1 Abstract2 Introduction3 System Description4 Sources of Uncertainty5 Fixed Base Case and Potential Flexibilities6 Decision Analysis on Wind Farm Project6.1 NPV Model6.2 Decision Tree Structure6.3 Decision Analysis6.4 Evaluation, Target Curve6.5 Evaluation, Multiple Criteria7 Lattice Analysis on Wind Farm Project7.1 NPV Model7.2 Lattice Setup7.3 Lattice Analysis7.4 Evaluation, Target Curve7.5 Evaluation, Multiple Criteria8 Conclusions and Lessons Learned9 ReferencesFall 2009David HwangESD.71Prof. Richard de NeufvilleApplication Portfolio: East Coast OffshoreWind Farm DevelopmentContents1 Abstract...............................................................................................................................................32 Introduction.........................................................................................................................................33 System Description..............................................................................................................................44 Sources of Uncertainty........................................................................................................................55 Fixed Base Case and Potential Flexibilities.........................................................................................66 Decision Analysis on Wind Farm Project............................................................................................76.1 NPV Model..................................................................................................................................76.2 Decision Tree Structure...............................................................................................................86.3 Decision Analysis........................................................................................................................96.4 Evaluation, Target Curve.............................................................................................................96.5 Evaluation, Multiple Criteria.......................................................................................................97 Lattice Analysis on Wind Farm Project.............................................................................................107.1 NPV Model................................................................................................................................107.2 Lattice Setup..............................................................................................................................117.3 Lattice Analysis.........................................................................................................................127.4 Evaluation, Target Curve...........................................................................................................127.5 Evaluation, Multiple Criteria.....................................................................................................138 Conclusions and Lessons Learned.....................................................................................................139 References.........................................................................................................................................142 David Hwang | ESD.71 | East-Coast Offshore Wind Farm Development1 AbstractThis application portfolio provides an analysis of the design of a 75-turbine offshore wind farm off the East Coast of the United States. In particular it addresses the notion of designing such a wind farm in a flexible manner for the best expected economic performance over a 20-year period of time. Based on estimates of uncertain fluctuations in turbine cost, turbine efficiency, and electricity price, two system analyses were performed: decision analysis and lattice analysis. Using decision analysis, it is shown that building a wind farm in a staged approach rather than a fixed approach provides a higher expected net present value (ENPV) over the course of the wind farm. Using lattice analysis, it is shown that adding the option of shutting down turbines of the wind farm when electricity prices are low (and hence revenues arelow) provides a higher ENPV than not having this shutdown option. In both analyses, a multi-criteria evaluation was also performed which showed that under almost every criterion, adding flexibility to the design provides the best possible economic outcome. The conclusion of these analyses strongly suggests that flexibility in system design is a “win-win” situation: flexibility preserves the upside economic potential when uncertain conditions are favorable and limits the downside risk when the uncertain conditions are adverse. 2 IntroductionAs global carbon emissions rise and costs of traditional fossil-fuel based energy increases, the need for renewable energy sources has come to forefront of societal concerns. One important renewable energy source is wind energy, a zero-emissions vehicle of electricity generation. To harness wind energy, wind turbines translate mechanical energy used to rotate the turbine blades into electricity which can be transmitted to local municipal areas. A collection of wind turbines is called a wind farm, and a number of wind farms installations have been implemented in such areas as Alamont Pass in California and North Hoyle in the United Kingdom [1]. Wind farms can be partitioned into two categories: onshore and offshore. Onshore wind farms are land-based and have the advantage of ease of construction, ease of connection to existing power lines, and easeof maintenance [2]. Offshore wind farms are more costly to construct and maintain, however they offer the promise of greater wind speeds and hence greater power generation. In addition, offshore wind turbines are typically larger than onshore turbines, which also help to produce greater power. Due to the technological difficulties of offshore wind farms, they compromise very few of the wind farms installation in North America, as shown in the figure below [3].3 David Hwang | ESD.71 | East-Coast Offshore Wind Farm DevelopmentOffshore wind power has made many headlines in recent years among politicians and scientists. In December 2008, Secretary of the Interior Ken Salazar suggested that offshore wind power from the Atlantic Ocean could generate up to 1000 Gigawatts of electrical power in the United States [4]. Even more recently, in September 2009, the European Wind Energy