New York State has responded to the recent actions and statements of offshore developers in the face of increasing costs of production making the current price levels for offshore energy uneconomic.
The state on Thursday November 30th published fourth solicitation for offshore wind projects and land-based renewables. New York State is still looking to accelerate its take-up of renewable energy, but has had to take account of changes in the industry.
New York Governor Kathy Hochul recently launched a 10-point action plan that included plans to overcome the macroeconomic and inflationary challenges that crippled a recent auction. The state wants to produce 70% of its energy from renewables by 2030, with 9 GW of offshore wind energy by 2035. Industry analysts have called this target anywhere between optimistic and fantasy.
Planned projects by Ørsted, BP and Equinor petitioned state regulators to permit them to reset pricing on previously agreed power purchase agreements. The regulators, presumably thinking that they were calling the energy companies’ bluff, rejected the proposals. That led the developers to threaten to walk away from their projects and accept the write-off. Had they all done so, a prospective 5GW of offshore wind energy would have vanished.
The latest solicitation from the New York State Energy Research and Development Authority (NYSERDA) highlighted that conditional awards included three offshore wind and 22 land-based renewable energy projects, totalling 6.4 GW of energy, or some 12% of New York’s electricity needs.
The new call is open to all bidders and, claimed NYSERDA, provided greater flexibility for any tenderers. It sets a minimum size of 800 MW for the proposals. The solicitation includes provisions for a variety of proposals, including the opportunity for projects that currently hold power contracts to participate, allowing the companies to re-bid their projects as a means of resetting the pricing.
NYSERDA noted that the companies must commit to conditional termination and that the process included an updated policy to permit the terminations. NYSERDA is also reporting that steps were taken to streamline the process. The bid fees due with the proposals have been reduced.
As with the previous round, NY State is also offering the option of incorporating a price structure into the proposal that permits a one-time adjustment to reflect changes in certain price indices. NYSERDA claimed that this would help to ensure the long-term viability of the projects.
However, protectionism in any US project is never far from the surface. Apart from the Jones Act problems, which has been estimated to double the cost of production because of the shortage of qualifying vessels, New York has also included a minimum US iron and steel purchase requirement. That will be a sop to domestic steel producers. Also in the solicitation is a provision requiring proposals “to understand the benefits and burdens to disadvantaged communities”. There are also the long-standing requirements for environmental mitigation, fisheries mitigation, engagement, and New York workforce plans.
Final proposals for the offshore wind solicitation are due by January 25th 2024, with award announcements expected to be made by the end of February 2024.