Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Economy

New York’s Offshore Wind Future Is Being Dragged Down By Its Past

Can the state decarbonize without bailing out its dicey projects?

New York Governor Kathy Hochul.
Heatmap Illustration/Getty Images

This hasn’t been a good month for the offshore wind industry in New York, but the state is pushing ahead to try to reach its aggressive decarbonization goals. Governor Kathy Hochul announced on Tuesday contracts for three big offshore wind projects slated to go into operation in 2030 and bring four gigawatts of renewable energy to the grid.

As evidenced by the attendance of a senior White House official, Ali Zaidi, at the announcement, both the Hochul and Biden administrations are excited about New York’s offshore wind plan — or at least committed to making it work, despite the challenges and setbacks it has faced. And you can see why: Combine the three projects announced Tuesday with the four previously contracted out and the total is over eight gigawatts by 2030, almost the state’s goal of nine gigawatts by 2035.

But plans written down on paper are not steel in the sea and turbines in the air.

Up and down the East Coast, many states’ offshore wind projects are seeing rapidly accelerating costs from higher interest rates and supply chains that are throwing their plans to decarbonize their electricity sectors into doubt. Some projects, like Commonwealth Wind in Massachusetts, were mothballed while others, like Ocean Wind 1 in New Jersey, are eligible for fresh infusion of subsidies thanks to action by the legislature.

New York itself has so far failed to follow New Jersey’s lead. Two weeks ago, the state’s utility regulators denied a request by offshore wind developers to have their existing contracts readjusted for their new reality. An industry group warned the denial would likely lead to canceled projects, imperiling the state’s decarbonization goals.

So I was curious, does Hochul’s plan tackle the cost issue at all? It turns out it does, but not in a way that will rescue already troubled projects.

Before Tuesday’s announcement, she released a “10-point action plan” for renewables that included a provision to “launch an accelerated renewable energy procurement process for both offshore and onshore renewable energy projects, aiming to backfill any contracted projects which are terminated.”

These new contracts would have mechanisms to address rising costs without special payments or cancelling the deals. In short, the state’s strategy to address rising costs largely rests on coming up with new contracts that allow costs to rise (or are just more expensive in the first place), as opposed to going back and adjusting deals it has already struck with developers.

“Whereas in the earlier projects developers bore the risk of cost increases, in this current solicitation prices would be somewhat lower because risk is somewhat shifted to ratepayers,” Fred Zalcman, the director of the New York Offshore Wind Alliance, told me.

Emily Cote, a spokesperson for New York State Energy Research and Development Authority told me that the “strike price” of $145 per megawatt (an estimate of the all-in cost of the project divided by megawatt-hour — basically, it’s what developers are guaranteed to get paid) for the three announced is “approximately 28 percent higher” compared to the four existing projects, but 13 percent less than the what developers were asking for in inflation adjustments.

“This award group will also support a comparable amount of [offshore wind] development (4 gigawatts of new offshore wind projects) at a lower cost to ratepayers than the amount requested by these companies to the [New York state regulators],” Cote said.

Outside analysts think this system will work, at least for the new developers. Tancrede Fulop, an analyst at Morningstar, estimated that one of the three developers selected in this round, Community Ocean Wind (a consortium of the German energy company RWE and the utility National Grid), would ultimately get a strike price of $171 per megawatt after adjustments, compared to the $110 per megawatt that Orsted and Eversource’s Sunrise Wind received.

Community Ocean Wind’s deal, Fulop wrote, “impl[ies] good value accretion.” Morgan Stanley analysts wrote that the deal was “supportive of value creation even at conservative assumptions.”

But whether that approach will work to meet the state’s goals remains to be seen. All four of the existing wind projects may not be viable, their developers warned after the state decided not to adjust their contracts. While it’s possible the projects could end up being cancelled and bid on again under the new, more flexible contract arrangements, that could still add up to serious delays.

“The proponents of earlier projects have made clear that without relief ... the projects were in economic peril,” Zalcman said.

It’s also unclear if New York’s existing offshore wind developers will be around for a re-start.

Two of the groups currently building wind projects in New York — Equinor and BP plus Orsted and Eversource — bid in the latest round, but neither were picked. Both groups had asked for a version of the inflation adjustment present in this round to be retroactively applied to their current projects. Their rejection was an ominous sign for their chances of that happening.

Meanwhile, one of the winning bidders includes Rise Light & Power, which had actually publicly opposed the adjustments when much of the renewable industry was united in requesting them. Observers interpreted the move as Rise making a play for future renewable energy deals with the state.

“We are disappointed that New York did not select Sunrise Wind 2 in its latest offshore wind solicitation. Sunrise Wind 2 prioritized our commitment to financial discipline while delivering new economic activity and local jobs,” an Orsted spokesperson told me, noting it would “continue to evaluate opportunities.”

The spokesperson also reiterated that its South Fork Wind project’s construction is “underway and ongoing” with “turbine installation expected to begin imminently,” and electricity actually expected to flow by the end of the year. But the spokesperson also noted that for Sunrise Wind, a 924 megawatt project, its “viability and therefore ability to be constructed are extremely challenged without this adjustment.”

“We’re optimistic, but if experience tells us anything, these are exceedingly challenging projects that require a number of different elements coming together. It won’t be easy,” Zalcman said.

Blue

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Politics

Zohran Mamdani’s Silent Climate Politics

The self-described “ecosocialist” ran an ultra-disciplined campaign for New York City mayor. Once he’s in office, the climate issue could become unavoidable.

Zohran Mamdani.
Heatmap Illustration/Getty Images

Zohran Mamdani, the New York state assemblyman, democratic socialist, and Democratic nominee, was elected mayor of New York City on Tuesday night.

Many factors fueled his longshot rise to Gracie Mansion — a congested primary field, a gleam-in-his-eyes approach to new media, and an optimistic left-wing worldview rendered newly credible by global tumult — but perhaps above all was a nonstop, months-long performance of bravura message discipline. Since the Democratic primary began in earnest earlier this year, Mamdani has harped in virtually every public appearance on what he has described as New York’s “affordability crisis,” promising to lower the city’s cost of living for working-class residents.

Keep reading...Show less
Blue
Politics

How Mikie Sherrill Won New Jersey’s Electricity Election

The next governor of the Garden State turned a potential liability into an advantage.

Mikie Sherrill.
Heatmap Illustration/Getty Images, Library of Congress

Mikie Sherrill was vulnerable. While New Jersey’s gubernatorial elections tend to favor the party not in control of the White House, no party had won three straight terms in the governor’s mansion at Drumthwacket since the Kennedy administration.

Yet the Democratic congresswoman and former Navy helicopter pilot defeated her Republican rival, former New Jersey State Assemblyman Jack Ciattarelli, on Tuesday night by a comfortable margin of 56% to 43% at press time.

Keep reading...Show less
Blue
Politics

Democrats Win 2 Key Energy Races in Georgia

A “seismic change” comes for the state’s Public Service Commission.

Voting stickers and power lines.
Heatmap Illustration/Getty Images

Voters in Georgia ousted two Republican energy regulators in a statewide election on Tuesday, shaking up the party’s nearly two decade-long run holding all five seats on the state’s Public Service Commission.

Democrats Alicia Johnson and Peter Hubbard, who campaigned on the promise to protect ratepayers from skyrocketing energy bills by pushing for more renewable energy, won in a landslide against incumbents Tim Echols and Fitz Johnson.

Keep reading...Show less
Blue