
Company in their Integrated Resource Planning proceeding be13
Connecticut Department of Public Utility Control. My role, as the lea14
Brattle team in that assignment, was to analyze customer impacts a15
implications of various resource strategies regarding renewables develop16
energy efficiency. Exhibit AWC-402 to our testimony contains a more17
description of my qualifications and expert witness experience.18
19
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II. PURPOSE AND SUMMARY OF TESTIMONY1Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY?2
A. The purpose of our testimony is to describe and quantify some of t3
policy, reliability, congestion relief, and other economic benefits assoc4
the Atlantic Wind Connection Project (AWC Project or Project).5
Q. WHAT IS THE AWC PROJECT?6
A. The AWC Project is a double-circuit, high-voltage direct current (7
offshore transmission backbone with twelve offshore AC-DC converte8
capable of integrating at least 6,000 MW of offshore wind gene9
geographic locations ranging from northern New Jersey to southern Virg10
Project will also have onshore DC-AC converter stations at seven lo11
New Jersey, Maryland, Delaware, and Virginia, where renewable pow12
injected into the existing transmission grid in controlled proportions. Th13
which will be built in five phases, can also be used to transmit up to 2,0014
energy and capacity between interconnection points along the coast, pro15
offshore reinforcement to the existing onshore grid in the congested Mi16
power market.17
Q. WHAT ARE THE AWC PROJECTS MAIN BENEFITS?18
A. The AWC Project provides a platform on which offshore wind devel19
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Offshore wind generation facilitated by the AWC Project will lo1
emissions by reducing coal, gas, and oil usage, and it will reduce ener2
across the PJM footprint. The Project will also enhance reliability a3
congestion in what the Department of Energy (DOE) has designated 4
the most congested National Interest Electric Transmission C5
Importantly, this is true of the AWC Project whether viewed without w6
out, full wind build-out, or simply in comparison to a scenario in which7
wind is interconnected by radial transmission lines.8
The Mid-Atlantic region offers the most abundant and most 9
offshore wind resources in the country. The AWC Project can help10
Atlantic and other PJM states take advantage of this resource to achieve 11
requirements. In doing so, the Project offers significant economi12
compared to individual radial interconnections for each offshore wind 13
reducing siting, permitting, and interconnection barriers to wind develop14
Project will expedite the installation of offshore wind on a scale that v15
spurs the development of local industry to provide equipment and servic16
will substantially lower the cost of offshore wind development.17
Of particular importance, the AWC Projects HVDC back18
AC-DC converters are controllable which, unlike the typical radial tra19
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more effective solution for developing Mid-Atlantic offshore wind reso1
provides significantly higher economic, reliability, congestion relief, 2
and environmental benefits to the PJM grid and to the region. Our 3
explains these public policy, reliability, congestion relief, and other 4
benefits in detail.5
Q. PLEASE SUMMARIZE THE EXTENT TO WHICH THE AWC P6
WILL ENABLE STATES TO MEET THEIR RPS.7
A. The AWC Project helps meet states RPS policies, which require loa8
entities to buy increasing amounts of energy from renewable resources,9
offshore wind. PJM projects that meeting these state RPS requireme10
footprint would require up to 25,000 MW of wind by 2015 and 50,0011
2025. Of the states directly interconnected by the AWC Project, N12
requires 22.5% renewables by 2020, Delaware 25% by 2025, Marylan13
2022, and Virginia has a goal of 15% by 2025.14
Offshore wind power has received an increasing amount of pub15
attention as a key resource for the eastern U.S. because it is abundant an16
close to load centers. In contrast, other local renewable resources are s17
remote resources (such as onshore wind in the Midwest) would requ18
transmission investments without much local economic development 19
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Delaware, Maryland and Virginia, and providing nearly 65% of the re1
by 2025before considering the potential demand for offshore wind f2
states. Moreover, since wind conditions rarely allow entire wind 3
simultaneously generate at their maximum rated capacity, it is more cost4
to install wind capacity in excess of the transmission capacity to max5
value of the overall investment. In our analysis of benefits, we have ass6
6,600 MW of nameplate wind generation would be interconnected to 7
Project, which will result in 10% additional wind energy generated 8
0.2% in curtailments.9
Q. PLEASE SUMMARIZE SOME OF THE COSTS AND BE10
ASSOCIATED WITH THE SCALE OF OFFSHORE 11
DEVELOPMENT SUPPORTED BY THE AWC PROJECT.12
A. Developing this amount of offshore wind generation will require a13
investment of approximately $30 billion. This investment has to be con14
the context of associated benefits. As shown in Table 1, integrati15
6,600 MW of offshore wind generation facilitated by the AWC Pr16
reduce customer locational marginal prices (LMPs) by appr17
$1.6 billion per year (net of offsetting impacts on capacity market pri18
analysis shows that this benefit is widespread: load-weighted annua19
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In addition, the development of offshore wind will create 1
economic stimulus for the local economy, as shown in Table 2. Ther2
other benefits and costs, including the capacity value of wind, wind in3
costs, and the AWC Project-specific benefits discussed in Sections IV th4
of our testimony.5
Table 16Electricity Market and Emissions Benefits of Integrating 6,600 M7
Offshore Wind Generation in New Jersey, Delaware, Maryland, and8(relative to a Base Case without offshore wind)9
Type of Benefit Annual Value
(in 2016 $s)
20-yea
(in 20
Emission reductions 16 million tons CO225,000 tons SO211,000 tons NOx
Value of CO2 emission reductions(assuming $30/ton CO2)
$500 million $5.2 b
Reduction in fossil fuel productioncosts in Eastern Interconnection
Customer value of LMP reductions inPJM (net of $480 million/yearoffsetting impact on capacity prices)
$1.1 billion
$1.6 billion
$12 b
$17 b
Table 210Economic Stimulus Benefit of 6,600 MW of Offshore Wind Gen11
and Related Offshore Transmission12(relative to a Base Case without offshore wind)13
Economic ActivityJobs Earnings
Ec
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Q. PLEASE EXPLAIN THE DIFFERENCE BETWEEN LOW IN-R1
AND HIGH IN-REGION MANUFACTURING IN TABLE 22
A. As Table 2 shows, the overall magnitude of the economic stimulus b3
offshore wind investments to the local economies is significant. How4
magnitude of this economic benefit also strongly depends on the extent5
wind turbines and other plant and equipment are manufactured within6
Atlantic region (rather than being imported) and the extent to which co7
services and logistical support are provided by companies and employe8
the region. Achieving a high in-region provision of these equipment an9
will require a scale of offshore wind power development that jus10
investment in manufacturing and logistical facilities.11
Q. DOES YOUR TESTIMONY EVALUATE THE ECONOMICS 12
REQUIREMENTS AND OFFSHORE WIND GENERATION RE13
TO OTHER POLICY OPTIONS?14
A. No. While we recognize the above benefits and costs of offsh15
generation, the focus of our testimony is to identify the public policy, r16
congestion relief, and other economic benefits of the AWC Project itse17
so primarily by comparing the Project to more conventional ways to int18
offshore wind through radial transmission lines. The rest of this summ19
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A. The AWC Project is able to reliably deliver 6,000 MW of offshore wi1
and additionally provide a fully controllable 2,000 MW HVDC transmi2
between southern Virginia and northern New Jersey at a total constructi3
approximately $5 billion. In comparison, we estimate that delivering 64
of wind power with radial transmission lines from individual wind plant5
