Citing inflation, interest rates and supply chain disruptions, BP and partner Equinor said Jan. 3 they reached an agreement to terminate their contract to sell power from the Empire Wind 2 project offshore New York.
The agreement with the New York State Energy Research and Development Authority (NYSERDA) came as the developers look to capture new offtake opportunities amid the changing economic environment for the offshore wind sector. The agreement announced Jan. 3 “repositions an already mature project to continue development in anticipation of new offtake opportunities,” Equinor said.
Rising costs challenged the economic viability of some mature offshore wind projects, including Empire Wind 2, that had contracts in place before inflation and interest rates soared. The higher costs prompted several developers, including Equinor and BP, to request in August a higher price for power produced at offshore wind farms—a request that was denied in October by New York authorities.
However, in late November, NYSERDA invited all project developers to compete in a new solicitation process, enabling companies to leave their old contracts and offer their already planned projects at higher prices.
New York aims to develop 9 gigawatts (GW) of offshore wind energy by 2035, enough to power up to 6 million homes, and source 70% of its electricity from renewable energy.
“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,” said Molly Morris, president of Equinor Renewables Americas.
“We will continue to closely engage our many community partners across the state,” Morris said. “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 Empire Wind farm consists of Empire Wind 1 with up to 57 wind turbines and Empire Wind 2 with up to 90 wind turbines, together generating about 2 GW of renewable energy.
NYSERDA said it plans to notify winners of its solicitation in February 2024. The contracts are expected to be executed in the second quarter.
RELATED
Ørsted Stock Plummets After Offshore New Jersey Wind Projects Canceled
Recommended Reading
BP Energy Outlook: Oil Demand Diminishes, NatGas, LNG a Wildcard
2024-07-16 - BP’s energy outlook presents a view at current trends for energy use through 2025 and a net zero case, which would require a history-defying shift from adding fuel sources to substituting them.
KC Fed Survey: NatGas to Rise, but Not Enough for Profitability
2024-07-15 - The Kansas City Federal Reserve Bank’s energy survey saw activity decline in the second quarter as producers look to the back half of 2024 for natural gas prices to improve—but not enough to turn a profit.
Pemex Reduces Fuel Thefts as US-Mexico Energy Trade Value Dips
2024-07-15 - Mexico, the largest export market for U.S. petroleum products, expects to lessen its foreign fuel dependence as its builds a new $16 billion refinery.
Freeport LNG in Texas on Track to Take in NatGas Again After Hurricane Beryl
2024-07-15 - Since Freeport shut, U.S. gas futures have declined to a two-month low.