New York rejects Ørsted, Equinor and BP bids to adjust offshore wind contracts
New York rejects Ørsted, Equinor and BP bids to adjust offshore wind contracts | Utility Dive
The New York Public Service Commission on Thursday denied petitions from Ørsted, Equinor and BP to adjust offshore wind contracts, which the PSC said would have cost ratepayers billions of dollars.
State municipal utilities and other intervenors warned the PSC that allowing the contract adjustments would “increase ratepayer costs by a total of $29.76 billion over the contract terms.”
This would result in cost increases of between 2.3% and 6.7% in each energy bill for residential customers, and between 2.5% and 10.5% for commercial customers, NYPSC estimated.
The developers sought the adjustments to compensate for financial struggles facing the offshore wind industry in the U.S., which they say threaten their ability to complete these projects.
The NYPSC noted that in its petition seeking a contract adjustment for their 924-MW Sunrise Wind project, Ørsted said “the project’s financial profile has worsened markedly — so much so that it is now not a viable investment.”
As project costs have risen steeply amid supply chain challenges, inflation and high interest rates, several offshore wind developers in the Atlantic have sought to exit and renegotiate power purchase agreements.
Avangrid was the latest to do so, filing settlements with Connecticut utilities Eversource Energy and United Illuminating to cancel its power purchase agreements for the 804-MW Park City Wind project.
The American Clean Power Association called the NYPSC’s decision“shortsighted” in a Thursday release and said it had “thrown New York’s environmental and clean energy future into peril.”
“Absent a robust offshore wind industry, it will not be possible for New York State to achieve its climate or environmental justice goals,” ACP said.
The New York State Energy Research and Development Authority said in a Thursday statement that it “remains steadfast in [its] commitment to a cost-effective and timely procurement, and development of renewable energy projects on behalf of New Yorkers.”
NYSERDA said it plans to “assess impacts on the contracted portfolio, and with input from the Department of Public Service and the renewable energy industry, proceed swiftly with an accelerated procurement process that prioritizes competition, simplifies bid requirements, [and] incorporates inflation indexing.”
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.