Siting decisions of offshore wind farms influence the magnitude of emissions reduction benefits. This paper calculates electricity generation and emissions reduction of CO2, NOx, and SO2, and values these reductions to determine the impact of the siting location for a 300 MW offshore wind farm in Lake Michigan. The most important patterns for emissions reduction were the monthly trends, where January, March, and December consistently had the highest electricity generation and emissions reduction benefits. Summer months such as July and August had the lowest emissions reduction benefits. The intra-day trends showed higher emissions reduction benefits during off-peak hours, due to a higher likelihood of coal units being the marginal generator. These diurnal differences were smaller in magnitude than the seasonal differences. Two benefit valuation scenarios were analyzed for a 20-year time period, one using marginal damages of pollution and another using market prices for pollution allowances. The first scenario resulted in emissions reduction benefits ranging from $1827/kW to $2690/kW ($2508/kW averaged) throughout the Lake Michigan region for the 20-year period (applying a 3% discount rate). This equates to approximately $33/MWh in all lake locations since the emissions reduction benefits are primarily a function of electricity generation. The market price scenario resulted in a much lower range of $820/kW to $1060/kW ($987/kW average or 39% of the pollution damage costs). In scenario 1, the major component of emissions reduction benefits was CO2 reduction (86% of benefits), and 83% of these CO2 benefits were from offsetting coal plant emissions. A sensitivity analysis on size and region of emission reduction location showed that the NOx and SO2 benefits vary significantly (unlike CO2 benefits), but this variation had minimal effects on the total emissions reduction benefits. In comparison with economic investment costs, the scenario 1 emissions reduction benefits equal 49% of the total investment cost (in 2014 $million) on average. Spatial maps and heat maps are generated to illustrate the spatial and temporal variations in the emissions reduction benefits.
CSS Publication Number:
Chiang, Amy C., Gregory Keoliean, Michael Moore, Jeremiah Johnson. (2016) “Emission Abatement Costs and Benefits of Siting an Offshore Wind Farm: A Spatial Analysis of Lake Michigan.” Ecological Economics, 130: 263-276