After a year plagued by setbacks and substantial write-offs totaling billions of dollars, the U.S. offshore wind sector is eyeing a promising turnaround in 2024. Hindered by stalled developments, the industry looks to rebound, aligning with state goals and President Joe Biden’s aspirations to decarbonize the power grid and tackle climate change.
The significant slowdown in progress throughout 2023 stemmed from offshore developers retracting power sale contracts in states like Massachusetts, Connecticut, and New Jersey. This retreat was prompted by surging inflation, increased interest rates by the Federal Reserve, and disruptions in the supply chain, all contributing to escalated project costs, Reuters news report said.
European energy giants, including Orsted, Equinor, and BP, collectively took a substantial hit, writing off approximately $5 billion on offshore wind projects in the U.S. These write-downs were necessitated by the realization that existing power sale contracts were insufficient to cover the expenses associated with constructing and financing these projects.
In a bid to revive these faltering projects, developers are pinning hopes on upcoming solicitations in states like New York, New Jersey, Massachusetts, and Connecticut. Despite anticipated higher auction clearing prices, states remain steadfast in their commitment to clean energy objectives, as highlighted by Eli Rubin, a senior energy analyst at EBW Analytics Group.
At the beginning of 2023, only two small offshore wind projects were operational in the U.S., with a total capacity of a mere 41 megawatts (MW). However, 2024 is poised to witness a dramatic surge in capacity, with nearly 1,000 MW expected to come online as commercial-scale projects off New York and Massachusetts commence operations.
This substantial capacity growth translates to potential power generation for around 500,000 U.S. homes, underlining the significant impact of offshore wind energy expansion.
State support continues to be instrumental in driving the momentum. New York recently initiated a solicitation allowing companies to re-offer projects at higher prices, expediting the process to announce winners by February.
In New Jersey, Governor Phil Murphy directed the launch of an accelerated offshore wind solicitation in early 2024 after cancellations by major players like Orsted. Despite cancellations, projects like the Atlantic Shores wind farm continue their development, spearheaded by companies like Shell and EDF.
Meanwhile, in Virginia, Dominion Energy’s Coastal Virginia Offshore Wind project remains on budget and scheduled to commence offshore construction in May 2024, paving the way for power generation starting in late 2025.
Massachusetts witnesses progress with projects like Vineyard Wind 1 by Avangrid and Copenhagen Infrastructure Partners, while Avangrid plans to re-bid on projects previously canceled in Massachusetts and Connecticut.
As the industry braces for a competitive landscape in 2024, companies like Orsted aim to begin offshore construction on their Revolution Wind project, set to supply 704 MW to consumers in Rhode Island and Connecticut, marking another significant stride in the offshore wind energy sector’s resurgence.