Blow to Orsted, Equinor and BP as New York rejects pleas for offshore wind contract relief leaving 4GW in limbo
Regulator said cost hikes of up to 55% would have substantial ratepayer impacts and were ‘fundamentally inconsistent' with commission policy
Nearly all of New York’s pacesetting 4.3GW of contracted offshore wind capacity is now in limbo following rejection of developers’ pleas for inflation relief by the state's utility regulator.
New York Public Service Commission (PSC) denied petitions by the state's two offshore wind developers, joint ventures (JVs) of Equinor-BP and Orsted-Eversource, for increases to offtake contracts as high as 55%, which one PSC member reportedly described as “breathtaking”.
“The requested amendments to the contracts would have provided adjustments outside of the competitive procurement process; such relief is fundamentally inconsistent with long-standing commission policy,” said commission chair Rory Christian.
“Competition in the procurement process is necessary to protect ratepayers and provides the soundest approach to mobilise the industry to achieve our critical State goals dependably and cost-effectively.”
Equinor and BP expressed disappointment in the PSC's rejection of their petition “for support to help offset the unforeseen challenges facing our industry today stemming from inflation, supply chain disruptions and high interest rates,” said Molly Morris, president of Equinor Renewables Americas.
Noting that the projects must be financially sustainable to proceed, Morris added the JV “will assess the impact of the State’s decision on these projects”.
According to the petition, the Equinor-BP JV was calling for “a 54% increase on average across its portfolio”, which includes the 2.1GW Empire Wind 1 & 2 and 1.2GW Beacon Wind arrays.
The JV was seeking different rates across its three projects, with Beacon the highest at 55%. This would raise its rate from $118 per MWh to $190.82/MWh – the most among all projects.
Orsted-Eversource partnership requested a smaller hike of 27% increase for its 920MW Sunrise Wind farm, to $139.99/MWh.
PSC said the requests would rocket monthly power bills by nearly 7% for residential customers and over 10% for commercial and industrial users and “were not in the best interest of the State’s ratepayers”.
'Viability extremely challenged'
New York average retail power prices are around $24/MWh, according to the US Energy Information Agency.
“We believe making available the same inflation-related mechanisms offered to recent offshore wind projects is a reasonable solution for addressing the unprecedented macroeconomic factors challenging first-wave offshore wind farms while also keeping New York’s climate goals within reach,” said David Hardy, CEO Americas at Orsted.
“Sunrise Wind’s viability and therefore ability to be constructed are extremely challenged without this adjustment,” Hardy added.
“We will evaluate our next steps and communicate the status of the project as soon as possible as our joint venture and board consider the best options going forward in light of this decision.”
The ruling leaves the future of the projects – which include all of the state’s offshore wind except the 132MW South Fork under construction by Orsted-Eversource – in limbo as the developers try to chart a path forward.
New York has set goals of 9GW of offshore wind capacity as part of its efforts towards 70% clean power by 2030 and economy-wide net-zero emission by 2050.
A representative for the New York State Research and Development Authority (Nyserda), which oversees the state's energy transition, said that cancelled projects “are generally expected to be made eligible by Nyserda to participate in future competitive procurement opportunities.”
“Nyserda remains committed to providing these projects future opportunities to contribute to New York's renewable energy goals,” the representative said.
The state closed its round 3 solicitation for up to 4.7GW last January, and Nyserda confirmed that it would “make award announcements in the near future”.
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