Energy Costs End Wind Project

Duke Energy Carolinas has abandoned plans to build three wind turbines in the region's Pamlico Sound as an offshore wind demonstrator project because costs have ballooned to almost $120 million.

But the company is committed to spending about $750,000 more on studies UNC Chapel Hill has undertaken to determine the commercial viability of windmills off the Carolina coast.

Paul Newton, head of strategy for regulated utilities for parent Duke Energy Corp., says Duke learned a lot from the experience. "We have learned what the demonstrator project was designed to tell us, which was what you need for commercial development of offshore wind for North Carolina.”

The lesson is twofold. First, any project must be large scale, because a small project cannot be cost-effective, Newton says. The cost of building the first turbine (including permitting, design, and other initial expenses) is $88 million, he notes. The cost of the next two turbines would be $14 million each.

That puts the cost for the demonstrator at $116 million, more than three times the original $35 million estimate. Add decommissioning costs, Newton says, and the pilot approaches $145 million.

That makes the small project economically untenable. But if the initial costs are spread over dozens or hundreds of subsequent turbines, the economies of scale makes such a venture possible.

The second lesson is that projects should be built farther from the shore. Pamlico Sound is too shallow to easily accommodate construction of the towers and turbines, Newton says. The large barges needed for such a project would have difficulty navigating the sound.

For more on Duke's struggle with the North Carolina wind turbines study, click here for the full story from the Charlotte Business Journal (subscription required).