by Scott DiSavino
The American offshore wind industry foresees a year 2024 under better auspices, with the start of several projects after a year marked by blocked developments and billions of dollars in write-offs.
The offshore wind sector is expected to play a major role in helping several states and US President Joe Biden achieve goals to decarbonize the power grid and combat climate change.
But progress slowed in 2023 after offshore developers canceled power sales contracts in Massachusetts, Connecticut and New Jersey, and threatened to cancel deals in other states, due to the soaring inflation, interest rate hikes and supply chain issues that have driven up project costs.
European energy companies Orsted ORSTED.CO, Equinor EQNR.OL and BP BP.L have taken write-downs totaling $5 billion on offshore wind projects under development in the United States, as contracts for existing electricity sales did not cover the construction and financing costs of the projects.
Next year, developers hope to revive projects whose power sales contracts have been canceled or are in jeopardy by putting their facilities out for bid in several states, including New York, New Jersey, Massachusetts and Connecticut.
“While auction clearing prices may increase, states appear to remain committed to meeting their clean energy goals,” said Eli Rubin, senior energy analyst at energy consulting firm EBW Analytics Group .
There were only two small offshore wind projects operating in the United States as of early 2023, one in Rhode Island and the other in Virginia, with a total capacity of just 41 megawatts (MW). Capacity is expected to increase to nearly 1,000 MW in 2024 as commercial projects come on stream off New York and Massachusetts.
One thousand megawatts of offshore wind power can power about 500,000 American homes.
“Government procurement and state policies will continue to drive demand for offshore wind energy and federal support will help create more jobs, invest in the supply chain and produce energy at the nationally,” said Ryan Ferguson, spokesperson for the Danish energy company Orsted.
STATE SUPPORT
New York state last month issued a request for proposals allowing companies to back out of old contracts and rebid projects at higher prices. In February it will announce the winners of an accelerated call for tenders for offshore wind power.
The state accelerated the bidding in October after several developers, including Orsted, BP and Equinor, threatened to cancel power sales contracts awarded in 2019 and 2021 before the Federal Reserve began to raise interest rates in March 2022 to combat soaring inflation.
New York’s first offshore wind farm, Orsted’s South Fork, with a capacity of 132 MW, began generating electricity in December.
In New Jersey, Gov. Phil Murphy in November directed the state’s utility regulators to issue an expedited bidding process for offshore wind in early 2024 after Orsted, the country’s largest utility. offshore wind turbines in the world, has canceled its two Ocean Wind projects.
Elsewhere in New Jersey, Shell SHEL.L and French company EDF continue to develop the 1,510 MW Atlantic Shores wind farm, which is expected to produce electricity by 2027-2028, according to the project’s website.
In Virginia, US energy company Dominion Energy DN said its 2,587 MW Coastal Virginia Offshore Wind project, worth about $10 billion, was on budget and on track to begin construction. at sea in May 2024. The first production of electricity is expected for the second half of 2025 and the completion of the project is planned for the end of 2026.
In Massachusetts, Avangrid AGR.N and Copenhagen Infrastructure Partners’ 806 MW Vineyard Wind 1 project is on track to produce electricity in the near future.
Avangrid, which canceled contracts to sell power from offshore projects in Massachusetts and Connecticut in 2023, said it plans to retend its 1,232 MW offshore Commonwealth Wind projects of Massachusetts and Park City of 804 MW off the coast of Connecticut, in future calls for tenders.
“What you will see in 2024 is a large number of competitive bids that will result in contracts allowing projects to move forward,” said Ken Kimmell, director of offshore wind development at Avangrid.
Avangrid is majority-owned by Spanish energy company Iberdrola IBE.MC.
Orsted, meanwhile, said it plans to begin offshore construction in spring 2024 for its roughly $4 billion Revolution Wind project, which will provide 704 MW to consumers in Rhode Island and Connecticut.