Rising costs and logistical issues have led to a series of delays in recent weeks for at least 10 offshore wind projects across the U.S. and Europe totaling $33 billion, the Wall Street Journal reported Monday.
The trouble has surfaced just weeks after Maine Gov. Janet Mills signed an offshore wind power bill that will hand billions in taxpayer-funded contracts to wind power port and turbine developers.
“At the moment, we are seeing the industry’s first crisis,” said Anders Opedal, chief executive of Norwegian offshore wind manufacturer Equinor, in a WSJ interview.
The Norwegian company and BP are working together to develop three wind farms off the coast of New York, a project which seeks to provide power to around 2 million homes.
They told the state in June that it will need to renegotiate the power prices or else the project won’t get financing.
Last month the Biden administration announced their first-ever offshore wind energy lease sale for the project in the Gulf of Mexico, part of the Biden-Harris plan to deploy 30 gigawatts of offshore wind electricity by 2030.
Peter Lloyd-Williams, a senior analyst at Westwood Global Energy Group, told the Journal that the delay of numerous offshore wind projects in the U.K. and Europe are a “major red flag” for the industry.
A 40 percent cost increase recently halted an offshore wind project in the U.K., while investors postponed decisions on two projects in the Baltic Sea.
Another three projects in the North Sea totaling about $19 billion in planned spending are potentially delayed or are revising terms, Lloyd-Williams said.
“If the soundest projects in the most mature markets start to sink, that is a major red flag,” he said.
Avangrid, a U.S. subsidiary of the Spanish utility company Iberdola and parent company of Central Maine Power, agreed this month to pay $48 million to back out of an offshore wind project in Massachusetts that it bid in September 2021, when the market outlook was better.
“What happened of course is that the world changed dramatically,” Ken Kimmell, vice president of offshore wind development with Avangrid, told the WSJ.
Among those changes are the war in Ukraine sending the price of steel and other supplies higher at the same time Europe began an accelerated push for offshore wind, as well as a series of interest-rate hikes that has made borrowing more expensive, Kimmell said.
Kimmell said he expects the contracts resulting from Massachusetts’ next round of bidding for offshore wind projects in January 2024 to include clauses that account for possible price increases or dips, calling the industry’s troubles a “speed bump, not a brick wall.”
In July, Rhode Island’s largest utility company decided not to move forward with a massive offshore wind project, arguing that rising costs had made the deal too expensive for ratepayers.
The problem of rising costs is not limited to offshore wind — quality issues related to Siemens Energy’s flagship onshore turbines are estimated to cost about $1.75 billion to fix, while the company forecasts that it expects to lose about $5 billion this year.
The wind industry’s troubles raise questions about the costs of Gov. Mills’ plan to erect wind turbines in the Gulf of Maine.
Mills signed a bill to authorize and fund the construction of a port on the coast of Maine that will eventually serve as the construction site for the offshore wind turbines — a bill which lawmakers approved without knowing how much the years-long endeavor will cost ratepayers and taxpayers.
The Governor’s Energy Office called for $8 billion in spending on the port in their “Offshore Wind Roadmap,” and said that Maine stands to secure twice as much in private investment from offshore wind projects.
The unpredictable costs associated with the port project, which will not be operational for several years, make it difficult for developers looking to invest in the project to make an informed cost-benefit analysis.