Rising costs challenged the economic viability of some mature offshore wind projects, including Empire Wind 2, that had contracts in place before inflation and interest rates soared. (Source: Shutterstock)
Citing inflation, interest rates and supply chain disruptions, BP and partner Equinor said Jan. 3 they reached an agreement to terminate their contract to sell power from the Empire Wind 2 project offshore New York.
The agreement with the New York State Energy Research and Development Authority (NYSERDA) came as the developers look to capture new offtake opportunities amid the changing economic environment for the offshore wind sector. The agreement announced Jan. 3 “repositions an already mature project to continue development in anticipation of new offtake opportunities,” Equinor said.
Rising costs challenged the economic viability of some mature offshore wind projects, including Empire Wind 2, that had contracts in place before inflation and interest rates soared. The higher costs prompted several developers, including Equinor and BP, to request in August a higher price for power produced at offshore wind farms—a request that was denied in October by New York authorities.
However, in late November, NYSERDA invited all project developers to compete in a new solicitation process, enabling companies to leave their old contracts and offer their already planned projects at higher prices.
New York aims to develop 9 gigawatts (GW) of offshore wind energy by 2035, enough to power up to 6 million homes, and source 70% of its electricity from renewable energy.
“Commercial viability is fundamental for ambitious projects of this size and scale. The Empire Wind 2 decision provides the opportunity to reset and develop a stronger and more robust project going forward,” said Molly Morris, president of Equinor Renewables Americas.
“We will continue to closely engage our many community partners across the state,” Morris said. “As evidenced by the progress at the South Brooklyn Marine Terminal, our offshore wind activity is ready to generate union jobs and significant economic activity in New York.”
The Empire Wind farm consists of Empire Wind 1 with up to 57 wind turbines and Empire Wind 2 with up to 90 wind turbines, together generating about 2 GW of renewable energy.
NYSERDA said it plans to notify winners of its solicitation in February 2024. The contracts are expected to be executed in the second quarter.
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