Equinor and BP Cancel New York Offshore Wind Power Sale Agreement

By Editor


European energy giants Equinor and BP have announced the termination of their agreement to sell power to New York from the proposed Empire Wind 2 offshore wind farm.

Citing escalating inflation, increased borrowing costs, and challenges in the supply chain, the companies have redirected the project’s development trajectory in light of shifting economic conditions, Reuters news report said.

In a news statement, Equinor emphasized the altered economic landscape within the industry, positioning the matured Empire Wind 2 project for continued development while anticipating fresh offtake opportunities.

“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.

The decision coincides with New York’s recent offshore wind solicitation, initiated in November, which provides companies the leeway to exit existing contracts and re-present projects at revised, elevated prices. The winners of the fast-tracked solicitation are set to be unveiled in February.

Equinor refrained from detailing its bid strategy for the 1,260-megawatt (MW) Empire Wind 2 project but indicated a cautious evaluation of the solicitation, expressing optimism over the state’s commitment to offshore wind endeavors.

The termination of the power sale agreement specifically affects the 816-MW Empire Wind 1, while affirming continued operation. Each megawatt of offshore wind has the potential to power approximately 500 U.S. households.

Offshore wind initiatives play a pivotal role in the pursuit of decarbonizing power grids, aligning with President Joe Biden’s climate goals and corresponding objectives set by several states, including New York.

However, progress within the offshore wind sector witnessed impediments in 2023 when developers canceled power sale contracts in Massachusetts, Connecticut, and New Jersey. These cancellations and threats to annul agreements in other states were primarily driven by escalating inflation, interest rate hikes, and supply chain disruptions, which significantly inflated project costs.

Responding to industry concerns, New York expedited its solicitation process in October. This move was prompted by the intentions of various developers, including Orsted, BP, and Equinor, to potentially terminate contracts awarded in 2019 and 2021. These actions were spurred by the Federal Reserve’s initiation of interest rate hikes in March 2022 to counter soaring inflation.

The uncertain fate of the Empire Wind 2 project was foreshadowed in June 2023 when project developers signaled reluctance to proceed under the existing contract, according to Timothy Fox, managing director at ClearView Energy Partners.

New York’s first offshore wind farm, Orsted’s 132-MW South Fork, commenced power provision in December.

Massachusetts witnessed a milestone as Avangrid, owned by Spanish energy entity Iberdrola, and Copenhagen Infrastructure Partners announced the inaugural power production of their 806-MW Vineyard Wind 1 project for the New England grid.

Latest News