would incur construction costs of $3.4 billion to $5.3 billion without of6
substantial additional public policy, reliability, congestion relief, a7
economic benefits we have identified and partially quantified for t8
Project. We estimate that interconnecting offshore wind with the AW9
provides $9-15 billion of benefits over a radial approach (including th10
costs of radial transmission lines), in addition to reliability and operatin11
we have not quantified.12
Q. PLEASE SUMMARIZE HOW THE AWC PROJECT WOULD S13
STATE POLICY OBJECTIVES.14
A. The AWC Project will support meeting the states renewable energy15
reducing permitting and planning barriers and achieving significant eco16
scale for offshore wind development. The Project creates a one-stop p17
landing-point selection, state environmental siting, and PJM tra18
planning. Compared to a plant-by-plant permitting and transmission19
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locations independently of these landing points and with a greatly 1
permitting process.2
Q. HAVE YOU QUANTIFIED THE VALUE OF SOME OF THESE 3
POLICY BENEFITS THAT THE AWC PROJECT WOULD PROV4
A. Yes. Increased scale and predictability of offshore wind development 5
by the AWC Project offers the prospect of significant cost savings f6
every aspect of offshore wind development. It will facilitate investmen7
manufacturing of wind turbines and related components and the develo8
more cost-effective construction and logistical infrastructure. We est9
streamlined permitting and increased scale that allows local manufact10
sourcing will reduce total offshore costs by approximately 20 percent. 11
$30 billion of offshore wind generation investment supported by t12
Project, this results in total cost reductions of approximately $6.0 b13
addition, promoting in-region manufacturing and sourcing results in sig14
greater employment and economic development benefits, as indicate15
difference between low and high in-region manufacturing benefits in16
Q. PLEASE SUMMARIZE HOW THE AWC PROJECT PR17
RELIABILITY AND OPERATIONAL BENEFITS.18
A. The AWC Project will provide significant reliability and operational19
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2,000 MW transfer capability between landing points in Virginia, M1
Delaware, and New Jersey reinforces the onshore grid in the constrai2
Atlantic region, reducing the need for future onshore reinforcements; a3
Projects controllable HVDC technology provides PJM with additional 4
to address reliability challenges whenever they arise.5
The capabilities of the Projects advanced HVDC technology als6
operating benefits that enhance reliability and reduce the cost o7
operations. These include: (a) the ability to redirect power flows instan8
to address system contingencies; (b) improved system stability; (c9
support and improved reactive performance; and (d) blackstart capabi10
Project further provides for more reliable delivery of offshore wind po11
individual radial connections by being able to redirect power away fro12
points with temporary reliability-related transmission constraints.13
We have not quantified the economic value of these reliab14
operational benefits, nor have we quantified the value of the Project15
reliability benefits. However, if the AWC Project avoids the need for16
major onshore transmission project, the savings would likely exceed $1 b17
Q. HOW DOES THE AWC PROJECT PROVIDE CONGESTION RE18
A. The Projects offshore backbone and controllability allows energy from19
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We analyzed the economic value of this benefit using Ventyxs P1
simulation model. Working with Ventyx staff, we simulated market 2
for 2016 with the addition of 6,600 MW of nameplate offshore wind g3
added in two ways: one case with the AWC Project and an alternative 4
radial interconnections. These simulations showed that the AW5
significantly reduces congestion. Instead of simply injecting wind po6
closest onshore location, the AWC Project transfers power to the best7
along the backbone, where the LMP is the highest. It also transfers po8
low-priced onshore interconnection points to higher-priced locations. T9
benefits reduce system-wide congestion costs by $196 million annually 10
to radial interconnections of individual wind plants. Most of the relief 11
constraints near the wind power injection points and also on constra12
western Pennsylvania into eastern PJM. Compared to the radial interc13
of individual wind plants, the congestion relief provided by the AW14
helps to reduce system-wide production costs by $33 million per y15
approximately $350 million over the initial 20 years of the Project.16
Q. WHAT IMPACT WOULD THE AWC PROJECT HAVE ON LM17
CUSTOMER PAYMENTS RELATIVE TO A RADIAL ALTERNA18
A. The LMP benefits from the AWC Project with full wind build-out (com19
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impacts would save PJM customers approximately $126 million per1
$1.35 billion over 20 years. However, the lower LMPs will increase2
prices, which offsets $110 million annually ($1.2 billion over 20 years3
LMP reductions.4
Q. ARE THERE ANY SIGNIFICANT FACTORS THAT AR5
INCLUDED IN THE ABOVE ESTIMATES OF CONGESTION-RE6
BENEFITS?7
A. Yes. The above estimates significantly understate the value that the AW8
will provide under real-time system operations. This is because a n9
operational factors that cause price volatility in the real-time marke10
captured in PROMOD simulations, including wind generation uncert11
forecasting errors, load forecasting errors, sudden outages of generat12
transmission outages, unexpected loop flows from neighboring regions, a13
rate limitations on generators.14
Analysis of historical hourly day-ahead and real-time LMP di15
among the AWC Projects interconnection points shows that the ability 16
power flows in real time is worth approximately twice as much as in17
ahead market. Since PROMOD simulations are more comparable to18
ahead market than the real-time market, we estimate that the Projects19
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A. We simulated the effects of the AWC Project without any offsh1
generation. Compared to a 2016 Base Case that includes only2
transmission and generation additions, adding the AWC Project reduce3
congestion by transmitting power from less congested, lower-priced lo4
more congested, higher-priced locations. The results of this analysis 5
congestion costs would decrease by $147 million and production 6
$51 million per year.7
Q. WHAT OTHER CONGESTION-RELATED ECONOMIC BE8
DOES THE AWC PROJECT PROVIDE?9
A. In addition to transmitting the capacity value of 6,000 MW of offshor10
which PJM is likely to count as less than 2,000 MW for resource 11
purposesthe AWC Project will be able to transmit 2,000 MW of capa12
unconstrained southern Virginia northward into the constrained EMAA13
of PJM. The Project also allows transmission of capacity betw14
constrained subareas within EMAAC if capacity prices were to differ ac15
subareas again in the future.16
We have not forecasted future capacity market conditions and t17
impact of the Project on such future prices. However, using a scenari18
PJM recently conducted to assess the impact of added transfer cap19
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without considering the capacity price benefits to all retail customers, th1
transmitting up to 2,000 MW of capacity from southern Virginia to EM2
five years would be worth $180 million.3
Q. WHAT EFFECTS DOES THE AWC PROJECT HAVE ON EMISS4
A. By facilitating the development of offshore wind more quickly and 5
scale than if individual wind developers had to plan, permit, and build 6
interconnections, the AWC Project will give rise to major emissions r7
As shown in Table 1, the 6,600 MW of offshore wind interconnected by 8
Project would eliminate 16 million tons of CO2 emissions from fossil9
generation per year. That is equivalent to taking 3 million cars off the ro10
Q. PLEASE SUMMARIZE YOUR MAIN CONCLUSIONS ABOU11
AWC PROJECTS BENEFITS.12
A. Table 3 summarizes the benefits discussed and quantified in our testim13
Table 3 shows, the approximately $5 billion construction cost of the AW14
is more than offset by a number of economic benefits that the Project off15
plant-by-plant development of offshore wind generation and the interc16
