NY Offshore Wind: Chasing the Pot of Gold
NY "Re-Bid" Offshore Wind prices up ~ 1.8x over the 2018-2020 bid prices. With that massively increased price tag, NY appears to have brought the developers back to the 'affordable' green fold.
Over the past number of months, New York’s offshore wind fantasies were hit with a hard dose of reality: to meet the state’s target of 9,000 MW of Offshore Wind by 2035, it is going to costs taxpayers and ratepayers a lot of money.
Before we assess the current state of affairs, there’s a key point to make: There’s a big difference between prices and costs. When there’s a lot of hype and hope that renewable costs will decline, it’s understandable that developers would negotiate lower and lower prices to gobble up a larger share of the newly mandated markets. But much like a cartoon character that runs off of the cliff and looks down before falling, there’s a moment when times stands still and hype gives way to reality.
For a number of Years, NY state agencies have solicited bids for offshore wind projects. In exchange, the state guarantees prices for developers.
At first, prices declined. South Fork is NY’s first major wind farm (130MW) and it recently came online in December of 2023. Its price contracts were negotiated in 2 separate phases (~2015) and (~2017). Between those phases, prices declined.
Between 2018-2020, NY accepted and later awarded bids to 4 large wind projects for nearly 4.2 GWs of Capacity. The 4 initial projects - Empire 1, Beacon, Sunrise, and Empire 2 - prices were locked in at $83 - $118 per MWh range.
During this time, wind turbines rapidly grew larger. But when turbine manufactures started to realized that increasing blade lengths resulted in much higher warranty costs, a number of manufactures ran into financial trouble. This combined with the increased interest rates and inflation drove the costs up.
As a result, all 4 of the initial big projects have since either been cancelled the original contracts and/or rebid. Two projects are currently cancelled (Beacon and Empire 2) and the other 2 went back to the state and “Re-bid” prices significantly higher. In February of this year, NY awarded re-bid prices for those two projects at just over $150/ MWh. Those rebid prices are nearly 1.8x the original price of $83.36/MWhr for those 2 projects.
In addition to the rebid projects, NY also awarded 3 additional new contracts to 3 new projects, with an average price of approx $148/ MWhrs.
So far, of all of the projects, South Fork is the only one to have come online. Of the other 5 projects still in the works, Sunrise Wind announced its final investment decision on March 26, 2024. Empire 1 is still waiting for an FID and the other three are in development. Based on publicly available data, here is a table showing the projects, their guaranteed prices, and status.
And here is a map from NYs government showing the locations of the projects currently under development or already built (South Fork).
So just how much is this going to cost NY taxpayers and ratepayers? For reference, during the energy crisis of 2022, NY average electricity rates ranged from $58-$127 per MWhr, depending on the region of the state (This was the all in price, including the wholesale and capacity prices).
So, in the name of meeting the state’s green energy vision, it is willing to lock taxpayers and rate payers into prices that are significantly HIGHER than the 2022 energy crisis.
On Jan 13th of this year in a post titled New York On the Hook, we discussed how NY’s offshore wind ambitions were putting the ratepayer and the taxpayer in a bind:
“Unfortunately for the average Joe ratepayers and taxpayers, this green adventure is a bit like chasing the pot of gold at the end of the rainbow. The rainbow looks like it ends on top of the next hill. But when you climb that hill… surprise… the rainbow ends on… the next hill.”
Unfortunately, the recent rebid contracts at higher prices have simply confirmed that initial assessment.
As always, thanks for reading!
Off-shore wind is and will always be a boondoggle. Not to mention what happens in 15-20 years (maybe not even that) when the salt water inevitably corrodes them beyond repair...leaving the ratepayers to foot the bill for their removal.
Thank you for showing how expensive that electricity will be. Are there any “firming” requirements imposed on the developers?