Equinor and bp have announced the cancellation of their contract to sell offshore wind power to New York State from their proposed Empire Wind 2 project.
The decision was made due to rising inflation, higher borrowing costs, and supply chain issues.
In a statement, Equinor stated that the termination of the agreement was a result of changing economic circumstances in the industry. They also mentioned that the project will continue to be developed in anticipation of new opportunities for power off-take, referring to a new offshore wind solicitation launched by New York in November.
The new solicitation allows companies to exit old contracts and re-offer projects at higher prices. The winners of the expedited solicitation for offshore wind will be announced in February. While Equinor declined to comment on their bid strategy for the 1,260-megawatt (MW) Empire Wind 2 project, they did mention that they are carefully assessing the solicitation and are encouraged by the state’s commitment to offshore wind.
The power sale agreement for the 816-MW Empire Wind 1 project remains in place, according to an Equinor spokesperson. Notably, one megawatt of offshore wind can power around 500 US homes.
The offshore wind industry is expected to play a significant role in helping US President Joe Biden and several states, including New York, meet their goals to decarbonize the power grid and combat climate change. However, progress has slowed in recent years due to various challenges faced by offshore developers.
In 2023, several developers canceled contracts to sell power in Massachusetts, Connecticut, and New Jersey, while also threatening to cancel agreements in other states. This was due to soaring inflation, interest rate hikes, and supply chain problems that increased project costs.
In response to these challenges, New York accelerated its solicitation in October. This was after several developers, including Orsted, the world’s biggest offshore wind company, bp, and Equinor, threatened to cancel contracts to sell power that were awarded in 2019 and 2021. This was before the Federal Reserve started hiking interest rates in March 2022 to combat soaring inflation.
According to Timothy Fox, managing director at ClearView Energy Partners, Empire Wind 2 has been at risk since the project developers made it clear in their June 2023 petition that they would not move forward under the current contract.
In December, New York’s first offshore wind farm, Orsted’s 132-MW South Fork, provided its first power.
In Massachusetts, Avangrid and Copenhagen Infrastructure Partners announced on Wednesday that their 806-MW Vineyard Wind 1 project has produced its first power for the New England grid.
Avangrid is majority-owned by Spanish energy company Iberdrola.
