New England States Agree to Buy Offshore Wind Power Amid Industry Challenges - gCaptain
New England States Agree to Buy Offshore Wind Power Amid Industry Challenges
Offshore
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Wind turbines at Orsted's Block Island wind farm off Rhode Island, one of two commercial offshore wind farms in the United States. Credit: PennyJack Creative/Shutterstock
Oct 4 (Reuters) – Three U.S. states in New England – Massachusetts, Rhode Island and Connecticut – on Wednesday agreed to jointly procure offshore wind power as soaring interest rates and rising equipment and labor costs have made some projects uneconomic.
By joining forces, the states hope to counter the pain rippling across the nascent U.S. offshore wind industry, which is expected to play a key part in decarbonizing the power sector and revitalizing domestic manufacturing.
Earlier this week, another offshore wind developer canceled agreements to sell power to local utilities – this time in Connecticut – because the previously agreed upon prices for that power was too low to cover the rising cost of building the project.
Massachusetts Governor Maura Healey announced the agreement between the three states at the American Clean Power Association’s Offshore WINDPOWER Conference in Boston, according to a press release on the governor’s website.
The three states will seek multi-state offshore wind proposals for selection in 2024 for up to 6,000 megawatts (MW) of power.
Any two or three states may agree to select a multi-state proposal and split the anticipated megawatts and renewable energy certificates from a single project.
One megawatt can power about 1,000 U.S. homes.
On Monday, Avangrid AGR.N, a U.S. subsidiary of Spanish energy firm Iberdrola IBE.MC, said it filed agreements with power companies in Connecticut to cancel power purchase agreements for Avangrid’s proposed Park City offshore wind project.
“One year ago, Avangrid was the first offshore wind developer in the United States to make public the unprecedented economic headwinds facing the industry,” Avangrid said in a release.
Those headwinds include “record inflation, supply chain disruptions, and sharp interest rate hikes, the aggregate impact of which rendered the Park City Wind project unfinanceable under its existing contracts,” Avangrid said.
Avangrid has said it planned to rebid the Park City project in future offshore wind solicitations.
Also over the past week, utility regulators in Massachusetts approved a proposal by SouthCoast Wind, anotheroffshore wind developer, to pay local power companies a total of around $60 million to terminate contracts to provide about 1,200 MW of power.
Those Massachusetts power companies include units of Eversource Energy, National Grid and Unitil.
SouthCoast Wind, formerly known as Mayflower Wind, is owned by units of Shell and Ocean Winds. Ocean Winds is owned by units of Portuguese energy company EDP Energias de Portugal’s majority-owned EDP Renováveis and France’s ENGIE.
(Reporting by Scott DiSavino; Editing by Aurora Ellis)(c) Copyright Thomson Reuters 2023.
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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.