CleanTechnica has always been an ardent supporter of offshore wind. At a time when renewable energy is one of the keys to keeping the Earth habitable for humans (and millions of other species as well), it offers several key advantages.
First, wind speeds are higher and more constant over the oceans than they are closer to land or inland. That predictability is appealing to investors and makes electricity from offshore wind farms more dispatchable — meaning when the grid needs it, it will be available. Second, offshore wind installations are mostly out of sight of land, which avoids the whole NIMBY problem associated with land based wind and solar facilities.
There have been many proposed offshore wind farms along the New England coast and southward to New York and New Jersey, but to date, the five turbines installed near the coast of Block Island in 2016 are the only offshore wind turbines currently installed and operating in the United States.
Recently, we reported on 25 utility companies in the US which have formed the Smart Electric Power Alliance. Its members have pledged to lower their carbon emissions 80% by 2030 — a position that is at odds with the majority of utility companies. Three of its members are Eversource, Avangrid, and National Grid, all of who supply electricity to New England. They are depending on electricity from various offshore wind farms to meet those goals.
Some of the proposed wind installations have been in the planning phase for more than 20 years. There have been an untold number of public hearings where petabytes of reports, graphs, and charts have been presented, examined, and argued over. The Inflation Reduction Act provided the spark to get many of those projects approved — finally.
Offshore Wind Projects Terminated In New England
But just when we thought everything was moving in the right direction, the economic calculus has changed, rendering some of them unprofitable. And so, several organizations that bid for the right to construct offshore wind farms are cancelling their commitments, even though doing so will result in substantial penalties.
Avangrid and several Connecticut utilities have agreed to terminate a long term power purchase agreement for the 804 MW Park City Wind project that was planned off the coast of Massachusetts. Avangrid, a subsidiary of Spanish utility company Iberdrola, said on October 3 that economic conditions had made the project “unfinanceable.” Avangrid plans to rebid the 804 MW Park City Wind project, which had previously secured 20-year PPAs with Eversource Energy and United Illuminating. UI is a subsidiary of Avangrid.
The announcement is the latest sign of turbulent conditions for the offshore wind industry in the US, according to Renewable Energy World. In July, Avangrid agreed to pay $48 million to pull out of a PPA with Eversource Energy, National Grid, and Unitil for another offshore wind project, the 1,223 MW Commonwealth Wind located 20 miles south of Martha’s Vineyard. Rhode Island Energy, meanwhile, terminated its PPA with Ørsted and Eversource for the offshore wind farm Revolution Wind 2.
Avangrid said it had been “transparent and collaborative” with the utilities, as well as state and federal officials, as it sought to salvage the PPAs for Park City Wind. “One year ago, Avangrid was the first offshore wind developer in the United States to make public the unprecedented economic headwinds facing the industry including record inf supply chain disruptions, and sharp interest rate hikes, the aggregate impact of which rendered the Park City Wind project unfinanceable under its existing contracts,” the company said in a statement on October 3.
Rising Interest Rates
The price of steel has been going up recently, which raises the cost of the offshore wind platforms, but perhaps the most important factor here is the dramatic rise in interest rates led by the Federal Reserve and followed by most banking regulators around the world.
Somehow, those regulators are always diligent about protecting the assets of the wealthy while ignoring the impacts their policies have on ordinary folks. If you are working for a living, seeing interest rates price you out of the market for a new car or a home feels a lot like inflation, while to the financial community, interest rates are not seen as a component of inflation.
One way or another, the cost of doing business has increased to the point where many offshore wind projects that seemed to be profitable during the planning and permitting stages are now not looking so profitable in a post-pandemic and high borrowing cost world.
In August, the 1.2 GW South Coast Wind project, a joint venture between offshore wind specialist Ocean Winds and Shell, agreed to pay a $60 million penalty to terminate the PPAs it had signed with Massachusetts utility National Grid, Boston-based energy company Eversource, and New Hampshire utility Unitil. That decision is pending approval from the Massachusetts Department of Public Utilities.
In July, Utility Dive reported that Eversource Energy, National Grid, and Unitil have reached an agreement with Avangrid on terminating their power purchase agreements for the company’s 1,223-MW proposed offshore wind farm known as Commonwealth Wind. Avangrid had requested the termination in December, 2022 due to global economic headwinds like inflation.
There’s Still Hope For Offshore Wind
Despite pulling back on two offshore wind projects it was involved with, Avangrid is still planning to move forward with its Vineyard Wind project. On September 6, 2023, the first tower left a staging area in New Bedford on its way to the site.
The state of Maine is betting big on offshore wind to decarbonize its utility grid, despite the upward cost spiral. The waters in the Gulf of Maine are too deep for conventional wind turbines, so Maine is supporting floating offshore wind with a goal of installing 3 GW. The plans have been carefully coordinated with the state’s fishing and lobstering industries.
3 GW of offshore floating wind power could provide about half of Maine’s electricity demand in 2040, Jack Shapiro, climate and clean energy director at the Natural Resources Council of Maine, told Canary Media. Maine’s electricity needs are expected to increase as more heat pumps and electric cars are placed in service in the state.
Offshore wind is driven by two primary factors. First, it is less intermittent than solar, which makes it more attractive to utility companies. Second, it avoids the NIMBY problem that afflicts so much of the solar power industry.
Farmers understand that farming can include harvesting the energy of the sun. Conceptually, that is all that traditional farming is anyway. It can give farmers a source of reliable, predictable income to insulate them from the vagaries associated with agriculture.
I am watching the first season of Yellowstone right now. There was a line in the show I watched yesterday by John Dutton, the main character, who said, “Farming is the only business in which the objective is to break even.” It’s a hard row to hoe, and a reliable source of income can make all the difference.
Installing a ground-mounted solar farm is a walk in the park compared to building offshore wind. It would be quite an unpleasant result for all of us if the ability to dramatically lower our carbon dioxide emissions was hamstrung because some people just don’t want to see wind turbines or solar panels.
Myself, I don’t want to see the tops of mountains ripped off in West Virginia and dumped in the valley below, or ugly thermal generating stations, or millions of empty oil and gas wells marching across the land. Why are my concerns of any less importance than the tender sensibilities of someone who quakes in fear at the sight of a solar panel? That’s a question I would like an answer to.
Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.
Our Latest EVObsession Video
CleanTechnica uses affiliate links. See our policy here.