The Dismal Economics for Offshore Wind

By Jonathan A. Lesser
Key Manhattan Institute


1. Offshore wind is not cost-effective, and the forecasts of rapidly declining costs through increasing economies of scale are unrealistic.

2. Absent continued subsidies—such as state mandates for offshore generation and renewable energy credits, which force electric utilities to sign long-term agreements with offshore wind developers at above-market prices—it is unlikely that any offshore wind facilities will be developed.

3. These subsidies, along with the need for additional transmission infrastructure and backup sources of electricity, will increase the cost of electricity for consumers and reduce economic growth. The actual costs of offshore wind projects borne by electric ratepayers and taxpayers are likely to be greater than advertised.

4. Experience in Europe over the previous decade demonstrates that the performance of offshore wind turbines degrades rapidly—on average, 4.5% per year. As output declines and maintenance costs increase, project developers will have a growing economic incentive to abandon their projects before the end of their contracts to supply power. In contrast to the strict requirements for nuclear power plants, it is unclear whether offshore wind project owners will be required to set aside sufficient funds to decommission their facilities. This will likely mean that electricity ratepayers and state taxpayers will pay to decommission offshore wind turbines or pay higher prices to keep the projects operating.

5. The cumulative environmental impacts of multiple offshore wind projects along the Atlantic Coast—including on fisheries and endangered species—may be significant and irreversible.

6. Mining the raw materials of offshore wind turbines, especially rare-earth minerals, has significant environmental impacts because those materials primarily are mined overseas, where environmental regulations are less stringent than in the United States. Dismissing environmental impacts that occur outside the U.S. while championing offshore wind’s alleged worldwide climate-change benefits is hypocritical. The justification of subsidies for offshore wind based on increased economic growth, new industries, and state job creation is an appeal to “free-lunch” economics. The subsidies will benefit the well-connected few while imposing economic costs on consumers and businesses at large.

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