Down but not out: Equinor takes hit on U.S. offshore wind, but hope remains - Reuters
Down but not out: Equinor takes hit on U.S. offshore wind, but hope remains | Reuters
Down but not out: Equinor takes hit on U.S. offshore wind, but hope remains
Equinor's logo is seen next to the company's headquarters in Stavanger, Norway December 5, 2019. REUTERS/Ints Kalnins/File Photo Acquire Licensing Rights
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OSLO, Oct 27 (Reuters) - Norway's Equinor (EQNR.OL) booked a $300 million impairment on its U.S. offshore wind power portfolio on Friday after New York officials rejected a request for better terms, but said the state's continued commitment to the technology still offered hope.
The charge, announced during Equinor's earnings, comes two weeks after New York regulators turned down the company's petition to renegotiate the terms of its offshore wind projects because of soaring costs and supply chain constraints.
"We were disappointed by the rejection of the price adjustment for the contracts," Equinor CEO Anders Opedal told the group's earnings presentation.
"But shortly after, New York's governor announced a 10-point plan and we are in the process of looking at what that means for us and the potential opportunities for our projects."
The plan included a potential expedited new auction presented by New York regulator NYSERDA late on Thursday, Opedal said.
In the document, NYSERDA mooted the possibility of new offshore wind awards in the first or second quarter next year that would also be open to projects that "were previously contracted with NYSERDA or other state offtakers".
Equinor and partner BP (BP.L) are planning to build the Empire Wind 1, Empire Wind 2 and Beacon Wind farms off New York. They will have a combined capacity of 3,300 megawatts, capable of powering 2 million homes.
Opedal said in order to go ahead with the projects Equinor needed to see "reasonable profitability" and "robustness compared to the risk".
Worldwide, a perfect storm of supply chain delays, design flaws and higher costs in the offshore wind industry has put dozens of projects at risk of not being delivered in time for countries to meet climate goals.
Equinor's impairment contributed to increasing the net operating loss at its Renewables unit to $412 million from $56 million a year ago.
In documents relating to the petitions, Equinor and BP said they were facing upfront capital investments for these projects "in excess of $20 billion".
Reporting by Nora Buli and Nerijus Adomaitis; Editing by Christian Schmollinger and David Holmes
Our Standards: The Thomson Reuters Trust Principles.
Related Knowledge Center: Offshore wind energy
Over the next decade, U.S. offshore wind power is expected to grow from a single 30-megawatt wind farm off Rhode Island to more than 2,000 MW of capacity along the Atlantic Seaboard. There are contracts for wind power off the coasts of Massachusetts, Connecticut, New York, Maryland, New Jersey, Rhode Island, and Virginia.
The National Renewable Energy Laboratory has estimated the United States has over 4,000 gigawatts (GW) of offshore wind potential, enough to power the country four times over.
The growth in part being spurred by state solicitations, including in New York, where then-Gov. Andrew Cuomo (D) set a commitment of 9,000 MW of offshore wind by 2035, and in Connecticut, where in June 2021, Gov. Ned Lamont (D) signed legislation authorizing the construction of 2,000 MW of offshore wind by 2030.
The offshore development is also being driven by an investment tax credit set to end in December 2019 and is equal to 12 percent of expenditures. U.S. Sens. Susan Collins (R-Maine) and Tom Carper (D-Del.) have introduced a bill to extend the tax credit for up to eight years.
The Interior Department has held eight competitive lease sales that resulted in 15 offshore wind leases over 1.7 million acres that has the potential for 21 GW of capacity. In February 2022, the Bureau of Ocean Energy Management completed a bidding process that realized $4.37 billion for 488,000 acres across six lease areas in federal waters off New York and New Jersey.
Projects have also been proposed off the Southeast coast, off California and Hawaii, and for the Great Lakes.