Another U.S. Offshore Wind Power Contract Cancelled

Researched by Industrial Info Resources (Sugar Land, Texas)--While there will be more to come from Industrial Info about the turmoil that the U.S. offshore wind industry faces, the latest news from the sector is that BP (NYSE:BP) (London, England) and Equinor (NYSE:EQNR) (Stavanger, Norway) have terminated the contract with New York state for the power from the unbuilt Empire 2 offshore wind project, making the project's future more uncertain.

The Empire 2 project was destined for waters about 15 miles south of Long Island. This second project was to outshine its sister Empire 1 project in power output by using approximately 80 turbines, each rated at 15 megawatts (MW), to achieve nameplate generation of 1,200 MW. Construction was expected to kick off in 2027, putting it on track for completion by the start of 2030. Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project Database can click here for the project report.

BP and Equinor cited reasons heard from other offshore wind developers that have recently cancelled power supply agreements: rising inflation, higher interest rates and supply-chain issues that have increased since the original agreement was made.

Red flags around the project went up earlier this year when BP and Equinor filed a petition with the state seeking additional funding from consumers for their projects. New York denied the request in October, leading to the cancellation of the existing contract.

Another BP-Equinor offshore project that had contracted power supply with New York also was included in the petition. The Beacon windfarm would be closer to Massachusetts, but still provide power to New York. This project will use 123 10-MW turbines to provide nameplate generation of 1,230 MW. Construction is expected to begin in 2025. Subscribers can click here to learn more.

However, all is not lost in regard to a renewed contract between the companies and the state. In November, New York launched a new offshore wind solicitation that allowed companies with existing contracts to exit their old contracts and resubmit planned projects at higher prices. New York may be willing to accept a revised Empire 2 contract to help facilitate its climate goals, which include having at least 70% of its electricity load coming from renewable sources by 2030 and the development of 9,000 MW of offshore wind power by 2035.

In a statement regarding the changes, Equinor said, "This agreement reflects changed economic circumstances on an industry-wide scale and repositions an already mature project to continue development in anticipation of new offtake opportunities. The decision recognizes commercial conditions driven by inflation, interest rates and supply chain disruptions that prevented Empire Wind 2's existing OREC [Offshore Wind Renewable Energy Credit] agreement from being viable," suggesting the project will be resubmitted with a changed funding structure.

Meanwhile, another BP-Equinor offshore wind project appears to be moving forward. The Empire 1 windfarm, also off Long Island, will have 54 turbines, each rated at 15 MW, to provide more than 800 MW of power. Construction is expected to begin in the coming months. Subscribers can learn more by viewing the project report.

Other projects in New York waters are progressing. Nearing completion is the South Fork offshore windfarm off Montauk on eastern Long Island. Smaller in size than many of the proposed windfarms in U.S. waters, the facility will use 12 turbines to generate 130 MW. In December, South Fork became the first commercial-scale offshore windfarm in U.S. waters to supply power to the grid. All 12 turbines are expected to be operational in early 2024. Subscribers can click here for more information on the project.

Subscribers to Industrial Info's GMI Power Database can click here to view reports for all of the projects discussed in this article and click here for the related plant profiles.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 trillion (USD).