U.S. offshore wind sector 'fundamentally broken' - BP exec - Reuters.com
U.S. offshore wind sector 'fundamentally broken' - BP exec | Reuters
U.S. offshore wind sector 'fundamentally broken' - BP exec
A construction barge and crane float next to the first jacket (C) installed to support a turbine for a wind farm in the waters of the Atlantic Ocean off Block Island, Rhode Island July 27, 2015. REUTERS/Brian Snyder/File Photo Acquire Licensing Rights
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LONDON, Nov 1 (Reuters) - BP's renewables boss said on Wednesday the U.S. offshore wind industry is "fundamentally broken" as BP and its partner Equinor (EQNR.OL) study options to develop huge projects off the coast of New York after writing down$840 million of their value.
The offshore wind industry, one of the fastest growing energy sectors, has recently suffered a string of major setbacks due to equipment reliability issues, supply chain problems and sharp cost increases.
Orsted (ORSTED.CO), the world's largest offshore wind developer, on Wednesday flagged writedowns of up to $5.6 billion after halting the development of U.S. offshore wind projects.
Anja-Isabel Dotzenrath, BP's head of gas and low carbon, said that problems in the United States included permitting, the time lag between signing power purchase agreements and projects being built and a lack of inflationary adjustment mechanisms.
"Ultimately, offshore wind in the U.S. is fundamentally broken," Dotzenrath told an FT Energy Transition conference in London.
"There is a fundamental reset needed in the speed of permitting, security of permitting, etc..."
She added that BP and Equinor are studying a new 10-point proposal by U.S. regulators that would allow the companies to re-bid for projects in an "accelerated" process.
"There is a path forward but it's challenging," Dotzenrath told reporters on the sidelines of the conference.
"I believe all these projects will be built."
The new plan comes after the state of New York rejected the companies' request to revise upwards the payment received by developers under power supply contracts for the giant projects.
Over the past week, BP wrote down$540 million and Equinor took a $300 million impairment on their Empire and Beacon offshore wind projects, which have a combined capacity of 3.3 gigawatts, capable of powering 2 million homes.
BP paid Equinor $1.1 billion in 2020 for a 50% stake in the venture.
Claudio Descalzi, CEO of Italian energy company Eni (ENI.MI) told the conference that costs to develop new offshore wind projects have doubled recently.
"To do new offshore wind projects is very hard," Descalzi said.
Reporting by Ron Bousso and Shadia Nasralla; editing by Jason Neely and David Evans
Our Standards: The Thomson Reuters Trust Principles.
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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.