New York State Initiates Fresh Offshore Wind Auction to Bolster Troubled Projects
Posted 17/11/2023 15:07
In a bid to provide support to the beleaguered offshore wind industry, New York State has announced a new offshore wind solicitation scheduled for November 30, with bid submissions due in January 2024. This move comes as a response to challenges faced by European energy companies, including Orsted, Equinor, and BP, which collectively incurred $5 billion in writedowns on incomplete U.S. offshore wind projects.
The setbacks for these companies were attributed to the unforeseen surge in inflation, escalating interest rates, and disruptions in the supply chain, leading to significantly higher project costs than initially projected. The existing power sales contracts for these projects proved insufficient to cover the increased expenses, prompting the need for a strategic reevaluation.
The upcoming solicitation will be open to all bidders, including those with existing contracts. This flexibility allows companies to reconsider their planned projects at revised prices, potentially facilitating the exit from their previous contracts. The inability to renegotiate older contracts at higher rates had prompted warnings from these companies about the possibility of canceling the power sales agreements.
Following the decision by the New York Public Service Commission (NYPSC), the state's utility regulator, not to renegotiate existing contracts, Governor Hochul unveiled a 10-point plan on October 12. The plan aims to assist renewable energy firms in overcoming macroeconomic and inflationary challenges impacting the sector. One of the key measures outlined in the plan is the accelerated solicitation for offshore wind and other renewable projects, a move officially announced on Thursday.
The offshore wind projects affected by these developments include Orsted's 924-megawatt Sunrise, Equinor, and BP's joint ventures - the 816-MW Empire Wind 1, 1,260-MW Empire Wind 2, and 1,230-MW Beacon Wind.
In a positive development for the companies, the New York State Energy Research and Development Authority (NYSERDA) recently awarded three offshore wind contracts at significantly higher prices compared to the earlier projects bid by Orsted, BP, and Equinor.
This renewed solicitation aims to revive confidence in the offshore wind sector and foster the continued growth of renewable energy projects in the state.