Two of the largest developers of offshore wind projects, BP and Equinor, have reached an agreement with New York State regulators to cancel the power purchase agreement for their joint venture Empire Wind 2 project citing increased costs and supply chain disruptions. Coming three months after the regulators rejected a proposal to raise the power price, the agreement clears the way for the project to be rebid in New York State’s current solicitation.
“Commercial viability is fundamental for ambitious projects of this size and scale,” said Molly Morris, president of Equinor Renewables Americas in the company’s press release. “The Empire Wind 2 decision provides the opportunity to reset and develop a stronger and more robust project going forward.”
The agreement with the New York State Energy Research and Development Authority (NYSERDA) terminates the Offshore Wind Renewable Energy Certificate (OREC) Agreement for the Empire Wind 2 project, an offshore wind project with a potential generative capacity of 1,260 MW. The agreements which also included the first phase of the project as well as the first phase of another project Beacon Wind 1, were reached in 2022 before inflation and interest rates jumped. Ørsted’s Sunrise Wind project was also included in the 2022 agreement with NYSERDA.
When the agreement was reached, they heralded the fair price and ability to bring the projects in at competitive costs. Empire Wind 2 specifically had a power price of $107.50/MWh while the smaller 816 MW Empire Wind 1 and Beacon Wind (1,230 MW) were each set at approximately $118/MWh.
Citing the changing commercial conditions driven by inflation, interest rates, and supply chain disruptions, the five projects had sought permission from NYSERDA to reset their pricing. The authority however rejected the proposal in October 2023 citing the lack of competitive bidding. New York, however, in December launched an accelerated next round of solicitations which provides an opportunity to rebid the projects but the firms have to cancel existing agreements.
“This agreement reflects changed economic circumstances on an industry-wide scale and repositions an already mature project to continue development in anticipation of new offtake opportunities,” the companies said today announcing the reset and plans to seek new offtake opportunities for Empire Wind 2. The companies however reiterated their belief that offshore wind can be an important part of the energy mix while citing the progress at the South Brooklyn Marine Terminal, which would be the base of their operations.
The Empire Wind 1 and Empire Wind 2 projects recently reached a key federal permitting milestone, having received the federal Record of Decision from the Bureau of Ocean Energy Management (BOEM). Last month, Empire Wind 1 also received its Article VII Certificate of Environmental Compatibility and Public Need in New York.
Today’s announcement did not address the power agreement for either Empire Wind 1 or Beacon Wind which the joint venture partners are also developing.
The lease for the Empire Wind project was acquired in 2017 and calls for a total capacity of more than 2 GW. The two projects would be located between 15 and 30 miles southeast of Long Island. The site spans 80,000 acres, with water depths of between 65 and 131 feet.
