Energy Transition Intelligence

Offshore wind has taken a beating in U.S. Can it come back?

byMatthew Keillor, Editor, Enverus Intelligence

In March 2021, the Biden administration set a goal of deploying 30 GW of offshore wind capacity in the U.S. by 2030. These efforts have faced significant growing pains, however, exacerbated by the COVID-19 pandemic and follow-on impacts such as inflation. Reaching 30 GW by 2030 increasingly appears difficult, if not impossible, to achieve.

Prior to 2021, there were just two operational offshore wind farms in the country, both off the East Coast. Ørsted predecessor DONG Energy’s Block Island Wind, a five-turbine wind farm with 30 MW of capacity, came online in 2016, and Ørsted and Dominion Energy’s 12 MW pilot project for Coastal Virginia Offshore Wind followed in 2020.

Europe added 23 GW in 10 years; U.S. will have to add 30 GW in 7 to meet goal.

Since then, only one project has been fully completed—Ørsted’s 132 MW South Fork Wind in March—while Avangrid’s 806 MW Vineyard Wind has delivered first power and will be completed later this year. While not a true apples-to-apples comparison, Europe installed 1.5-3.7 GW of offshore capacity per year between 2013 and the end of 2022, growing from a total of 7 GW to 30 GW over that time frame, according to industry association WindEurope.

According to Enverus Core data, there is roughly 41.1 GW of offshore wind capacity in the U.S. with assigned project names and/or developers that could potentially come online before YE30. (Enverus Core users, click here to interact with the workbook.) Only around 11.2 GW of those projects, however, are advanced enough to have interconnection agreements in place. The remaining roughly 30 GW of capacity is still in earlier phases of development with significantly less visibility regarding the likelihood of completion. Even for those projects with interconnection agreements, several developers have been struggling to make them commercially viable.

Perhaps the first rumblings of problems among developers in the U.S. came in late 2022, when Avangrid warned that supply chain disruptions, inflation and rising interest rates risked making its proposed Commonwealth Wind project off Massachusetts untenable. Those issues—which have most seriously impacted more mature projects, such as those awarded contracts prior to the pandemic—came to a head in a rapid-fire series of events beginning in the 2H23 and continuing into this year.

Avangrid terminated power purchase agreements for Commonwealth Wind and Park City Wind last August and October, respectively. Ørsted warned of impending impairments on several of its projects in September, and that same month governors of six Northeastern U.S. states requested federal support for the industry in a letter to President Biden. Ørsted ultimately recognized a $4 billion impairment in its 3Q23 results and canceled the Ocean Wind 1 and 2 projects, after New York denied petitions from the company and other developers for relief in October.

Rumblings of issues with projects began in 2022 and exploded in 2H23

Following a review of its portfolio, Ørsted made significant cuts to its development plans globally, including the planned Skipjack Wind project off Maryland, which brought its canceled planned offshore capacity in the U.S. up to about 3.2 GW. Equinor and BP also recognized respective impairments of $300 million and $540 million for the Empire Wind and Beacon Wind projects off New York, and they later terminated existing contracts with the New York State Energy Research and Development Authority for the wind farms. Eversource Energy finalized its full exit from offshore wind this February, after taking $2.17 billion in 2023 impairments on its portfolio.

Most recently, NYSERDA announced April 19 that it would not award final contracts to three projects selected in its third offshore wind solicitation—Attentive Energy One, Community Offshore Wind and Excelsior Wind—after newly spun-off GE Vernova’s decision to scrap its 18 MW Haliade-X turbine platform and move to a smaller turbine. NYSERDA said the decision caused “technical and commercial complexities” for the developers, which had planned to use the larger turbine, and GE Vernova CEO Scott Strazik told Reuters the company could not reach an agreement to supply smaller turbines to the projects before the contracts were canceled. Strazik added that the company expects to have a 15.5 MW replacement prototype turbine ready in late 2025.

Developers and state and federal authorities have begun making material efforts to address these challenges. Equinor and BP agreed to part ways on U.S. offshore wind with an asset swap that saw Equinor take over the Empire Wind projects and BP the Beacon Wind projects, so they could continue to progress them independently. Avangrid rebid its Park City and Commonwealth Wind projects, now known as New England Wind, and it also received a positive record of decision on the projects from the U.S. Bureau of Ocean Energy Management. Dominion Energy received the final federal approvals for the 2.6 GW Coastal Virginia Offshore Wind project in January and plans to begin offshore construction in Q2.

NYSERDA launched an expedited offshore wind solicitation in November, inviting all developers to submit bids even if they had existing or canceled contracts. It ultimately selected Equinor’s Empire Wind 1 and Ørsted’s Sunrise Wind 1 projects, and Ørsted took a positive FID on Sunrise Wind in March. On April 23, the agency announced it would hold its fifth offshore wind solicitation this summer, and it is also planning a $200 million solicitation for supportive supply chain and logistics development and a $300 million solicitation for major component supply chains.

New federal rules intended to streamline regulations for deploying offshore wind.

Lastly, on April 24 the Department of the Interior announced that BOEM and the Bureau of Safety and Environmental Enforcement finalized new regulations for renewable energy development on the U.S. Outer Continental Shelf. The final rules are intended to increase certainty and reduce costs associated with deployment of offshore wind and are expected to save about $1.9 billion for the industry over the next 20 years—although those savings seem small, considering the timeline and that each gigawatt-scale project costs billions of dollars to develop and build.

Still, the rules, among other things, eliminate duplicative regulatory processes, increase survey flexibility and tailor financial assurance requirements and instruments. Streamlining federal regulatory requirements on developers should allow them to get necessary approvals faster and reduce project timelines. The BOEM will also publicly release a five-year renewable energy leasing schedule every two years. On deck in 2024 are potential auctions in the Central Atlantic, the Gulf of Maine, the Gulf of Mexico and offshore Oregon.

About Enverus Intelligence Publications
Enverus Intelligence Publications presents the news as it happens with impactful, concise articles, cutting through the clutter to deliver timely perspectives and insights on various topics from writers who provide deep context to the energy sector.

Picture of Matthew Keillor, Editor, Enverus Intelligence

Matthew Keillor, Editor, Enverus Intelligence

Matthew Keillor joined Enverus in 2019. As part of the Publications team, he covers oil and gas commodity markets, renewable energy and upstream, financial and M&A activity in the oil and gas sector. Matthew is a graduate of Texas State University.

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