NY offers new offshore wind auction, may revive troubled projects - Reuters
NY offers new offshore wind auction, may revive troubled projects | Reuters
NY offers new offshore wind auction, may revive troubled projects
New York Governor Kathy Hochul speaks during a press conference to announce vehicle congestion pricing plan in New York City, U.S., June 27, 2023. REUTERS/Brendan McDermid/File Photo Acquire Licensing Rights
- Companies
Nov 16 (Reuters) - New York State will issue a new offshore wind solicitation on Nov. 30 with bids due in January 2024, the state government said, in a move that should support the troubled industry.
European energy companies Orsted (ORSTED.CO), Equinor (EQNR.OL) and BP (BP.L) have taken a combined $5 billion of writedowns on U.S. offshore wind projects that are not even completed, in part because their existing power sales contracts would not cover the cost of building and financing the projects.
That is because soaring inflation, rising interest rates and supply chain problems have led to much higher costs than anticipated.
The new solicitation will be open to all bidders, including those with existing contracts. This would allow the companies to re-offer their planned projects at higher prices and exit their old contracts.
The companies had warned they could cancel the power sales contracts after failing to convince the New York Public Service Commission(NYPSC), the state's utility regulator, to renegotiate the old contracts at higher prices.
In response to the NYPSC's decision, New York Governor Hochul announced on Oct. 12 a 10-point plan to help renewable energy firms "overcome recent macroeconomic and inflationary challenges that have impacted the renewable energy sector."
Those measures included the expedited solicitation for offshore wind and other renewable projects announced on Thursday.
The offshore wind projects that the companies are developing are Orsted's 924-megawatt (MW) Sunrise, and the joint venture between Equinor and BP's 816-MW Empire Wind 1, 1,260-MW Empire Wind 2 and 1,230-MW Beacon Wind.
In a positive sign for the companies, the New York State Energy Research and Development Authority (NYSERDA) on Oct. 24 awarded three offshore wind contracts at much higher prices than the earlier projects bid by Orsted, BP and Equinor.
Reporting by Scott DiSavino; editing by Jonathan Oatis, Nick Zieminski and Richard Chang
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.