States Beg Biden to Bolster Offshore Wind While Projects Flounder
Six US governors have implored President Joe Biden to boost support for the fledgling offshore wind industry amid growing concerns that surging costs imperil multi-billion dollar projects planned for coastal Atlantic waters and the nation’s climate goals. The governors, including those from Connecticut, Massachusetts, New York and New Jersey, made their plea in a letter to Biden obtained by Bloomberg News. It follows recent lobbying by Orsted A/S to claim bonus tax credits under the Inflation Reduction Act, with the Danish company warning that without additional support to offset rising costs and supply chain hurdles, it could “walk away” from some of its US offshore wind projects. “Absent intervention, these near-term projects are increasingly at risk of failing,” the governors said in the letter dated Wednesday. “Without federal action, offshore wind deployment in the US is at serious risk of stalling because states’ ratepayers may be unable to absorb these significant new costs alone.” States are already under pressure to renegotiate power purchase agreements that were inked before a runup in costs for everything from financing for offshore wind farms to the towers, turbines and foundations needed to support them. Shell Plc, Avangrid Inc., and other companies are paying tens of millions of dollars to exit contracts, while Equinor ASA and BP Plc asked New York to approve a 54% price increase for power from two of their projects. But the governors warn “offshore wind faces cost increases in orders of magnitude that threaten states’ ability to make purchasing decisions.” Failed projects would threaten not just state deployment goals but also further challenge Biden’s bid to get 30 gigawatts of offshore wind production capacity installed by the end of the decade. The Biden administration must act urgently and “utilize every federal tool available” to keep offshore wind projects competitive, the governors wrote. Their top request is for updated Treasury Department guidance that makes clear offshore wind projects will be “fully eligible” for new clean energy tax credits, including bonus incentives under last year’s sweeping climate law. To ensure offshore wind projects “are able to move forward in the current economic climate,” they argue the Treasury Department must provide “achievable pathways” to qualify for those added tax credits, including a bonus credit of as much as 10% that’s tied to the use of domestically manufactured equipment. Using some made-in-the-US equipment is challenging as domestic offshore-wind supply chains still need to be cultivated. The governors also argue the US government can do more to help by streamlining the permitting of offshore wind projects and sharing revenue tied to offshore wind leasing that otherwise is funneled into federal coffers. © 2023 Bloomberg L.P. Sign up for our newsletter
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.