Posted on October 9, 2023
Massive turbines are starting to rise at State Pier. Tower segments were starting to be stacked on top of each other for the first time on Wednesday, as state officials lined up in front of them to rally and recommit to an offshore wind industry facing major headwinds in the Northeast U.S.
On Tuesday, Avangrid announced it was canceling its contract to sell power from Park City Wind to Connecticut, saying the price it agreed to in 2019 is too low amid inflation, high interest rates and supply chain challenges. As prices for offshore wind contracts skyrocket across the region, Avangrid is looking to bid again at a higher price.
And Ørsted told CT Examiner that it will make its “final investment decision” on whether to move forward with Connecticut’s other wind project Revolution Wind late this year or early next year – though it says it’s still advancing the project, and that onshore construction for the project is already underway.
On Wednesday, state officials invited press onto the redeveloped State Pier for the first time since turbine parts for Eversource and Ørsted’s South Fork Wind started arriving, and announced a new approach to buying wind power.
Connecticut, Massachusetts and Rhode Island – who share an electric grid with the rest of New England – agreed to join their procurements together instead of separately as they have in the past. Together, they’re seeking bids for a combined 6,000 megawatts worth of projects that the states could contract with separately or together.
“By aligning and shopping together, we expect that we’ll be able to achieve more competition in our RFP’s, and we’ll be able to make joint decisions,” DEEP Commissioner Katie Dykes said.
Avangrid’s contract for the 804 MW Park City Wind accounted for nearly three-quarters of the 1,108 MW of power that Connecticut had agreed to buy from offshore wind projects – the rest coming from Revolution Wind, a joint venture of Eversource and Ørsted.
But Dykes said despite losing the Park City commitment, the states aren’t obligated to select any contracts – and they’ll weigh the costs against the benefits of bringing more carbon free electricity to the region, and increasing power generation in the winter when New England needs it most.
It’s clear that the costs will be higher than they were in 2017 and 2019 when the state contracted to buy power from Park City and Revolution Wind at about 8 and 10 cents per kilowatt hour, respectively.
How much higher is unclear. In New York, developers have been asking to renegotiate their contracts to sell power at 11 to 12 cents per kilowatt hour to around 14 to 19 cents – up to almost double the prices of Connecticut’s earlier contracts.
Dykes said they don’t know yet what the prices will be in the New England state’s procurements early next year, or how they’ll compare to New York.
Asked why the states would look to procure power now, when “temporary” headwinds are causing high prices across the industry, she said part of the point is to gauge the market “on a consistent basis.” Joining with Massachusetts and Rhode Island is another attempt at finding “creative solutions” to keep projects more affordable, she said.
“We’re not able to buy [wind] at any price, I think that’s an important message to developers,” Dykes said. “At the same time, we’re factoring in the important benefits in terms of carbon and the reliability challenges in New England.”
Also unclear is the future of Danish energy giant Ørsted in U.S. offshore wind, after its CEO Mads Nipper said in August that the company was willing to walk away from projects amid the market forces facing the industry.
Ørsted and Eversource are partners on South Fork Wind and Sunrise Wind – both contracted to sell power to New York and planned to be assembled in New London – as well as Revolution Wind, now the only project Connecticut has a contract to buy power from. Eversource is in the process of selling its stake in that partnership.
Asked whether Ørsted is still considering scrapping its U.S. projects, David Ortiz, head of government affairs for Ørsted Americas, deferred to his parent company and Nipper, who was not present.
Dykes said that Ørsted had not asked to renegotiate the price of its contracts with Connecticut for Revolution Wind, which is supposed to start construction in New London in 2024. But when reporters asked Ortiz whether Ørsted had committed to build Revolution, Ortiz deferred again – saying the company hadn’t made a final decision on financing for the project.
“I will say that we’re planning to begin offshore construction in the new year, and we’re engaging with all of our partners to continue to discuss the challenges that we face,” Ortiz said.
Asked by CT Examiner through a spokesman to clarify if the company was committed to building Revolution Wind at the agreed price, Ørsted responded with a statement saying it was “advancing” the project before making a final decision on whether to move forward.
Ørsted said onshore construction has already started on that project, which received federal approval earlier this year. The company said it’s working to qualify for higher tax credits and working with suppliers on delays to improve its “near-term” projects.
“We continue to work with our partners and stakeholders to mitigate the macroeconomic challenges facing early-stage offshore wind projects that are important to helping states like Connecticut reach their clean energy goals,” the statement read.
Still, state officials said they remained optimistic about offshore wind, with Dykes saying she’s “confident” the state can still achieve its goals of zero-carbon electric generation by 2040. Lamont acknowledged the “challenges” the industry is facing with high interest rates and supply chain issues, but reaffirmed his commitment to wind.
“You take that into account, but you have to have a core belief: Do you think that wind is going to be a key piece of our state’s future, our region’s future, and our country’s future when it comes to carbon-free power that you can really count on at a reasonable price?” Lamont said. “I think the answer to that is, ‘yes.’”