of individual wind power plants through radial HVAC transmission li17
onshore grid. Interconnecting offshore wind with the AWC Project18
$9-15 billion of benefits over a radial approach (including the avoided19
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Table 31Types and Approximate Magnitude of AWC Project-Related2Economic Benefits Over Individual Radial Interconnections3
of 6,600 MW Offshore Wind Generation4
Type of AWC Project BenefitEstimat
Economic
Avoided cost of radial HVAC transmission links to shore Economic value of ability to access better wind locations
$3.4-5.3 bnot quant
Scale-related benefits (streamlined planning and permitting): Reduced cost from higher in-region turbine manufacturing Scale-related savings for other equipment and installation Reduced planning, permitting, and siting costs/uncertainties Shoreline siting-related environmental benefits
$3.2 bil$1.2-3.0 b
$0.6 bilnot quant
Reliability benefits: Avoided cost of on-shore reliability upgrades
Reinforced existing grid through offshore backbone HVDC operational benefits (voltage support,improved reactive performance, stability, and control ofAC power flows, blackstart capability)
not quant
not quant
not quant
Congestion relief benefits: NPV of reduced production costs measured in PROMOD NPV of additional production cost savings in real-time
or, alternatively:
NPV of additional reduction in PJM Load LMP NPV of capacity price offset to LMP decreases
Related (locational) capacity market benefit: Capacity value of 2,000 MW EMAAC import capability:
NPV of resource cost savings*or, alternatively:NPV of reduced customer payments due to price impact*
* these are order-of-magnitude estimates that are not
included in the low end of total benefits below
$350 mil$310 mil
$1.35 bil-$1.2 bil
$180 mil$2.7 bil
Approximate overall magnitude of AWC Projectbenefits over radial interconnection of individualwind plants (compared to approximately$5 billion in AWC Project cost)
> $9-15 b
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Q. HOW HAVE YOU ORGANIZED THE REMAINDER OF1
TESTIMONY?2
A. The remainder of our testimony is organized as follows:3
Section III provides an overview of state renewable energy po4associated renewable energy requirements, and the economic i5
offshore wind generation facilitated by the AWC Project.6
Section IV analyzes the AWC Project configuration and costs comp7the radial interconnection of individual wind farms.8
Section V evaluates the public policy and scale-related benefi9AWC Project.10
Section VI discusses and provides preliminary estimates of the relia11operational benefits associated with the AWC Project.12
And, finally, Section VII discusses the congestion relief and related 13benefits associated with the AWC Project.14
III. BACKGROUND: STATE RPS REQUIREMENTS AND15ECONOMIC BENEFITS OF OFFSHORE RENEWABLE16
POWER DEVELOPMENT17
1. State Renewable Energy Policy Requirements18Q WHAT ARE THE RENEWABLE ENERGY REQUIREMEN19
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West Virginia and the District of Columbiahave renewable portfolio1
or goals ranging from 15% to 25% by 2025. PJM projects that meeting 2
RPS requirements in its footprint would require up to 25,000 MW of3
2015 and 50,000 MW by 2025.14
Q. WHAT ARE THE RENEWABLE ENERGY REQUIREMENTS 5
FOUR COASTAL MID-ATLANTIC STATES WITH AWC L6
POINTS?7
A. All four coastal Mid-Atlantic states with AWC landing points hav8
legislation or regulations establishing renewable energy requirements9
ranging from 15 to 25 percent of total supply over the next 10 to 15 year10
New Jerseys RPS requires investor-owned utilities and retail su11procure 22.5% of their electricity sales from qualifying r12
resources by 2020. Qualifying resources include wind, solar, sm13
resource recovery facilities, biomass, fuel cells, geothermal, lan14
and tidal energy. In-state solar generation must provide appr15
2% of the total energy supply, and approved small hydro and16
recovery facilities must provide at least 2.5% of the total energ17
Legislation enacted in August 2010 also requires offshore wind t18
t f th bl l lth h th d t il f thi li9
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under development. That legislation aims to support the develo1
at least 1,100 MW of offshore wind.2
Delawares RPS requires all utility and retail suppliers to procu3their electricity sales from qualifying renewable resources by 24
at least 3.5% from solar generation. Solar PV and fuel cell resou5
before December 31, 2014 receive 300% credit (i.e., each MWh 6
counts for three MWh). Onshore wind resources sited before 7
31, 2012 receive 150% credit, and offshore wind resources sit8
December 31, 2017 receive 350% credit toward meeting the st9
requirements.10
Marylands RPS requires all utility and retail suppliers to procu11their electricity sales from qualifying renewable resources by 212
at least 2% from solar generation. On November 2010, the 13
Ocean Energy Management, Regulation and Enforcement (BO14
accepted the planning recommendations of the Maryland Offsh15
Task Force and issued a Request for Interest (RFI) and also a m16
offshore wind leasing area in federal waters adjacent to M17
Atlantic Coast (which made Maryland only the second state in 18
after Delaware to reach this point in the planning process).19
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year (2007) electricity sales that are supplied by non-nuclear ge1
According to the legislation, the utilities participating in the RPS2
are allowed to recover all incremental costs and also given inc3
the form of increased rate of return. In addition, utilities rece4
credit for the energy derived from onshore wind, and 300% cred5
energy derived from offshore wind. A study by the Virgini6
Energy Research Consortium, which was established by the 2007
Energy Plan legislation, has now identified 25 lease blo8
3,200 MW of potential offshore wind capacity in shallow wate9
the visible horizon.310
Figure 1 below summarizes the projected demand for renewable energy11
these state RPS requirements and goals. As Figure 1 shows, the total 12
estimated to increase from 11,700 GWh in 2010, to more than 40,00013
2020, and approximately 54,000 GWh in 2025. Assuming an averag14
factor of 37%, this demand is equivalent to 3,600 MW of renewable pow15
in 2010, more than 12,000 MW in 2020, and approximately 16,600 MW16
As discussed below, however, due to RPS credit multipliers, less offsh17
generating capacity would be needed to satisfy the existing requirement.18
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Figure 11Renewable Demand in Mid-Atlantic Coastal States by Year2
0
10,000
20,000
30,000
40,000
50,000
60,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Year
GWh
Sources and Notes:
[1] RPS targets from DOE's Database of State Incentives for Renewables and Energy Efficiency (DSIRE).
[2] Load forecasts based on EIA 2008 state electricity profiles; applied RTO-wide load growth rates from 2010 PJM Load F
[3] Virginia RPS goal is defined as a percent of base year (2007) sales minus average nuclear generation between 2004-06.
3
Q. HOW MUCH RENEWABLE CAPACITY CURRENTLY EXISTS 4
THESE STATES?5
A. Table 4 below summarizes renewable generation supply in the coa6
Atlantic states based on the unit-level database compiled by Ventyx, Th7
Velocity Suite. As the table shows, approximately 1,250 MW of 8
supply already exists, is under construction, or is at least partially 9
within states boundaries (mostly biomass and landfill gas). 10
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Table 41Renewable Supply in Mid-Atlantic Coastal States by Technolo2
Status Delaware Maryland New Jersey Virginia
TOTAL
CAPACITY
Assume
Capacit
Facto
(MW) (MW) (MW) (MW) (MW) (%)
Biomass 0 117 150 263 530 85%
Landfill Gas 7 26 65 128 226 85%
Onshore Wind 2 108 8 188 306 32%
Small Hydro 0 18 4 121 144 48%Solar 0 4 43 0 48 16%
TOTAL 9 274 270 700 1,253
Sources and Notes:
[1] Capacity calculated based on data compiled by Ventyx, The Velocity Suite (downloaded on 10/21/2010).
[2] Generation estimated based on technology-specific capacity factors.
[3] Includes existing units, and units that are under construction or permitted.
[4] "Small Hydro" includes only the units with a nameplate capacity of less than 30 MW.
[5] "Solar" does not include customer-sited generators.
