N.Y. Public Service Commission ruling disturbs offshore wind advocates

Image: BOEM

At the end of the day, electricity generated from offshore wind has to be paid for from consumers’ electricity bills. When those rates aren’t high enough to justify the huge investment required to get an offshore wind farm up and running, developers walk away as underscored by BOEM’s failed Texas offshore wind lease auction and the U.K.’s failed contracts for difference auction. Those were auctions for new wind farms. Now, following a New York State Public Service Commission ruling, some existing U.S. projects could stall.

The commission yesterday denied petitions submitted by Empire Offshore Wind LLC, Beacon Wind LLC, Sunrise Wind LLC, and the Alliance for Clean Energy New York, Inc. (ACENY).

Looking to address recent inflationary pressures impacting project economics, the petitions were seeking adjustment to Renewable Energy Credit (REC) and Offshore Wind REC (OREC) purchase and sales agreements entered with NYSERDA.

The commission says that it found that the contract amendments sought “were not in the best interest of the state’s ratepayers” and that, on a monthly bill basis, granting the request could have resulted in as high as 6.7% increases for residential customers and as high as 10.5% for commercial or industrial customers on monthly bills.

You can read more on the commission’s reasoning here.

Empire Offshore Wind and Beacon Wind are joint ventures between Equinor and BP and Sunrise Wind is a joint venture between Ørsted and Eversource.

DEEPLY DISAPPOINTING

The Alliance for Clean Energy New York, which filed its petition on behalf of the 86 upstate New York wind and solar projects, says the commission’s decision affects 81 utility-scale solar power projects and five land-based wind power projects, totaling 7.5 GW of power generation, and four offshore wind projects, totaling 4.2 GW.

“The renewable energy industry is deeply disappointed with the commission’s unfortunate ruling denying relief for renewable energy projects dealing with unprecedented inflation in the wake of the COVID-19 pandemic,” said Anne Reynolds, executive director of the Alliance for Clean Energy New York. “The decision is short-sighted. We were hoping the commission would act strategically on behalf of ratepayers and the environment; instead, their decision will result in increased costs and greenhouse gas emissions.”

“Today’s PSC decision denying relief to the portfolio of contracted offshore wind projects puts these projects in serious jeopardy and deals a potentially fatal blow to the progress these projects have made to localize clean energy manufacturing, reinvigorate New York’s ports and harbors, train and deploy New York’s skilled union workers, and revitalize environmental justice communities,” said New York Offshore Wind Alliance director Fred Zalcman. “These four projects represent nearly half the offshore wind capacity New York has committed to develop by 2035, and should they be allowed to fail, the state must redouble its efforts to make up this shortfall and honor its commitment to climate progress.”

POTENTIAL RE-BID?

“During the commission meeting, the Department of Public Services spokesperson ‘notes the potential to hold a re-bid,’ but didn’t provide any other detail,” said Reynolds. “We will watch re-bid developments closely but note that New York is already six months late in issuing the 2023 solicitation under the Clean Energy Standard for Tier 1. New York also has yet to issue awards in the pending offshore wind solicitation and hasn’t announced awards resulting from the Tier 1 solicitation from 2022. Some large-scale projects facing massive milestone payments need greater certainty than afforded by today’s decision, and unfortunately will likely cancel projects and withdraw from the New York market. Other projects will have the ability to re-bid, and we do expect that many will re-bid. We also expect that collectively, hundreds of millions of dollars that were invested as contract deposits will be lost; the bid prices will be higher based on the same inflation pressures we described in our petition; the 2024 construction season will be missed; and various grid interconnection deadlines will be missed.”

Not all observers of the industry believe that Reynolds’ direst predictions will come true, but clearly a lot of rethinking and restrategizing is going on at major clean energy developers and supply chain partnert=s who have already committed millions to New York State offshore wind.