In a strategic move to propel its renewable energy agenda and bolster the burgeoning offshore wind solicitation industry, New York announced a fresh offshore wind solicitation recently. The initiative is part of the state’s commitment to achieving renewable energy goals and aligns with broader efforts to combat climate change.
New York aims to secure 70% of its electricity from renewable sources by 2030, a pivotal step in the state’s ambitious plan to reduce carbon emissions significantly. Offshore wind is a key pillar in President Joe Biden’s vision to decarbonize the U.S. power grid.
The state has set its sights on developing 9,000 megawatts (MW) of offshore wind by 2035, a capacity sufficient to power up to six million homes. Notably, no operational offshore wind farms currently exist in New York, with the first being the 132-MW South Fork project by Danish energy firm Orsted, which is anticipated to begin producing power later this year.
Despite these positive strides, the offshore wind industry has encountered financial challenges recently, prompting developers to reconsider power contracts in several states, including New York. Inflation, interest rate hikes, and supply chain disruptions have increased project costs, resulting in developers seeking contract renegotiations.
European energy giants Orsted, Equinor, and BP have collectively incurred $5 billion in writedowns on U.S. offshore wind projects still under construction. The financial strain has been exacerbated by existing power sales contracts that no longer cover the escalated costs of building and financing these projects.
In response to these challenges, the new offshore wind solicitation will be open to all bidders, including those with existing contracts. This flexibility enables companies to re-offer their proposed projects at adjusted prices, offering an avenue to exit their previous contracts.
Notably, offshore wind developers had expressed concerns about cancelling power contracts due to the New York Public Service Commission’s reluctance to renegotiate existing agreements at higher rates. The contracts, awarded in 2019 and 2021 before the surge in interest rates and inflation, pertain to Orsted’s 924-MW Sunrise project and the Equinor/BP joint venture’s Empire Wind 1 (816 MW), Empire Wind 2 (1,260 MW), and Beacon Wind (1,230 MW).
A recent positive development for offshore wind developers came on October 24 when the New York State Energy Research and Development Authority (NYSERDA) awarded three offshore wind contracts at significantly higher prices than previous bids. This signals a potential shift in the financial landscape for the industry, providing hope for developers seeking increased compensation for their anticipated power production.
The offshore wind solicitation in New York reflects a commitment to navigating challenges, supporting industry growth, and realizing the state’s renewable energy ambitions. As the energy landscape evolves, the offshore wind sector plays a pivotal role in shaping a sustainable and greener future.