[6] Bluewater's proposed 350 MW project is not included because its status is listed as "Application Pending".3
Q. IS THE SUPPLY DESCRIBED ABOVE SUFFICIENT TO ME4
STATED RENEWABLE REQUIREMENTS OR GOALS OF C5
MID-ATLANTIC STATES?6
A. No. There is a large gap that will need to be met by additional reso7
addition to the 7,150 GWh from renewable energy plants that already 8
under construction, or are partially permitted, approximately 47,0009
additional renewable generation will be needed to meet state RPS targets10
Considering that at least 6,600 GWh is required to come from solar resou11
leaves approximately 40,000 GWh in additional demand from other 12
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approximately 16,000 GWh from offshore wind.4 Taking the states R1
multipliers into account, this number goes up to more than 26,000 G2
approximately 22,000 GWh from offshore wind, which is only two thi3
incremental 40,000 GWh needed for RPS compliance by 2025.4
Q. HOW MUCH OFFSHORE WIND POTENTIAL EXISTS IN TH5
ATLANTIC REGION?6
A. The Mid-Atlantic offshore region has been recognized as one of the m7
locations for offshore wind generation. The National Renewabl8
Laboratory (NREL) has determined that total Mid-Atlantic offsh9
energy potential is over 480,000 MW, of which 44,000 MW is located i10
waters between 12 and 50 nautical miles off the shores of PJMs f11
Atlantic coastal states.512
Q. HOW MUCH ADDITIONAL OFFSHORE WIND CAPACITY WO13
NEEDED TO SATISFY ONLY THE REMAINING REQUIREM14
THE FOUR MID-ATLANTIC STATES RPS TARGETS?15
A. If the incremental 40,200 GWh required for RPS compliance of the f16
came only from onshore wind resources with an average 32% capac17
then approximately 12,800 MW of additional onshore wind capacity 18
needed (taking into account solar carveouts and the 200% RPS credit 19
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come only from offshore wind resources with an average 40% capac1
then approximately 9,200 MW of new capacity would be needed (ta2
account solar carveouts and the 300% RPS credit for offshore wind in3
and 350% in Delaware). Thus, not even considering any potential de4
offshore wind energy in other PJM and neighboring states, the RPS req5
of the four Mid-Atlantic states with AWC landing points already sig6
exceeds the 6,000 MW of offshore wind generation that can be delivere7
by the Project.8
Q. HOW MUCH OF THE FOUR STATES RENEWABLE REQUIR9
WOULD LIKELY BE IMPORTED FROM STATES OUTSIDE TH10
ATLANTIC REGION?11
A. That is difficult to assess at this point. Most other states demand for re12
similarly exceeds their local supply, limiting the potential for onsh13
imports by the coastal Mid-Atlantic states. Only states in the Upper14
have significant long-term export potential. While these Upper Midwes15
have a large amount of high-quality onshore wind that could meet som16
coastal states RPS requirements, development of these resources is al17
by severe transmission constraints. In addition, the east coast states hav18
strong preference in favor of developing renewable resources within th19
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Q. WHAT IS THE MID-ATLANTIC STATES RATIONAL1
SUPPORTING OFFSHORE WIND OVER ONSHORE ALTERNA2
A. The coastal states support the development of offshore wind resour3
number of reasons. First, the Mid-Atlantic offers attractive wind speeds4
capacity factors that are comparable to or exceed those in the Upper Mi5
addition, the Mid-Atlantic coast has large areas of shallow water tha6
suited for deployment of offshore wind generation at lower cost than 7
incurred in deep-water locations. As mentioned above, NREL estimate8
Mid-Atlantic has a very large offshore wind potential in shallow wa9
attractive wind speeds (almost half of the U.S. total).710
Second, offshore wind generation can be located close to the co11
centers, which avoids the transmission investment costs and losses 12
with integrating much more distant onshore renewable resources.8
Fi13
coastal states have expressed a clear preference for offshore wind devel14
their efforts to create a clean-tech industry and reach a scale of offsh15
power development that would support local manufacturing of wind tur16
related equipment as well as the development of supporting infrastructur17
specialized vessels and on-shore staging areas. The availability of 18
manufacturing and other infrastructure is seen as a critical factor in red19
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cost of renewable power options, in particular the still evolving offsh1
technologies.92
2. Production Cost, Energy Price, and Emissions Benefits3Q. WHAT ARE THE MAIN COSTS AND BENEFITS ASSOCIATE4
OFFSHORE WIND DEVELOPMENT?5
A. While developing this amount of offshore wind resources requires s6
investmentsapproximately $30 billion for 6,600 MW of installed c7
these investments have to be considered in the context of associated8
Some of these benefits include: (1) environmental benefits through9
emissions of CO2 and other pollutants; (2) promotion of a strategic ind10
the economic stimulus associated with manufacturing, constructi11
operations, and other economic activities; (3) electricity market benef12
form of reduced LMPs and production costs from fossil fuel power plant13
Q. HAVE YOU QUANTIFIED THESE BENEFITS?14
A. Yes, we have. We have analyzed the electricity market and emissions i15
injecting 6,600 MW of offshore wind using PROMOD simulations. We16
estimated the employment and economic stimulus impact of this leve17
investment, using the Job and Economic Development Impact 18
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Q. PLEASE EXPLAIN HOW YOU SIMULATED THE ELECT1
MARKET AND EMISSION IMPACTS OF OFFSHORE WIND 2
DEVELOPMENT.3
A. As discussed further in Section VII of our testimony and Exhibit AWC4
directed staff of Ventyx, the vendor of the PROMOD simulation 5
simulate market conditions for 2016 with and without the addition of 66
of nameplate offshore wind generation. These simulations showed tha7
wind via the AWC Project significantly reduces LMPs, as well as the 8
and production costs from fossil fuel generating plants.9
Q. WHAT ARE THE EMISSIONS REDUCTIONS ASSOCIATED10
6,600 MW OF OFFSHORE WIND?11
A. The approximately 23,000 GWh of energy produced by 6,600 MW of 12
displace more than 23,000 GWh of fossil generation (the displacemen13
than one-for-one because injecting power closer to the coastal loa14
reduces electrical losses by approximately 1,000 GWh, or more than 1015
average). Approximately 61% of the displaced generation is gas-fire16
coal-fired, and 1.5% oil-fired, and all of the associated emissions are e17
As previously shown in Table 1, injecting up to 6,000 MW of ene18
6,600 MW of offshore wind capacity will reduce CO2 emissions from 19
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an economic value of approximately $500 million per year.10 The pre1
of these emissions cost savings over 20 years from 2016 through 2035 2
$5.2 billion (expressed in 2010 dollars).11 These benefits are ad3
production cost benefits, since the production costs in the PROMOD m4
not include CO2 allowance price adders, reflecting the currently poor 5
for near-term climate legislation.6
Q. WHAT ARE THE IMPACTS OF 6,600 MW OF WIND GENERAT7
SYSTEM PRODUCTION COSTS?8
A. The PROMOD simulations show that injecting up to 6,000 MW of en9
6,600 MW of offshore wind capacity reduces system-wide production10
$1.1 billion per year. The present value of the $1.1 billion in annual p11
cost savings over 20 years from 2016 through 2035 would be at least $12
(expressed in 2010 dollars). The savings are primarily derived from13
fossil fuel-fired generation with zero-variable-cost generation, but14
substantially reducing congestion and losses on the prevailing west-to-15
on the onshore system. In fact, our simulations show that annual conges16
decrease by $410 million and losses decrease by more than 115 MW on 17
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Q. HOW MUCH WOULD ADDING 6,600 MW OF OFFSHORE1
CAPACITY SAVE CUSTOMERS BY REDUCING ENERGY PRIC2
A. The PROMOD simulation results also show that this amount of offsh3
energy will reduce energy prices paid by customers by approximately $64
New Jersey, by $2-4/MWh in Delaware, Maryland and Virginia, by $2-55
Pennsylvania, and by $0.5-1.6/MWh in western PJM, with effects outsid6
as well. These price impacts, which are shown in Table 5, would reduce7
payments by $2.2 billion per year in PJM alone, without counting red8
other regions. Net of reduced loss refunds in the AWC Wind case9
system losses and LMPs are lower, which reduces marginal-loss-relate10
by $79 millionthe customer savings are only $2.1 billion, as describ11
Technical Appendix report filed as Exhibit AWC-403 with this testimon12
However, lower energy prices can be expected to increase capaci13
As energy prices decrease, so do the energy margins earned by generato14
will induce them to bid commensurately more in the capacity mar15
example, the potential developer of a new combustion turbine in EMAA16
anticipate $9/kW-yr lower energy margins and thus would bid that mu17
for capacity in order to be willing to enter the market.18
Assuming new combustion turbines set the capacity prices w19
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per year ($5 billion NPV), offsetting some of their savings from reduc1
