BP, Equinor tear up contract for big New York offshore wind project
Credit: By Josh Saul. January 3, 2024. bloomberg.com ~~
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BP Plc and Equinor ASA have terminated their power agreement with New York State for a 1.3-gigawatt wind farm in the Atlantic Ocean, blaming changing economic circumstances that made the Empire Wind 2 project unviable.
The companies said they plan to seek new offtake opportunities, according to a statement Wednesday. BP and Equinor were among a group of developers that were rebuffed in October after asking state regulators for higher rates to deliver power from offshore wind farms.
The rejection was just the latest blow to the US offshore wind industry, which is struggling to adjust to rising inflation, supply-chain issues and other factors that have driven up costs. Many projects are in jeopardy as developers are forced to recalculate the numbers for proposals originally modeled years ago.
“It appears that the economies of scale just aren’t enough to help these projects amid these macroeconomic events,” said Timothy Fox, an analyst at ClearView Energy Partners. “All those projects were on the bubble, so it’s not surprising that Equinor and BP want to reduce some of the risk they’re facing.”
About 17.5 gigawatts of US offshore wind projects have won state contracts, and proposals representing more than half of that are in dispute or have been canceled, according to Fox. Those include the Ocean Wind 1 and 2 developments in New Jersey with more than 2.2 gigawatts of capacity that Orsted A/S stopped late last year. One gigawatt is comparable to a big, conventional nuclear power plant.
New York announced in November a new energy solicitation that specifically encouraged bids from project developers that had petitioned the state for financial relief, as BP and Equinor did. The companies will forfeit to New York the $6.3 million contract security they posted under the power agreement, a representative for the project said in an email.
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