BP and Equinor have decided to cancel their power contract for a major offshore wind project in New York, citing "changed economic circumstances on an industry-wide scale."
“Equinor and bp today announced an agreement with the New York State Energy Research and Development Authority (NYSERDA) to terminate the Offshore Wind Renewable Energy Certificate (OREC) Agreement for the Empire Wind 2 project, an offshore wind project in the US with potential generative capacity of 1,260 MW,” Equinor said in a statement.
“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,” Molly Morris, president of Equinor Renewables Americas, said in a statement. “We will continue to closely engage our many community partners across the state. 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 economic conditions under President Biden, including high interest rates, supply chain difficulties, and rising inflation were the factors cited.
The rejection was just the latest blow to the US offshore wind industry, which is struggling to adjust to rising inflation, supply-chain issues and other factors that have driven up costs. Many projects are in jeopardy as developers are forced to recalculate the numbers for proposals originally modeled years ago.
“It appears that the economies of scale just aren’t enough to help these projects amid these macroeconomic events,” said Timothy Fox, an analyst at ClearView Energy Partners. “All those projects were on the bubble, so it’s not surprising that Equinor and BP want to reduce some of the risk they’re facing.”
About 17.5 gigawatts of US offshore wind projects have won state contracts, and proposals representing more than half of that are in dispute or have been canceled, according to Fox. Those include the Ocean Wind 1 and 2 developments in New Jersey with more than 2.2 gigawatts of capacity that Orsted A/S stopped late last year. One gigawatt is comparable to a big, conventional nuclear power plant.
New York announced in November a new energy solicitation that specifically encouraged bids from project developers that had petitioned the state for financial relief, as BP and Equinor did. The companies will forfeit to New York the $6.3 million contract security they posted under the power agreement, a representative for the project said in an email. (Bloomberg via Yahoo Finance)
The cancellation is another hit to the Biden administration and New York's green energy agendas, since wind was supposed to play a key role in their "goals to decarbonize the power grid and combat climate change," Reuters noted.
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