By Scott DiSavino and Nichola Groom
(Reuters) – New York released a new offshore wind solicitation on Thursday to keep the state on track to meet its renewable energy goals and support a nascent industry that has faced financial trouble in recent months.
Offshore wind is expected to play a major role in New York’s plan to reduce carbon emissions by getting 70% of the state’s electricity from renewable sources by 2030. It is also a pillar of President Joe Biden’s plan to decarbonize the U.S. power grid and combat climate change.
The state said it is supporting the development of 9,000 megawatts (MW) of offshore wind by 2035, enough to power up to six million homes.
There are, however, no offshore wind farms operating in New York. The first – Danish energy firm Orsted’s 132-MW South Fork project – is expected to produce its first power before the end of the year.
The New York State Energy Research and Development Authority (NYSERDA), which runs the renewable solicitations, welcomed “all project developers, including those that previously petitioned the New York State Public Service Commission for financial relief and new market entrants, to compete in the solicitation process.”
Offshore wind developers have threatened in recent months to cancel contracts to sell power in New York after earlier dropping agreements in Massachusetts, Connecticut and New Jersey as soaring inflation, interest rates and supply chain problems led to much higher costs to build projects than anticipated.
European energy companies Orsted, Equinor and BP have taken a combined $5 billion of writedowns on U.S. offshore wind projects that are mostly in development, in part because their existing power sales contracts would not cover the cost of building and financing the projects.
OPEN TO ALL BIDDERS
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 threatened to cancel their existing 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.
Those offshore wind contracts, which were awarded in 2019 and 2021 before interest rates and inflation soared, were for Orsted’s 924-MW Sunrise, and the Equinor/BP joint venture’s 816-MW Empire Wind 1, 1,260-MW Empire Wind 2 and 1,230-MW Beacon Wind.
“While we review the RFP and determine our next steps, we know that ready-to-build projects like Sunrise Wind are the only offshore wind farms that can be delivered within the next several years,” said a spokesperson for Orsted and Eversource, partners in developing South Fork, the first U.S. offshore wind farm.
In a positive sign for offshore developers hoping to get more money for the power they will produce, NYSERDA awarded three offshore wind contracts on Oct. 24 at higher prices than the earlier projects bid by Orsted, BP and Equinor.
NYSERDA said final proposals in Thursday’s solicitation are due by Jan. 25 with award announcements expected in February.
(Reporting by Scott DiSavino in New York and Nichola Groom in Los Angeles, additional reporting by Deep Vakil and Sherin Elizabeth Varghese in Bengaluru; Editing by Stephen Coates and Barbara Lewis)
