European energy giants Equinor and BP have decided to terminate their power sale agreement with New York state for the proposed Empire Wind 2 offshore wind farm.
European energy giants Equinor and BP have decided to terminate their power sale agreement with New York state for the proposed Empire Wind 2 offshore wind farm. The decision, attributed to rising inflation, increased borrowing costs, and supply chain disruptions, underscores the broader economic challenges the renewable energy sector faces.
In a joint announcement, Equinor and BP revealed the termination of their power sale agreement for the Empire Wind 2 offshore wind farm project in New York. The move is a response to changing economic circumstances on an industry-wide scale, including inflationary pressures, elevated borrowing costs, and challenges within the supply chain.
The Empire Wind 2 project, with a capacity of 1,260 megawatts (MW), had been a key component of New York’s efforts to bolster its renewable energy portfolio and meet ambitious decarbonization targets.
The offshore wind industry, seen as pivotal in achieving climate goals, has faced setbacks in recent times, with developers canceling contracts in several states due to inflation, interest rate hikes, and supply chain disruptions.
The decision by Equinor and BP reflects a broader trend within the offshore wind sector. Other developers have also faced challenges, with cancellations of power sale contracts in Massachusetts, Connecticut, and New Jersey. These setbacks have prompted a reevaluation of existing contracts and a push for higher prices in response to the economic headwinds facing the industry.
New York state has accelerated its efforts to navigate the challenges posed by the offshore wind industry’s economic landscape. In November, the state launched a new offshore wind solicitation, allowing companies to exit previous contracts and re-offer projects at adjusted prices. The winners of this expedited solicitation are expected to be announced in February.
Equinor, in a statement, acknowledged the changed economic circumstances and indicated a commitment to continue developing the Empire Wind 2 project.
The company remains optimistic about new offtake opportunities, especially considering the offshore wind solicitation initiated by New York. While details of Equinor’s bid strategy for the Empire Wind 2 project remain undisclosed, the company expressed encouragement by the state’s commitment to offshore wind.
Despite the termination of the Empire Wind 2 agreement, the power sale agreement for the 816-MW Empire Wind 1 remains unaffected. This underscores the complexity of the challenges faced by individual projects within the offshore wind sector, as each must navigate a unique set of economic factors.
The offshore wind industry’s role in helping the U.S. achieve decarbonization goals, as advocated by President Joe Biden and various states, remains pivotal. However, challenges have prompted industry stakeholders to reassess contracts and project viability.
ClearView Energy Partners’ Managing Director, Timothy Fox, highlighted that Empire Wind 2 had been ‘at risk’ since developers signaled their reluctance to move forward under the existing contract in June 2023.
As the offshore wind industry grapples with economic challenges, the termination of the Empire Wind 2 power sale agreement by Equinor and BP serves as a notable development. The situation reflects the broader industry dynamics, emphasizing the need for adaptability and strategic repositioning in the face of inflation, borrowing costs, and supply chain disruptions.
New York’s response, through an expedited solicitation, signifies a commitment to overcoming obstacles and advancing its offshore wind ambitions. The outcome of the upcoming solicitation will provide insights into the industry’s ability to navigate economic headwinds and contribute to the broader clean energy transition.