After two years of steadily marching forward, the renewable energy ambitions of the Biden administration and offshore wind developers ran head-on into escalating financial challenges in 2023.
By September, construction work was well underway at the U.S. industry’s marquee Vineyard Wind project, an 804-megawatt turbine array off Massachusetts that will be the first utility-scale site in federal waters. Joint venture partners Avangrid and Copenhagen Infrastructure Partners with their U.S. service contractor Foss Maritime moved turbine components out of the Port of New Bedford, Mass., as cable laying operations began. The first of 62 turbines were being assembled by Oct. 12.
But way back in January, Avangrid was already taking legal steps to be released from its earlier Massachusetts power purchase agreements for its own planned 1,200-MW Commonwealth Wind project. It was an early warning signal that wind power companies, beset by inflation, rising prices for turbines and other components, as well as higher interest rates for financing saw their previously negotiated state power agreements as untenable.
Nine months later, danger was evident as governors of six Northeast states urgently asked the Biden administration to boost federal tax credits for offshore wind developers, give their states a share of revenue from offshore energy leases and hasten permitting for the projects.
The Sept. 13 letter from governors of Massachusetts, Rhode Island, Connecticut, New York, New Jersey and Maryland was a stark departure from their usual boosterism of offshore wind power and its economic prospects.
Calling for more federal support for their states’ wind power agreements with developers, the governors’ letter echoed warnings from Ørsted and other wind companies seeking to revise previous power agreements: “Inflationary pressures, Russia’s invasion of Ukraine, and the lingering supply chain disruptions resulting from the Covid-19 pandemic have created extraordinary economic challenges that threaten to reverse these offshore wind gains.
“Instead of continued price declines, offshore wind faces cost increases in orders of magnitude that threaten states’ ability to make purchasing decisions,” the letter stated. “These pressures are affecting not only procurements of new offshore wind but, critically, previously procured projects already in the pipeline.
“Absent intervention, these near-term projects are increasingly at risk of failing. Without federal action, offshore wind deployment in the U.S. is at serious risk of stalling because states’ ratepayers may be unable to absorb these significant new costs alone.”
Along with more subsidies for wind power, the governors want “a new revenue-sharing program for federal offshore wind leasing” — for the first time giving coastal states a cut of the money energy companies pay to the federal Bureau of Ocean Energy Management.
In July Rhode Island Energy decided not to enter a power purchase agreement for the proposed Revolution Wind 2 project because the projected costs for electric customers were too high — a setback for developers Ørsted and Eversource that came just after BOEM had completed a positive environmental review for the partners’ first-phase Revolution Wind project.
By October developers of Commonwealth Wind, SouthCoast Wind and Park City Wind had cancelled contracts for planned turbine projects that would have generated 3.2 gigawatts off southern New England. The developers paid $124 million in penalties with hopes of rebidding into new state procurement rounds.
“The resulting delay will inevitably push back installation dates to the late 2020s,” the non-profit industry group Business Network for Offshore Wind said in its third quarter report to members.
Then on Oct.12 New York state power regulators denied petitions by offshore wind developers to charge customers billions of dollars more in future energy sales, a setback that could threaten the viability of four projects and the state’s ambitions for renewable energy sources.
Petitions from developers Ørsted and Eversource for their planned Sunrise Wind project sought a 27% increase in future power prices, while joint venture partners Equinor and BP wanted 54% more overall for their Empire Wind 1, Empire Wind 2 and Beacon Wind projects.
In announcing the denial, the New York State Public Service Commission said it “opted to preserve the robust competitive bidding process that provides critically needed renewable energy resources to New York in the fairest and most cost-effective manner that protects consumers.”
“The commission has repeatedly stated that competition in the procurement process is necessary to protect ratepayers and provides the soundest approach to mobilize the industry to achieve our critical state goals dependably and cost- effectively, and we do so again through today’s action,” said commission chair Rory M. Christian.
Wind power advocates saw the decision as a major step backward for New York’s renewable energy plans, among the most ambitious in the U.S. “Sunrise Wind’s viability and therefore ability to be constructed are extremely challenged without this adjustment,” Ørsted CEO Americas David Hardy told Reuters.
“With one shortsighted decision, the NYSPSC has thrown New York’s environmental and clean energy future into peril,” said Jason Grumet, CEO of the American Clean Power Association.
“Absent a robust offshore wind industry, it will not be possible for New York state to achieve its climate or environmental justice goals. Moreover, critical economic benefits from new manufacturing facilities and the revitalization of ports will be squandered along with the creation of good paying union jobs,” said Grumet. “We urge New York state to maintain its clean energy commitment and reconsider this decision.”
The winter and spring of 2022-2023 had summoned another storm for offshore wind advocates. Opponents accused developers and their offshore survey work of contributing to whale deaths off the Mid-Atlantic coast.
The controversy began when a series of dead humpback whales washed ashore along the New Jersey and New York coasts starting in December 2022 at Atlantic City, N.J., and subsequently at other beaches in the region. By Sept. 23 of 2023, the National Oceanic and Atmospheric Administration had reported 17 humpback strandings in the two states — half of 34 in all, reported from Massachusetts to Florida. The sight of the dead whales triggered an intensive campaign by offshore wind critics, as well as a coalition of Jersey Shore community groups including Clean Ocean Action, tourism businesses, and commercial fishermen.
Ørsted’s planned 1,100-MW Ocean Wind 1 was caught up in the escalating opposition, with the company suing local governments in Cape May County, N.J., over their attempts to block onshore construction. Cape May and its allies in the commercial fishing and tourism industries fired back Oct. 17 with a lawsuit in federal District Court claiming the Bureau of Ocean Energy Management and other agencies violated federal laws in granting Ørsted a lease in federal waters and positive environmental reviews.