New York offshore wind projects back on track – at nearly double the original cost

Two US offshore wind projects, thrown into doubt last year after inflated supply chain costs rendered them uneconomical, have been awarded new contracts by the New York state government worth just over $US150 per megawatt-hour ($A230/MWh) – almost double the original strike price.

New York governor Kathy Hochul says the state hadsawarded two projects for contract negotiation from its fourth offshore wind solicitation: Equinor’s 810MW Empire Wind and Sunrise Wind, a planned 924MW project being developed by Ørsted and Eversource.

The developers last year petitioned New York regulators to adjust the prices they would receive for power generated from the planned offshore wind farms, the first contracts for which locked in an all-in development price of $US83.36 per MWh back in October 2019.

The petition was denied – causing shares in Danish offshore wind giant Ørsted to plummet – on the basis that awarding higher payments would cost ratepayers billions of dollars and undermine the competitive bidding process.

Instead, the New York State Energy Research and Development Authority (NYSERDA) in January launched a fourth auction, to give companies a chance to rebid their projects and replace existing contracts.

NYSERDA says the all-in development cost awarded over the life of the new contracts is $US150.15 per megawatt-hour, which is “on-par with the latest market prices.” The average bill impact for customers over the life of the projects is calculated at around 2%, or about $US2.09 a month.

On the other side of the ledger, the projects are expected to create more than 800 near-term construction jobs and inject $US2 billion into the state’s economy, including through newly negotiated community investments.

As part of the new contracts, the developers have committed to invest an extra $US32 million in community-focused investments in New York’s disadvantaged communities and $US16.5 million toward wildlife and fisheries monitoring.

The companies have also committed to purchasing a minimum of $US188 million of US-made iron and steel, supporting investments in the US manufacturing and the New York Buy American Act. 

“Empire Wind 1 and Sunrise Wind are now on a path to project completion, driving local investments and enhanced economic benefits to New York State at cost-competitive rates,” NYSERDA said in a statement last week.

“The projects, totaling over 1,700 megawatts of clean energy (enough to power one million New York homes), will be the largest power generation projects built in New York State in over 35 years once they enter operation in 2026, and will continue progress towards achievement of the State’s Climate Act goal to develop 9,000 megawatts of offshore wind energy by 2035.

“Together, Empire Wind 1 and Sunrise Wind are expected to deliver $6 billion in in-state spending and support nearly 1,000 jobs over the lives of the projects. They will deliver a host of benefits in line with Climate Act goals, with over $1 billion invested in disadvantaged communities, $117 million supporting minority, women-owned, and veteran-owned businesses, and over $43 million in workforce investments.”

Ørsted group EVP and CEO Americas, David Hardy, said the state’s decision to award new contracts would drive the offshore wind industry forward at a “critical moment” for New York.

“With these provisional awards in New York’s fourth offshore wind solicitation, we can see all the pieces of the state’s offshore wind economy coming together, and we’re incredibly proud of the role Sunrise Wind will play in this new American clean energy industry,” Hardy said.

“Sunrise Wind is on a path to adding nearly a gigawatt of clean energy capacity to New York’s grid by the end of 2026, while creating jobs and new career paths, investing in local communities, diversifying the regional energy mix, and propelling the state toward its clean energy targets.”

Equinor Renewables Americas president Molly Morris said Empire wind was “an advanced project” that would soon deliver reliable renewable power to hundreds of thousands of New Yorkers.

“We thank Governor Hochul and NYSERDA for executing on this expedited process and look forward to continued community engagement as we move toward a groundbreaking at the South Brooklyn Marine Terminal this spring,” Morris said.

NYSERDA says the new contracts will also usher in the construction and operation of the South Brooklyn Marine Terminal assembly and staging port, which itself is expected to create 400 construction jobs.

The regulator says this project will transform an unused 70-acre waterfront site in a “disadvantaged community” into a thriving offshore wind port. The projects will also invest more than $US80 million in construction and manufacturing associated with advanced foundation components at the Port of Coeymans, and continue to make investments totaling $US135 million in electric grid infrastructure.