The first week of 2024 has already been a roller coaster of good and bad news for President Joe Biden’s offshore wind ambitions.
The nation’s first large-scale wind farm just started producing power for New England’s electric grid. The bad news is that another major East Coast project has thrown in the towel, the latest victim of skyrocketing costs that are putting Biden’s offshore wind dreams out of reach.
According to the Biden administration, the plan was for the US to generate 30,000 MW of energy from offshore wind by 2030. The US lags far behind Europe and China in developing offshore wind energy, much more of which it will need to produce clean energy. goals related to the Paris climate agreement. Since taking office, Biden has rolled out the red carpet for offshore wind, creating policy incentives and opening large swaths of the U.S. coastline to development. Despite tax credits and rental auctions, the industry is still struggling to overcome mounting obstacles.
“This is a historic moment for the U.S. offshore wind industry.”
The US actually has more potential to generate electricity from offshore wind energy than most other countries. It has yet to fulfill that potential. By 2050, offshore wind energy could generate up to a quarter of the country’s electricity. But until recently, the country only had the capacity to generate 42 megawatts of electricity from two small offshore wind farms — equivalent to about 0.0014 percent of Biden’s 2030 goal.
These numbers got a tiny bit better this week thanks to the Vineyard Wind 1 project about 15 miles off the coast of Martha’s Vineyard. It delivered power to the New England power grid for the first time on Tuesday at 11:52 pm local time. It came from just one turbine as part of the project’s initial commissioning process, which produced only 5 MW of power. At least five turbines are expected to start operating at full capacity in “early 2024,” according to a press release yesterday. There are a total of 62 turbines at Vineyard, capable of lighting 400,000 homes and businesses in Massachusetts by the time the project is complete. The project alone could bring U.S. offshore wind capacity to approximately 850 MW.
“This is a historic moment for the U.S. offshore wind industry,” Massachusetts Governor Maura Healey said in the news release. “As we look ahead, Massachusetts is on the path to energy independence thanks to our leading work in the country to support the offshore wind industry.”
Further up New York’s East Coast, the outlook for offshore wind energy turned bleaker this week. Developers Equinor and BP have canceled their offtake agreement with New York State for the planned 1,260 MW Empire Wind 2 project. The companies cited “changed economic conditions on a sector-wide scale” as the reason. Inflation, high interest rates and supply chain disruptions apparently made the deal financially unfeasible.
“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 in the future,” Molly Morris, president of Equinor Renewables Americas, said in a statement yesterday.
In other words, the companies are likely looking for new offtake agreements, ostensibly at higher rates to reflect rising development costs. Developers signed offtake deals for a slew of new offshore wind projects in the US before the Federal Reserve began raising interest rates in response to inflation. Higher costs for construction materials such as steel and resin also began to jeopardize projects. As a result, BP, Equinor and other offshore wind developers filed petitions last year asking them to charge customers higher rates for electricity. New York regulators denied their request last October.
BP and Equinor are not the first developers to drop projects in recent months. Wind energy giant Ørsted last October canceled two major projects off the coast of New Jersey that would have generated a combined 2,248 MW of clean energy. While that was a big blow, another 130 MW Ørsted-backed project, called South Fork Wind, began delivering power to Long Island in December from its first operational turbine.