This yields a $1.6 billion annual netbenefit in terms of customer wholes2
purchase costs, calculated as $2.2 billion in annual LMP reductions net o3
marginal loss refunds ($79 million) and capacity price increases ($480 m4
5
Table 56Impacts of the AWC Project with Wind on PJM Load LMPs7
Compared to the Base Case (without AWC and without Offshore 8
Region State PJM Area Annual Base AWC AWC Wind A
Load Case Wind vs. Base Case vs
LMP LMP LMP Loa
(GWh) ($/MWh) ($/MWh) ($/MWh)
[1] [2] [3] [4]= [3]-[2]
AWC States DE DPLC 20,517 $55.4 $51.7 ($3.7)
AWC States NJ AE 13,978 $58.2 $52.2 ($6.0)
AWC States NJ JCPL 29,004 $62.5 $56.2 ($6.3)
AWC States NJ PSEG 54,250 $60.4 $53.7 ($6.8)
AWC States NJ RECO 1,751 $64.6 $61.6 ($3.0)
AWC States VA VP 114,406 $53.2 $50.9 ($2.2)
AWC States MD BGE 39,503 $54.3 $50.9 ($3.4)
AWC States MD PEPCO 36,283 $54.8 $51.2 ($3.6)Other PJM-E PA METED 18,518 $55.8 $51.3 ($4.5)
Other PJM-E PA PECO 47,010 $57.7 $52.1 ($5.6)
Other PJM-E PA PENN Elec 21,574 $48.0 $46.0 ($2.0)
Other PJM-E PA PPL 47,100 $56.1 $51.1 ($5.0)
Other PJM-E PA UGI 1,159 $57.6 $52.1 ($5.5)
PJM-W IL COMED 125,253 $43.1 $42.5 ($0.6)
PJM-W OH AEP 188,533 $44.4 $43.9 ($0.5)
PJM-W OH FE OHIO 78,361 $43.9 $43.4 ($0.5)
PJM-W WV APS 55,414 $48.7 $47.0 ($1.6)
PJM TOTAL 892,613 $50.2 $47.7 ($2.4)
AWC States 309,692 $56.1 $52.1 ($4.0)
Other PJM-E 135,361 $55.3 $50.7 ($4.7)
PJM W 447 561 $44 5 $43 8 ($0 7)
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Employment and Economic Stimulus Benefits1
Q. WHAT ARE ECONOMIC STIMULUS BENEFITS?2
A. The development of offshore wind and associated transmission infrastru3
provide economic stimulus benefits for the Mid-Atlantic region through 4
employment, earnings by employees, and overall economic activity (i.e5
revenues associated with sales and re-sales of goods and services st6
These employment and economic activity benefits arise as direct, ind7
induced impacts associated with the investment. Direct impacts ca8
jobs, earnings, and economic activity generated by the direct co9
activities and spending on transmission infrastructure and wind g10
facilities. Indirect impacts arise as in-region suppliers to the transmi11
wind generation industries, as well as other upstream producers, benefi12
increased investment in infrastructure and generation. Finally, induced13
are created when the increased income from jobs supported by the tra14
and offshore wind construction is spent on products and services15
industries, generating a ripple effect throughout the regional economy.16
Q. HOW DID YOU ESTIMATE THE ECONOMIC STIMULUS BE17
PROVIDED BY THE 6,600 MW OF WIND AND ASSO18
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Development Impact (JEDI) Model.12 The economic stimulus1
associated with the transmission infrastructure build-out was estimated b2
recent study that quantified transmission investment benefits for the S3
Power Pool (SPP) based on analysis conducted using the Minnesota 4
Group Model.13 JEDI and IMPLAN are widely-used by economists a5
analysts to estimate how specific investments affect a regional economy6
Q. FOR WHAT LEVEL OF WIND AND TRANSMISSION INVES7
AMOUNTS HAVE YOU ANALYZED ECONOMIC ST8
BENEFITS TO THE MID-ATLANTIC REGION?9
A. The investment assumptions we used for this analysis are summarized i10
below. As the table shows, these investments consist of appr11
$23 billion of investments in wind turbines and their foundations, appr12
$2.8 billion in lower voltage AC transmission cables to connect the turbi13
offshore substations, and $5 billion in HVDC-related transmission exp14
AWC Project) to interconnect these offshore wind farms to shore.15
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Table 61
Estimated Wind Plant, AC Collector System, and2AWC Project Investment Summary3
ComponentsTotal Cost
(2010$)
Percentage of
Total
Investment
Uni
(20
($ Billion) ($
6,600 MW Wind Plant Investment 23.0 75%
Offshore AC Collector System Investment 2.8 9%AWC Project Investment 5.0 16%
Total 30.8 100%
Sources & Notes:
Wind Plant Investment includes turbines, blades, towers, foundations, and
additional labor and development, and permitting costs.
AWC Project Investment includes HVDC system components: off- and onshore
converters and HVDC backbone and lateral cables.4
5
Q. HOW HAVE YOU USED THESE INVESTMENT ASSUMPTI6
YOUR ANALYSIS?7
A. For the purposes of this analysis, the JEDI model was used with p8
settings for the state of New Jersey (as a proxy for the region), but th9
turbines, blades, towers, and foundations were adjusted to reflect10
equipment and construction costs as summarized in Table 6. To11
preliminary estimate of transmission-related benefits, we simply s12
benefits per billion dollar of investments derived from the SPP stu13
necessary investment in the offshore collector system that connects th14
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Q. HAVE YOU ANALYZED TO WHAT EXTENT THE ECO1
STIMULUS BENEFITS OF OFFSHORE WIND PLANT AND RE2
TRANSMISSION INVESTMENT DEPENDS ON THE DEGR3
WHICH THE WIND GENERATION AND TRANSM4
COMPONENTS ARE MANUFACTURED WITHIN THE MID-AT5
REGION?6
A. Yes, we have. To analyze the extent to which economic stimulus benef7
on the degree of in-region manufacturing of wind plant and tra8
components, we analyzed the impact of three cases:Low, Medium, and9
region manufacturing. Table 7 summarizes the in-region man10
assumptions associated with each of these three cases.11
Table 712Local Manufacturing Share13
Assumptions for the Economic Analysis Impact14
Share of In-Reg
Manufacturi
Wind Farm Low MediumEquipment
Turbines 0% 0%
Blades 0% 100%
Towers 0% 100%
Transportation 0% 100%Balance of Plant 82% 93%
Total Wind Farm Local Manufacturing Share 26% 55%
Offshore AC Collector SystemWires and electrical equipment 0% 50%
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For the wind farm construction-related analysis, these 1
manufacturing assumptions were analyzed with the JEDI model. 2
transmission-related analysis, we relied on the SPP study, which 3
analyzed transmission build-out scenarios for aLow in-region manufact4
(assuming all transmission equipment would be imported from out5
suppliers) and a Medium case (assuming that 50% of transmission 6
related electrical equipment facilities would be manufactured within th7
These SPP investment levels and economic stimulus results were used to8
normalized ratios for the amount of jobs, earnings, and overall econom9
stimulated by the transmission investment for both theLow andMedium10
manufacturing cases. These ratios were then applied to the tra11
investments associated with the AWC Project. The difference between12
and the Medium in-region manufacturing case was then applied to 13
estimate of theHigh in-region manufacturing case.14
Q. WHAT ARE THE RESULTS FROM THIS ANALYSIS?15
A. The results from our preliminary economic stimulus analysis are summ16
Table 8 below. As Table 8 shows, the combination of the offshore 17
associated transmission investment are estimated to support a total of 118
263,000 full-time equivalent (FTE) years of employment du19
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benefits as described earlier. Of the approximately 120,000 FTE-ye1
Medium in-region manufacturing case for wind plant construction, appr2
39,000 (33%) are directly supported by on-site construction, enginee3
design work; approximately 62,000 (52%) are supported indirectly at4
of wind power generation components and construction materials; an5
18,000 (15%) are induced by the additional spending (food, housing6
etc.) of employees supported by the direct and indirect economic activiti7
As Table 8 also shows, the total earnings by employees w8
construction-period jobs supported by the wind and associated tra9
investment range from $7.6 to $17.4 billion, depending on the level of10
manufacturing. The estimated overall economic activity stimulated11
investments during the construction period ranges from $16.4 to $51.5 b12
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Table 81
Analysis of Jobs, Earnings, and Economic Activity2
Full-Tme
Equivalent
Years
Total
Earnings
(2010$)
To
(FTE-Years) ($ Billion)
Low In-Region Manufacturing (19% of All Equipment)
Wind Plant Construction (6,600 MW) 79,000 $5.0
Offshore AC Collector System Construction 18,000 $0.9
AWC Project Construction 33,000 $1.6
Total 130,000 $7.6
Medium In-Region Manufacturing (54% of All Equipment)
Wind Plant Construction (6,600 MW) 120,000 $8.2
Offshore AC Collector System Construction 23,000 $1.1
AWC Project Construction 41,000 $2.1
Total 184,000 $11.4
High In-Region Manufacturing (98% of All Equipment)
Wind Plant Construction (6,600 MW) 184,000 $13.3Offshore AC Collector System Construction 28,000 $1.5
AWC Project Construction 51,000 $2.6
Total 263,000 $17.4
NREL (Musial, 2007)*
Wind Plant Construction (Scaled to 6,600 MW) 257,000 NA
Wind Farm Operation Over 20 years 145,000 NA
Ontario Offshore Wind Study (2010)**
Base Case (55% Local Sourcing of Development Costs)
Wind Plant Construction (Scaled to 6,600 MW) 166,551
High Case (63% Local Sourcing of Development Costs)
Wind Plant Construction (Scaled to 6,600 MW) 191,080
Sources & Notes:
* "Large-Scale Offshore Wind Power in the United States: Assesment of Opportunities and Barriers,"NREL , Sepetember 2010.
