Upstate electricity customers today got what seemed like good news when Equinor pulled the plug on its Empire Wind 2 (EW2) offshore wind project, one of several being funded by surcharges on New Yorkers as far away as Buffalo and Plattsburgh.
The announcement however is mainly theater, because Equinor looks poised to squeeze even more money from ratepayers—in a manner that should have state lawmakers deeply concerned about how little control they’ve retained over state renewable energy spending.
The company was part of a cabal of offshore wind and other renewable developers that last spring pressed the state to renegotiate subsidy deals, for projects including EW2, that had been reached prior to interest-rate hikes and increases in labor and supply costs. These subsidies come from customers paying higher delivery charges and aren’t shown on monthly statements.
Equinor asked the state Public Service Commission (PSC), which signs off on the subsidies, to boost its guaranteed minimum revenues by roughly $6 billion to $13 billion over 25 years. (It’s not clear how many billions Equinor was already set to collect).
But the PSC rejected the demands, saying in October the changes “were not in the best interest of the State’s ratepayers.”
But NYSERDA, the state energy agency which negotiates and dispenses subsidies, endorsed the demands for higher payments.
And NYSERDA now appears to be end-running the PSC to make them happen.
The agency responded to the PSC’s denial days later with a plan for new “expedited” subsidy opportunities seemingly tailored for existing solar or wind projects that had been denied extra funding and, at least temporarily, cancelled. And weeks later, NYSERDA created a new opportunity for offshore wind developers—for which bids are due in three weeks and bid fees have been reduced.
NYSERDA looks to be ignoring the concerns raised by the PSC, the governor-appointed body tasked with ensuring affordability and reliability for electricity customers.
Equinor officials called today’s move a “reset,” and described EW2 as an “already mature project” ready for “new offtake opportunities” as they said they were breaking their 2022 deal with the state. Work will continue, in the meantime, on Equinor’s other offshore wind projects, Empire Wind 1 and Beacon Wind.
The entire matter is especially unseemly from an upstate perspective because the region won’t be getting much if any of the electricity produced by the offshore wind turbines.
On top of it, much of upstate already gets the bulk of its power from carbon-free sources. In the areas west and north of Albany, nearly 93 percent of electricity generated and sold into the grid during 2022 came from nuclear power plants, hydroelectric dams, wind turbines or other renewables, compared to the Capital Region, lower Hudson Valley, New York City and Long Island together only having less than six percent of its generation come from any sort of renewable source.
NYSERDA, prior to today, expected to pay around $44 billion in coming decades for the offshore wind subsidies awarded so far, with about half of the funds coming from homes and businesses north of New York City.
New York environmentalists have fetishized offshore wind because of the technology’s success in northern Europe (where shallower waters, different weather patterns and higher fuel costs made it more practical). Service of that obsession has come at the expense of more reliable, potentially lower-cost carbon-free sources such as nuclear (which some offshore wind supporters have actively battled) and Canadian hydro.
Once New York set out to procure offshore wind specifically without concerns about its competitiveness among other renewables, state officials and developers were free to overlook a great deal.
New York kicked off its offshore wind awards when only one company—which later became Equinor—had secured a lease in New York waters. Unsurprisingly, Equinor’s Empire Wind 1 project won subsidies from New York a year and a half later.
American offshore wind projects had to comply with outdated federal laws, such as the Jones Act, that effectively prevent foreign ships or foreign crews from bringing cargo (such as wind turbine pilings and equipment) in and out of American ports. That prevented developers from harnessing the bulk of the benefits of Europe’s well-established sector and made American projects needlessly more expensive.
New York does not appear to have lobbied for an exemption or waiver from the Jones Act, and besides adding the state’s costs, delays in constructing Jones Act-compliant ships (necessary because existing ships and experienced crews are banned) have been a major hindrance to other states’ offshore wind efforts.
On top of it, the Cuomo Administration illegally bullied the offshore wind developers into signing project labor agreements under which the developers are forced to hire members of the construction unions that backed Cuomo’s re-election. These agreements, and a related mandate to pay union compensation levels, meant upstate New Yorkers would be paying higher electricity bills to backfill the union pensions of workers on turbines that would never serve their homes.
The developers were free to speak out against any of this, but it would have jeopardized their ability to win billion-dollar subsidy awards. It was a cost of doing business that New York’s system ensured could be safely passed on to ratepayers.
In fact, the EW2 award was written to reward Equinor with more than $150 million in additional subsidies if its spending on New York-based labor and other expenses exceeded a certain level, a detail that looks especially comical given the rising costs.
It may be months before New Yorkers know who’s in control of the state’s potentially runaway renewable costs. They can be certain in the meantime, however, who will be stuck paying them.