By Irina Slav of OilPrice.com,
The New York state authorities have rejected a request by Orsted, BP, and Equinor for raising the price of electricity in future power purchase contracts featuring offshore wind energy.
Offshore wind developers have been pressured by rising raw material and component costs, and higher borrowing costs, which has cast doubt over the viability of many projects. Indeed, Reuters reported that some projects planned for the waters off the coast of New York may need to be reconsidered in light of the authorities’ decision.
"Sunrise Wind's viability and therefore ability to be constructed are extremely challenged without this adjustment," Orsted told Reuters.
Sunrise Wind is an offshore project with a planned capacity of 924 MW that could supply electricity to 600,000 households. According to Orsted, it would also involve several hundred million dollars in investments in the state and 800 jobs.
"These projects must be financially sustainable to proceed," the president of Equinor Renewables Americas told Reuters, referring to the offshore wind projects the Norwegian energy major is leading in the U.S.
Per Reuters, Equinor is involved in three projects with BP—the 816 MW Empire Wind 1 and the 1.26 GW Empire Wind 2, as well as the Beacon Wind farm, with a projected capacity of 1.23 GW.
Indeed, rising costs have compromised the financial sustainability of many wind power projects and earlier this year led to the cancellation of a large-scale one off the coast of the UK.
Swedish Vattenfall, which led the Norfolk Boreas project, said it would quit it after it saw costs rise by 40%, which made the project unviable.
To tackle the rising cost problem, wind developers have turned to governments, asking for additional tax incentives and higher electricity prices, busting the myth of cheap wind power.
The New York Public Service Commission said that if they had agreed to do what the wind developers wanted, that would have added 6.7% to New Yorkers’ electricity bills, which are already among the highest in the State.