"Offshore Wind: Viable Option for Coastal Regions of the United States",Marine Technology Society Journal , 2007
** "Employment and Economic Impacts of Ontario's Future Offshore Wind Power Industry", The Conference Board of Canada, December 20103
4
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Q. HOW MUCH OF THE ECONOMIC STIMULUS BENEFIT 1
OFFSHORE WIND INVESTMENT IS DEPENDENT ON THE E2
TO WHICH COMPONENTS CAN BE MANUFACTURED WITH3
MID-ATLANTIC REGION?4
A. As Table 8 documents, the extent to which these investments benefit5
Atlantic region depends to a considerable extent on how much of the 6
equipment can be manufactured within the region. For example, the7
region manufacturing case (in which only 19% of all equipment i8
locally) supports only 130,000 FTE-years of employment while theMe9
(with 54% of all equipment manufactured sourced locally) supports ove10
FTE-years, an increase of almost 50%. As we discuss further in Section11
testimony, this means developing offshore wind at a pace and scale12
support the creation of local supply-chain industries should be an import13
policy goal that provides significantly greater economic benefits for the 14
Q. WHAT ARE THE EMPLOYMENT BENEFITS THAT CO15
AFTER THE CONSTRUCTION OF OFFSHORE FACILITIES HA16
COMPLETED?17
A. Once construction of the AWC Project and the 6,600 MW of offshore w18
has been completed, employment and related benefits to the local econ19
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over a 20-year operation period. Second, the development of 6,601
offshore wind generation in the Mid-Atlantic region will create a manu2
base and local supply chain for logistical services that can support th3
expansion of offshore wind generation beyond the 6,600 MW facilitat4
AWC Project. If additional offshore facilities are added at a steady r5
employment and associated economic benefits would continue 6
Considering the enormous offshore wind generation potential of the Mi7
region, this is a plausible outcome.8
Q. IS THE MAGNITUDE OF YOUR PRELIMINARY ESTIMA9
THESE ECONOMIC STIMULUS BENEFITS OF OFFSHORE10
DEVELOPMENT CONSISTENT WITH THE MAGNITUDE OF11
BENEFITS FOUND BY OTHER STUDIES?12
A. Yes. As shown in Table 8, NRELs research has found employment imp13
close to the upper bound of the benefits we estimated.14 The table also s14
results from a recent study for Ontario offshore wind development15
similar to our estimates.1516
17
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IV. AWC PROJECT CONFIGURATION1AND COSTS2
Q. PLEASE SUMMARIZE THE CONFIGURATION OF TH3
PROJECT.4
A. As explained in the testimony of Mr. Paul McCoy, the AWC Project is c5
as a double-circuit HVDC offshore transmission backbone with twelve6
AC-DC converter stations interconnected at seven existing substatio7
onshore grid. As shown in Figure 2, each circuit will be able to trans8
MW of energy and capacity between interconnection points along 9
accommodate six 500 MW offshore AC-DC converter stations to int10
offshore wind plants, and interconnect a total of 3,000 MW of onshor11
converter stations at four locations.12
As also shown in Figure 2, both circuits interconnect with 113
converter stations at PJMs Fentress substation in southern Virginia. 14
interconnection points are: 500 MW at Piney Grove (MD), 500 MW at15
(NJ), and 1,000 MW at Hudson (NJ) for one of the circuits, and 10016
Indian River (DE), 500 MW at Cardiff (NJ), and 500 MW at Sewaren (N17
other circuit. In addition to facilitating the interconnection of offsh18
power plants, this configuration provides an offshore reinforcement to th19
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Figure 21
Preliminary AWC 2-Circuit Design2
1000
Hudson
1000
IndianRiver
500
Cardiff
500
Larrabee
500
Sewaren
500
PineyGrove10
Fentr
500MWOffshorePlatform,ConverterandSwitchesDCSwitch 500MWOnshoreC
1000MWOnshore
3
4
Q. WHAT IS THE TOTAL INSTALLED NAMEPLATE CAPACITY5
OFFSHORE WIND FARMS FACILITATED BY THE AWC PROJ6
A. Considering the transmission capability to inject 6,000 MW, we have7
6,600 MW of installed offshore nameplate wind generation capacity 8
interconnected to the AWC Project. Building slightly more wind capac9
the overall cost of renewable power For example National Grid t10
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Q. DOES BUILDING WIND CAPACITY IN EXCESS O1
TRANSMISSION CAPABILITY RESULT IN SIGNI2
CURTAILMENT OF WIND GENERATION?3
A. No, not if the wind capacity exceeds the transmission capacity by onl4
we have assumed. Analyzing the NREL data for the AWC sites, we f5
only 0.2% of the potential energy generated from 6,600 MW of offsh6
would have to be curtailed to avoid exceeding the 500 MW output limit7
the 12 offshore converters. This minimal curtailment was incorporate8
market simulations.9
Q. HOW DO THE AWC PROJECTS COSTS COMPA10
CONVENTIONAL RADIAL INTERCONNECTION OF INDI11
OFFSHORE WIND PLANTS?12
A. The AWC Project is able to reliably deliver 6,000 MW of offshore wi13
and additionally provide a fully controllable 2,000 MW HVDC transmi14
between southern Virginia and northern New Jersey at a total15
approximately $5 billion. In comparison, we estimate that delivering 616
of wind power with radial high-voltage alternating current (17
transmission lines from individual wind plants to shore would cost18
$3.4 and $5.3 billion without offering the substantial additional publ19
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Q. YOU NOTED THAT IT WOULD COST BETWEEN $3.4 BILLI1
$5.3 BILLION TO INTERCONNECT OFFSHORE WIND FARM2
INDIVIDUAL RADIAL HVAC TRANSMISSION LINES. HOW D3
ESTIMATE THESE COSTS?4
A. We have estimated these costs by analyzing the installed costs of the 5
transmission elements needed to interconnect individual offshore wind6
the onshore grid. These transmission elements include: (1) an offshore 7
consisting of switchgear, transformation, and platform; (2) several HVA8
from the offshore substation to shore; and (3) an onshore substatio9
transformation (as a conservative assumption). These cost estimates are10
publicly-available information on the costs and project configuratio11
variety of sources, including actual project proposals. They do not in12
cost of wind turbines, turbine foundations, and the transmission collect13
that connects the individual turbines of a wind farm to the offshore s14
because these cost elements will be identical or approximately 15
irrespective of whether the individual wind farms are integrated16
individual HVAC lines to shore or through the AWC Project.17
Q. HOW MANY INDIVIDUAL WIND FARMS DID YOU ASSUME 18
BE DEVELOPED TO DELIVER 6,000 MW OF OFFSHORE19
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The second scenario we evaluated consisted of twenty radial HVAC tra1
lines with a capacity of 300 MW each. Either of these radial tra2
scenarios can thus deliver 6,000 MW of offshore wind generation simi3
capability of the AWC Project.4
Q. WHAT VOLTAGE LEVELS AND HOW MANY INDIVIDUAL 5
WOULD BE NEEDED TO ACHIEVE THESE 500 MW AND 6
TRANSFER CAPABILITIES TO INTERCONNECT INDIVIDUA7
FARMS TO THE ONSHORE GRID?8
A. We evaluated two configurations to achieve 500 MW transfer capabi9
230 kV HVAC submarine cable system consisting of two parallel circuit10
a 138 kV HVAC cable system consisting of three parallel circuits.11
300 MW transfer scenario, we developed the costs for a 138 kV HV12
configuration with two parallel circuits.13
Q. WHAT ARE THE OVERALL COSTS AND INDIVIDUAL14
ELEMENTS ASSOCIATED WITH EACH OF THESE THREE15
RADIAL OFFSHORE TRANSMISSION CONFIGURATIONS?16
A. Our estimates of the overall costs and cost elements of these three HV17
transmission configurations are summarized in Table 9.18
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Table 91
Estimated Costs of Radial HVAC Transmission Lines2Interconnecting Individual Wind Power Plants to the Onshore Grid3
Description of Illustrative HVAC Systems
Interconnection of 12
offshore wind farms based
on two 230 kV cables laid
in parallel trenches
Interconnection of 12
offshore wind farms based
on three 138 kV cables
laid in three parallel
trenches
Interconn
offshore win
on two 138 k
in paralle
Category (2010$ Billion) (2010$ Billion) (2010$
[A] [B] [C] [
[1] Offshore substations
and platforms$1.0 $1.0 $
[2] Offshore radial
cables$1.6 $1.9 $
[3] Onshore landing and
radial cables $0.5 $0.6 $
[4] Onshore substations $0.2 $0.2 $
[5] Total HVAC
System Cost$3.4 $3.8 $
Sources and Notes:
[1A]:
[1B]: 12 offshore substations and platforms.
