Proposals could increase wind energy costs 27% to 66%, NYSERDA report says 

A report by the state agency leading New York’s transition into a carbon-free energy grid says requests by wind farm developers to sharply increase what they can charge for the power could potentially be 27% to 66% higher than originally proposed.

Wind farm companies requesting the increases previously filed documents with the state that excluded from public release most of the now-released financial information.

In a filing with the state Department of Public Service last week, the state Energy Research and Development Authority largely concurred with claims by three offshore wind giants about factors that necessitated their requests for higher rates for the energy they plan to sell to the state grid over the next five years. New York state has a plan for a carbon-free electric grid by 2040.

The so-called strike-prices for power from the planned arrays, which correlates to how much local utilities would pay for the power, would be from 27% to 66% higher than they originally proposed in their previous bidding documents, the filing shows.

For instance, according to the NYSERDA estimates, Sunrise Wind, which would connect to the energy grid in Brookhaven Town, has proposed that its original price increase from $110.37 a megawatt hour increase to $139.99, a 27% hike. NYSERDA estimates that for the average residential customer, it would mean a 40-cents-a-month increase over the less than $1 previously proposed.

The project is being developed by Danish wind-energy giant Orsted, which this week said it would need to take impairment charges – reductions in the value of assets – of up to $2.3 billion because of market factors affecting several of its projects, including Sunrise.

For Norway-based Equinor, which is developing its projects off the South Shore of Long Island, the requests are higher. Equinor’s Empire 1 project would see a 35% increase in its price, from $118.38 a megawatt hour to $159.64, with NYSERDA estimating a 48-cents-a-month increase in customer bills. Empire 2, which is slated to deliver power to Long Island at Island Park, would see its price jump from $107.50 to $177.84, with an estimated $1.08 a month increase on customer bills over prior estimates of under $1; and Beacon Wind, which is slated to deliver energy to Queens, would see its price jump 62%, from $118 to $190.82, with an estimated $1.14 monthly bill impact.

If the state approves the requests as they are, it would translate to a $3.10 monthly bill increase, over the prior estimate of under $2.

“The economic impact is far too great,” Michelle Leo, a member of Protect Our Coast Long Island, an opposition group in Long Beach, said in an email in response to the release. “Off-shore wind is clearly too expensive because of the return to the investors …”

Equinor spokeswoman Lauren Shane, in a statement, confirmed the estimates in NYSERDA’s filing “largely align with Equinor’s own analysis,” and added that it was “important to understand that the impact to ratepayers of the higher strike prices for our projects would mean, at most, an estimated $2.69 per month extra on New Yorkers’ electricity bills.”

NYSERDA, in a separate statement, noted its analysis showed that “providing a price adjustment of some degree could help mitigate risks of future costs to ratepayers while preserving progress toward Climate Act goals. However, any change in projected ratepayer impacts will depend on the outcome of the Public Service Commission’s petition proceedings.”

The cost estimates come as the state Public Service Commission is reviewing the developers’ petitions to determine whether they are justified before making a ruling to approve or deny them.

A firm working for NYSERDA in its filing found that the market factors that have led the companies to make the request were justified. All three companies cited “megatrends” that have increased costs, including “unforeseen inflation and supply-chain bottlenecks.”

NYSERDA’s researchers also found that wind farm product makers are facing “severe financial pressures” because of the bottlenecks and inflation, while rising interest rates are presenting another set of challenges.

NYSERDA’s review shows that the “costs to develop clean energy generation projects have increased materially,” the filing concludes. “These market conditions, driven in large part by increased demand for raw materials, an increased demand for large-scale renewable energy caused primarily by the COVID-19 pandemic and the war in Ukraine, as well as supply chain constraints and bottlenecks, are unprecedented.”

The report says Sunrise Wind’s request encompassed adjustment mechanisms for inflation and for the cost to interconnect the project.

Equinor, for its projects, requested “multiple adjustment mechanisms,” which would lead to “a materially higher increase in price than those requested by Sunrise,” according to the report.

Update, February 29, 2024: The Sunrise Wind and Empire Wind 1 projects were awarded new contracts by New York, at $150.15 per MWh, an increase from their original contracts for, respectively $110.37 and $118.38.