US offshore wind power industry recovering after a tough year with canceled projects: experts

The US offshore wind power industry along the East Coast is recovering from a tough 2023 when several developers canceled projects or contracts, dealing a blow to state decarbonization policies that relied on that emissions-free generation, but state regulators acted fast and conditions are improving, developers, regulators and other stakeholders, said April 9.

"I think we are all realizing that our aspirations and goals and timelines that we had in mind were pretty exceptional ... but I think the goals are still really massive and we're on track to do some really great things over the next couple of years," Gregory Lampman, director of offshore wind at the New York Energy Research and Development Authority, said during the New York Energy Summit held in Albany and organized by INFOCAST.

State regulators need to be adaptive and not "simply write a contract and making developers do everything," he said. It is about finding ways to work with industry to ensure that all are successful in New York and the other regional states.

Offshore wind developers petitioned New York utility regulators for higher contract prices. Their request was denied in October 2023 on grounds that granting higher prices to already awarded contracts would be anticompetitive.

However, that denial caused some developers to cancel their contracts thus putting the state's climate law goals in jeopardy. New York has a mandate to install 9 GW of offshore wind power capacity by 2035.

Following the petition denial, it took NYSERDA about 60 days to release a new project solicitation, developers then had 60 days to prepare bids and NYSERDA reviewed them in 30 days. That whole process typically takes about 14 months, Lampman said, adding that going forward the agency's solicitations will reflect the lessons learned.

A 'rough' year

After a rough year, "it can only get better from here," Aude Schwarzkopf, head of commercial development at Equinor, said. "We started the year with three contracts with NYSERDA and by January 2024 we were down to zero," she said. "Luckily," the 810-MW Empire Wind 1 project was selected by NYSERDA in its fourth offshore wind solicitation that was done on the accelerated timeframe, Schwarzkopf said.

While last year was a setback for the industry, it may have helped refocus companies on important market dynamics like supply chains, she said. For the past several years companies had been chasing larger and larger turbines without paying much consideration to the global supply chains needed to deliver them.

"I think now things a slowing down a bit, which is a good thing for stability and [supply chain] visibility," Schwarzkopf said, adding that the turmoil made companies focus more on risk profiles.

Equinor continues to develop the Empire Wind 2 project which canceled its contract with NYSERDA last year. Despite a setback involving its proposed interconnection point that is being worked through, it will be a "compelling project for New York in future solicitations," she said.

Asked if the state-level challenges that impacted the offshore wind industry affected federal permitting, Luke Feinberg, an energy program specialist with the US Bureau of Ocean Energy Management said that the nice thing about the permitting process is there is some isolation, so challenges in New York do not have a "huge impact on the way we permit projects."

The status of power purchase agreements is not major determining factor, he said.

Regarding the alignment of policy with ambition, no state along the East Coast was immune to the setbacks faced by the industry last year, Fred Zalcman, director of the New York Offshore Wind Alliance, said.

"But is it fatal, no, whatever doesn't kill you makes you stronger," he said.

In large measure, the credit goes to state policymakers and primarily NYSERDA. To put out a procurement in a matter of months is really "lightning speed," Zalcman said.

The states generally have done a lot to restore investor confidence in the market and things are back on track. New York's third offshore wind solicitation awarded over 4,100 MW and the fourth solicitation extended a lifeline to at-risk legacy projects and there could be another solicitation later this year or early next year, he said.

"So, we could actually be well on our way to the 9 GW by 2035 target," Zalcman said.

Under all the scenarios in the scoping plan for New York's climate law, the state will need over 20 GW of offshore wind power capacity by 2050 and there is legislation under consideration to create a trajectory for getting there, he said.