[1C]: 12 offshore substations and platforms.
[1D]: 20 offshore substations and platforms.
[2]:
All systems assume 6,600 MW of installed wind generation capacity which is equivalent to a 10% overbu
MW of transfer capability. Each illustrative HVAC system has equally sized wind farms (i.e., 12 wind fa
of installed capacity each).Offshore substation costs based on onshore substation (with transformer) costs based on estimates from E
Reliability Organzation of Texas ("ERCOT"), "CREZ Transmission Optimization Study," April 2, 2008, p
platforms based on cost estimates from National Grid, "2010 Offshore Development Information Stateme
September 2010, p. A-69.
Cable cost estimates based on similar technology from National Grid, "2010 Offshore Development Infor
Statement: Appendix," September 2010, pp. A-67-68. All cable costs are based on 3-core cross-linked po
(XLPE) technology. Each offshore wind farm is 25 miles from the shoreline. A total of 55 miles of addit
was assumed from the shoreline to the onshore substation. Includes cable installation costs based on vari
costs per mile (excludes materials, ancillary vessels, and surveys) from National Grid, "2010 Offshore De
Information Statement: Appendix," September 2010, p. A-70. Fixed installation costs per radial interconn
surveys, engineering, mobilization/demobilization based on estimates from Green, J., Bowen, A., Fingeris
Y., "Electrical Collection and Transmission Systems for Offshore Wind Power," March 2007, p. 3.
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Q. WHICH OF THESE THREE RADIAL HVAC TRANSM1
CONFIGURATIONS WOULD MOST LIKELY GET BUILT?2
A. Assuming 6,600 MW of offshore wind could actually get develop3
through radial interconnections without an offshore backbone, we be4
most likely outcome would be a mix of these three configurations depen5
number of factors, including the availability of onshore interconnecti6
(e.g., existing 138 kV and 230 kV facilities close to shore), the abil7
onshore grid to accommodate injections of wind generation in the 308
500 MW range, and the size of wind farms that individual developers a9
finance through individual power purchase agreements. While t10
configurations of radial cable system interconnecting individual wind 11
certainly differ from the three configurations we evaluated, total costs o12
radial cable systems to interconnect individual wind farms with the on13
will very likely be within the $3.4 to $5.3 billion range of our cost14
These costs of interconnecting individual wind farms with their o15
transmission cables will be avoided if this amount of offshore wind gen16
integrated by means of the AWC Project.17
Q. HAVE YOU VERIFIED THAT YOUR COST ESTIMATES FO18
RADIAL INTERCONNECTIONS OF INDIVIDUAL WIND FA19
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A. Yes. We have used the same approach to estimate the cost of the AW1
This yielded cost estimates ranging from $4.9 to $5.6 billion, which is v2
consistent with the $5 billion estimate from the Project sponsors.3
Q. YOU MENTIONED THAT THERE ARE ADDITIONAL BENEFIT4
THE AWC PROJECT OFFERS OVER RADIAL INTERCONNE5
OF INDIVIDUAL WIND PLANTS WITH THE ONSHORE GRID6
ARE THESE BENEFITS?7
A. As we discuss in the next three sections of our testimony, the additiona8
offered by the AWC Project over the individual radial interconnection o9
wind power plants with the onshore grid includes a number of publ10
reliability, and congestion relief-related economic benefits. As the11
presented in Sections V, VI, and VII show, the modest incremental c12
offshore transmission backbone over the cost of radial interconnection13
than offset by the cost savings and economic benefits associated w14
economies, reduced siting and permitting uncertainties, and the relia15
congestion relief advantages offered by the AWC Project compared16
interconnections of individual offshore wind power plants.17
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V. PUBLIC POLICY BENEFITS1ASSOCIATED WITH THE AWC PROJECT2
Q. WHAT ARE THE PUBLIC POLICY BENEFITS THAT TH3
PROJECT PROVIDES COMPARED TO INTERCONN4
OFFSHORE WIND VIA CONVENTIONAL RADIAL LINES?5
A. The AWC Project will facilitate meeting the coastal Mid-Atlant6
renewable energy policy requirements and goals. It will do so in a7
substantially reduces the barriers, uncertainties and costs of developing8
wind generation, and that attracts more in-region manufacturing. It9
reduce the environmental shoreline impact of siting the needed transmiss10
Q. HOW DOES THE AWC PROJECT REDUCE THE UNCERT11
AND OVERALL COSTS OF DEVELOPING OFFSHORE12
GENERATION?13
A. The AWC Projected reduced the uncertainties and overall costs of d14
offshore wind generation in several important ways. First, it significant15
environmental permitting barriers and associated uncertainties with offs16
developments. Second, it greatly streamlines the PJM transmission pla17
interconnection process for developing significant amounts of offsh18
generation in the region. Third, the Project allows for a decoupli19
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offshore wind developments, leading to reduced costs and increased loc1
of wind turbines, plant components, and logistics services.2
Q. PLEASE EXPLAIN HOW THE AWC PROJECT R3
ENVIRONMENTAL PERMITTING BARRIERS AND UNCERTA4
ASSOCIATED WITH OFFSHORE WIND DEVELOPMENT.5
A. Environmental permitting of any transmission project, large or small,6
time consuming, and uncertain. The Department of Energys Electricity7
Committee, for example, noted that the fragmented nature of tra8
permitting and siting is exacerbated by a lack of coordination which ma9
delay the already lengthy siting process, add to the cost of transmission10
and increase the financial risk to a transmission developer. As the d11
Cape Wind permitting process has shown, permitting constra12
environmental sensitivities create costly barriers and significant dela13
siting process.14
A major advantage of the AWC Project is that it prov15
coordination and economies of scale for the permitting process: it rep16
many individual offshore-to-shore permitting efforts with a single17
permitting process for all 6,600 MW of offshore plants supported by the 18
The value of a coordinated and streamlined single shoreline p19
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tourist and residential areas, aviation routes, fishing zones, and shippin1
These constraints will limit the number of viable sites for both offsh2
farms and associated onshore landing points. In fact, because of such ov3
shoreline and offshore constraints, the Maryland Offshore Wind Dev4
study found that there may be only a few locations where wind farms5
interconnected.186
In short, in addition to offering a smaller environmental foot7
single streamlined permitting process of the AWC Project will greatly r8
uncertainties and costs of offshore wind development.9
Q. PLEASE EXPLAIN HOW THE PROJECT STREAMLINES T10
TRANSMISSION PLANNING AND INTERCONNECTION PROC11
A. Similar to streamlined environmental permitting, the AWC Project als12
substantially streamlined PJM transmission planning process compar13
interconnection of individual wind power projects. The AWC Proje14
evaluated in the PJM interconnection and transmission planning effort a15
project for injecting up to 6,000 MW from 6,600 MW of offshore wind n16
capacity into the onshore grid. Evaluating the interconnection of this a17
offshore wind generation as a single transmission project and interc18
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request avoids a lengthy iterative transmission planning and interc1
process for many individual projects. Given that individual wind power2
may be delayed or withdrawn, PJM would constantly have to re-evaluate3
combinations of wind plant and on-shore locations in its interconnecti4
For the AWC Project, a single planning effort can identify the best land5
for all 6,000 MW of potential injections from the offshore wind plants. 6
will this single planning step save time and effort, it will also result 7
optimal configuration for both onshore and offshore transmission.8
Q. YOU NOTED THAT THE AWC PROJECT ALLOWS 9
DECOUPLING OF THE SELECTION AND OPTIMIZATI10
LOCATIONS FOR ONSHORE LANDING POINTS AND OFF11
WIND PLANTS. HOW DOES THE PROJECT ACHIEVE THAT?12
A. Unlike individual radial transmission interconnections from offshore w13
to shore, the AWC Project is able to decouple the landing point and w14
locations so that each can be separately optimized. In the case of tran15
the AWC Project does not require a straight radial interconnection 16
offshore wind farm to shore. Instead, the Project allows for the select17
best locations for submarine cables to come on shore and interconnec18
onshore grid, while offshore wind plant locations can be developed 19
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HVDC backbone stretching from northern New Jersey to southern1
almost independently from the selected landing points.2
Q. DOES THIS DECOUPLING ALSO SIMPLIFY THE PERM3
PROCESS FOR WIND DEVELOPERS?4
A. Yes, very much so. The fact that onshore permitting and PJM interc5
processes are resolved through the AWC Project greatly simplifies the 6
permitting requirements for wind plant developers by limiting the 7
permitting needs to federal waters at locations that are mostly beyond t8
horizon from shore. Once these offshore permits are obtained, th9
developers can simply interconnect their plants with the AWC Proj10
various offshore locations. This expedited and simplified siting proce11
the Dutch grid operator, TenneT, referred to as a plug and play sol12
2009 position paper evaluating a proposed offshore transmission grid. 13
further noted that:14
[The] availability of offshore cables, grids and connections en15wind farm operators to plug in directly in order to supply elect16to the grid. This provides developers and financial backers with17assurances in advance, allowing national and international objec18
to be achieved more quickly.
