SOURCE:
By MARIE J. FRENCH - February 29, 2024
The projects are deemed critical to New York trying to reach 70 percent renewable energy sources by 2030, but the state has been struggling with how to reach those goals without overburdening utility customers.
ALBANY, New York — The cost to consumers of two offshore wind projects expected to support New York’s climate goals has more than doubled, Gov. Kathy Hochul announced on Thursday.
NYSERDA announced awards for the early projects that developers had threatened to cancel without higher prices. The agreements, which still need to be finalized, are expected to keep 1,700 megawatts of offshore wind — enough to supply 10 percent of New York City’s and Long Island’s electricity needs — on schedule for 2026.
The projects are deemed critical to New York trying to reach 70 percent renewable energy sources by 2030, but the state has been struggling with how to reach those goals without overburdening utility customers.
The estimated impact to consumer bills for the two projects will be 2 percent, or about $2 per month, under the new 25-year agreements. The 2019 agreements were expected to increase bills between 0.49 percent and 0.9 percent or 73 cents per month, according to NYSERDA.
“I promised to make New York a place for the renewable energy industry to do business, and we are delivering on that promise,” Hochul said in a statement. “Offshore wind is foundational to our fight against climate change, and these awards demonstrate our national leadership to advance a zero-emissions electric grid at the best value to New Yorkers.”
The two projects are the 810 MW Empire Wind 1 developed by Equinor and the 924 MW Sunrise Wind developed by Orsted and Eversource. Empire Wind, located about 15 miles south of Long Island has already received federal approvals, and Sunrise Wind expects approval later this year.
The projects are both expected to begin providing power by late 2026.
The average all-in development costs of the projects over the 25 years they’ll get payments from NYSERDA is about $150 per megawatt-hour. That’s also referred to as the “strike price” for offshore renewable energy credits.
This is in line with recent prices for projects, NYSERDA indicated. New Jersey agreed to contracts with three developers that included prices around that ballpark. The new offshore wind projects awarded last year by NYSERDA were about $145.07 per megawatt hour.
NYSERDA and ultimately ratepayers will pay a portion of that, after subtracting energy and capacity market revenues the developers earn by selling the electricity generated.
The contracts are expected to include new economic benefit commitments beyond those agreed to by the developers in their 2019 contracts: $188 million in purchases of U.S. iron and steel; $32 million for disadvantaged communities; $16.5 million for wildlife and fisheries monitoring and a labor peace agreement for operations and maintenance.
The agreements also maintain commitments by Empire Wind to utilize and support the South Brooklyn Marine Terminal as an assembly and staging port for offshore wind construction and for Sunrise Wind to use the Port of Coeymans near Albany for some foundation components.
The projects will bring $2 billion in near-term economic development, according to the governor’s office. The value of the contracts was not immediately available, but the earlier awards had a net present value of $2.2 billion.
The strike prices in nominal dollars (not adjusted for inflation) for those agreements were $110.37 per megawatt hour for Sunrise Wind and $118.38 per MWh for Empire Wind 1, according to public filings by NYSERDA.
The size of the Sunrise Wind project has increased since 2019, from 880 MWs to 924 MWs, which may explain a small part of the increased costs.
The developers in June last year petitioned the state’s Public Service Commission for increased payments under those contracts. They cited inflation, supply chain challenges and rising costs driven by the pandemic and Russia’s invasion of Ukraine, warning they couldn’t move forward at the agreed upon prices.
Sunrise Wind sought a requested increase to their average strike price of 27 percent while Empire Wind 1 sought a 35 percent increase. NYSERDA did not release separate prices for the projects on Thursday nor provide information that would allow a direct comparison between the 2019 figures and the new prices.
The PSC in October resoundingly and unanimously rejected the request to alter the contracts. Hochul praised the PSC’s decision and directed NYSERDA to run competitive processes to replace projects that canceled or salvage the early projects.
These awards are the result of NYSERDA’s fastest-ever procurement turnaround for new renewable energy projects. The authority put out the expedited offshore wind solicitation at the end of November and received final bids last month.
A third bidder, the 1.3 gigawatt Community Offshore Wind 2 project, has been “waitlisted” and may be awarded in the future, NYSERDA indicated.
Two other large offshore wind projects have canceled their NYSERDA contracts, dealing a blow to the state’s progress towards the 2030 target.
Environmental groups, lawmakers, business groups and labor unions offered praise for the decision to re-award the projects.
“These two offshore wind projects are already well advanced in the regulatory and siting process which provides a time advantage that NY was wise to leverage,” said Citizens Campaign for the Environment executive director Adrienne Esposito in a statement. “Continuing these projects is a smart economic decision that will provide local jobs, cleaner air and assists us in reaching our carbon reduction goals.”
NYSERDA plans a public webinar on the re-awards on March 19.