19
19
Q. ARE OFFSHORE GRIDS SIMILAR TO THE AWC PROJECT20
DEVELOPMENT ELSEWHERE?21
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1,600 MW of offshore wind);20 TenneTs North Sea analysis to int1
6,000 MW of offshore wind capacity;21 and the Irish Scottish Links o2
Study (connecting Scotland, Ireland, and Northern Ireland).22 More3
European countries recently signed a memorandum of understanding4
offshore grid networks in the North Sea to interconnect 150,000 MW5
capacity by 2030.236
With over 2,000 MW of installed offshore wind capacity and m7
under construction and planned, Europe currently has the most offsh8
development experience. This has evolved from embracing the idea o9
grids as an infrastructure priority to help meet renewable energy targ10
most cost effective and efficient manner.24 The AWC Project would 11
nascent U.S. offshore wind experience leapfrog past individually interc12
single offshore wind farms and bring offshore wind power developm13
U.S. more on par with that in Europe.14
Q. HAVE YOU QUANTIFIED THE POTENTIAL ECONOMIC VA15
THE AWC PROJECTS ABILITY TO INCREASE THE CERT16
RAMP-UP, AND SCALE OF OFFSHORE WIND DEVELOPM17
THE MID-ATLANTIC REGION?18
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attributed to a combination of support structures (20% to 30%) and log1
installation (as high as 20%). If we assume that the reduced uncertai2
ramp-up, larger scale and local supply facilitated by the AWC Project3
save 20% on that portion of total offshore wind generation costs, thes4
will reduce the overall costs of developing 6,600 MW of offshore wind5
between $1.2 billion to $3.0 billion.286
Finally, the streamlined environmental permitting and PJM tra7
planning and interconnection process will reduce the costs and time 8
development efforts. If we assume a coordinated effort in streamlined p9
development, and transmission planning and interconnection process 10
20% of the total project development and permitting costs, the associate11
for 6,600 MW of wind development would be approximately $600 mill12
on estimates by NREL that approximately 10% of total installed offsh13
generation costs are attributable to project development and permitting e14
The combination of these scale-related cost savings on offsh15
development$3.2 billion lower wind turbine costs, $1.2 to 3.0 billion16
construction, logistics, and installation costs, and $0.6 billion i17
development and permitting costsamounts to $5.0 billion to $6.8 18
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approximately 20% of a total $30 billion investment need. These co1
alone have the potential to offset the entire cost of the AWC Project, ev2
considering that the Project offers substantial reliability and energ3
benefits and avoids between $3.4 billion and $5.3 billion in transmiss4
that would be associated with radial interconnections of individual wind 5
Q. IS THE ESTIMATED 20% SCALE AND COORDINATION-R6
REDUCTION IN OFFSHORE WIND PLANT COSTS CONS7
WITH THE SAVINGS ESTIMATED BY OTHERS?8
A. Yes. For example, Steve Holliday, the Chief Executive Officer of t9
Kingdoms National Grid (the countrys regulated transmission c10
recently noted in the context of planning an offshore grid to interconnec11
wind plants that [u]nless we get coordination between offshore and12
right, the investment overall will be much higher than it needs to b13
further stressed that [a]n uncoordinated approach may cost 25 perc14
overall, past the end of the 2020s. And [we] will have to pay in our 15
bills more for unnecessary investments.31 Similarly, and as already not16
the Virginia Coastal Energy Research Consortium has estimated t17
manufacturing of wind turbines and towers would reduce the 18
approximately 22%.19
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Q. SOME OF THE ESTIMATED COST REDUCTIONS ARE ASSO1
WITH LOCAL MANUFACTURING AND LOGISTICS SERVICE2
WOULD THE AWC PROJECT HELP DEVELOP SUCH A 3
SUPPLY CHAIN?4
A. Attracting local manufacturing and logistics services requires that offs5
development has sufficient predictability and annual scale so that sup6
justify the upfront investments needed for building up the local ind7
manufacturing and investing in the necessary supporting infrastructure. 8
manufacturing of wind farm components, VCERC notes that:9
[The] one-time investment to build a turbine manufacturing 10(including a foundry for large castings, and separate facilitie11blade fabrication, tower fabrication, and nacelle assembly12estimated to be at least $500 million. Review of trade publica13and conversations with turbine manufacturers suggest that a de14of 100 to 150 turbines per year (or 500 to 800 MW per year) 15minimum of 5 years is required to justify such an investment.3216
17
Similarly, investments will be needed in supporting infrastructu18
harbor facilities and specialized vessels to erect offshore wind turbin19
offshore platforms, and lay submarine cables. NREL estimates that 20
capital outlay for vessels alone would be more than $100 million and21
construction of the initial dedicated offshore wind vessel might requir22
large-scale wind project with sufficient capital investment to offset th23
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pipeline.33 Without such supporting local infrastructure, offshore win1
will be more expensive and may also be delayed by the limited availabi2
recent Ontario study of offshore wind development noted:3
The [local] supply potential for offshore wind will depend critica4the pace at which specialized construction, manufacturing, ass5and staging facilities can be developed. These factors will be far6
important than the availability of suitable sites in determining ho7the industry can be established and the extent to which it can gr8As a result, the industry must address a critical mass issue.349
10
The AWC Project can spur local manufacturing by cre11
predictability, ramp-up, and scale needed to overcome these initial in12
hurdles to achieve cost reductions and facilitate timely project compl13
avoid supply bottlenecks.14
Q. WHAT IS THE ADDITIONAL EMPLOYMENT AND ECO15
DEVELOPMENT BENEFIT OF INCREASED 16
MANUFACTURING AND SUPPLY OF LOGISTICS SERVICES?17
A. As discussed in Section III of our testimony, an increase of local manu18
local construction, and other services substantially magnify the employ19
economic stimulus benefits of the offshore wind investment to the Mi20
region. As we estimated in Section III of our testimony, increa21
manufacturing and supply of logistics services can easily increase em22
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(in which only 19% of all equipment is sourced locally) supports only1
full-time-equivalent years of employment while the medium case (with 52
equipment manufactured or sourced locally) supports over 180,000 FTE3
increase of almost 50%. As our analysis showed, the increase would4
larger if more than 54% of all equipment would be manufactured o5
locally. This means that developing offshore wind at a pace and scale 6
by the AWC Project not only reduces overall costs but also provides sig7
greater economic benefits for the region.8
Q. YOU MENTIONED THAT THE AWC PROJECT WILL REDU9
ENVIRONMENTAL IMPACTS OF SITING OFFSHORE10
GENERATION. PLEASE EXPLAIN.11
A. The AWC Project allows for a single, coordinated environmental permit12
focusing on the best onshore interconnection points that avoid nature 13
and other sensitive coastal areas. The Project makes this possible by 14
high capacity and the offshore backbone, which enables the selection o15
points to be largely independent of the wind farms offshore locatio16
coordinated landing point selection benefit has also been recognized i17
where several offshore grids are under development. For example, the D18
operator TenneT noted that: [c]ompared with separate private connecti19
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spatial planning. For instance, there is less disruption to sea and coasta1
because transsections of dykes and dunes are kept to a minimum.352
In addition, the Projects HVDC technology allows for the transm3
6,000 MW of offshore power with fewer cables than AC techno4
therefore, narrower right-of-ways. This smaller environmental fo5
HVDC technology has also been recognized by PJM in its analysis of6
Atlantic Power Pathway (MAPP) project, where it found that the HVD7
requires less space for the same power transfer, reducing the disturbe8
40% compared to an HVAC solution.36
9
Finally, the environmental impact of offshore wind is reduced f10
the fact that