The myth that New York can replace fossil fuel power plants with cheap renewable energy has begun to crumble under renewable developers’ demands for higher prices to offset inflation and supply chain challenges. 

Multiple offshore wind projects that are not even built yet have asked the state’s Public Service Commission (PSC) to renegotiate their strike prices—the amount they will be paid per megawatt hour (MWh) of electricity produced. (A megawatt hour is roughly enough electricity to power 750 homes for one hour.) 

Ørsted and Eversource have asked for a 27 percent increase for their Sunrise Wind project, which would raise their strike-price from around $110 to nearly $140 per MWh. 

And the joint venture of Equinor and BP has asked for increases on all three of the projects it is developing. For Empire Wind 1, they want a 35 percent increase that would raise its strike-price from $118 to almost $160, for Empire Wind 2 a 66 percent increase that would bring its strike-price from $107.50 to almost $178, and for Beacon Wind a 62 percent increase to lift its strike-price from $118 to over $190. This is despite a leading analyst’s recent prediction that offshore wind should only cost $72 to $140 per MWh.   

If they do not receive their requested adjustments from the PSC, the developers may pull out of the projects. They could then rebid at their higher desired prices when the New York State Energy Research and Development Agency (NYSERDA) put these projects out for rebidding. 

The demands for price adjustments are coming from onshore wind and solar power as well. The Alliance for Clean Energy New York (ACE), a renewable energy industry group, has filed a petition to increase the prices paid to as many as 86 of 117 onshore wind and solar projects awarded by NYSERDA between 2016 and 2021. NYSERDA estimates the requested changes would increase strike prices an average of 63 percent for solar projects and 71 percent for onshore wind projects. 

Like the offshore wind projects, these facilities are not yet built but already the prices developers agreed to are allegedly no longer financially viable. If the Public Service Commission does not agree to their request, ACE says, these projects “cannot proceed economically on existing contract terms.”  

As if increases in prices for uncompleted solar and wind projects aren’t enough, an unfinished hydropower project—the Champlain Hudson Power Express, a high-voltage direct current line transmitting hydroelectric power from Quebec to New York City—has also asked for a price increase. 

All these cost increases will fall on a state that already has over 1 million utility customers who are collectively in arrears on their bills for nearly $2 billion. 

All of these projects face the same challenges—inflation and supply chain limitations that constrain the availability of needed materials and increase their costs. 

The problems are real, and they are not limited to New York or even to the U.S. In Massachusetts, energy company Avangrid paid $48 million in penalties to get out of its contract to build the Commonwealth Wind project. And in the U.K., Vattenfall recently backed out of an offshore wind farm due to spiraling costs. 

When most of these projects were agreed to, nobody expected inflation to hit its highest rates since the 1970s. Nor did they anticipate all the choke points in the supply chain caused by too many governments trying to develop too much renewable power too quickly. 

Not including China, governments have set targets for 77 gigawatts of offshore wind power by 2030, which would require a tenfold increase in annual building, a goal that consulting firm Wood Mackenzie flatly described as “not realistic.” 

The rapidly increasing demand is causing challenges at multiple points in the supply chains. Among these are mining and refining enough of the critical minerals needed for renewable energy sources, building new manufacturing facilities for offshore wind turbines in the U.S., and ensuring a sufficient number of wind turbine installation vessels, or jack-up ships, needed for building offshore wind towers.  

The lack of jack-up ships is especially critical in the U.S., where they need to be compliant with the Jones Act, a law requiring all ships operating between U.S. ports to be U.S.built, U.S.owned, and U.S.crewed. Currently there are no Jones Act compliant jack-up ships. While at least two are under construction, one of those is being paid for in part by Ørsted, the very company that is threatening to pull out of its commitment to New York wind projects.  

Supply chain problems are also exacerbated by the increasing size of offshore wind towers. Taller towers with longer blades produce more energy, but the industry is not yet set up to produce them at the scale demanded. Not all existing jack-up ships are large enough to handle them, and taller towers require more and larger tower sections. This has a double effect on production, because it requires more sections to be produced, but temporarily reduces the number that can be produced by making some factories obsolete. 

The increased costs are rocking the renewables industry, and particularly the offshore wind industry. The outlook for Ørsted’s American projects is so bleak that the company booked a $2.3 billion impairment on its U.S. portfolio, causing its stock price to plunge by 20 percent, hitting a low 70 percent below its 2021 share price. Given that Ørsted is the largest offshore wind company in the world by a wide margin, that’s a sign that investors aren’t optimistic about offshore wind’s near-term prospects. 

New Yorkers have long been promised a bright future of energy that’s both climate and walletfriendly. It’s increasingly clear that whatever gains are made on the climate front, the price is going to be higher than advertised.

You may also like

Upstate Catches A Big Break As Offshore Wind Deals Sink

The cancellation of planned offshore wind projects has sparked considerable heartburn and hand-wringing among lawmakers, activists and politically wired businesses and unions, but it’s been good news for the upstate families and businesses who would be paying more than half the cost. For them, each year of delays on scotched projects amounts to future electric-bill savings of upwards of $1 billion—and gives Albany another chance to find a better, less expensive way to go green. Read More

Albany’s Green Machine Goes Rogue

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 New York customers 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. Read More

Another battery flop zaps NY taxpayers

Plans to lure a Canadian battery company to the Hudson Valley with a slew of government incentives, including job-creation tax credits, loans, and federal subsidies, appear to be a dud. It’s a reminder that when it comes to picking winners in the energy-storage space, taxpayers are often losers. Read More

NYSERDA’s Roadmap to Nowhere  

New York school districts face a multi-billion dollar unfunded mandate to convert to electric school buses. While the transition will cost between $8 and $15 billion above the cost of buying traditional buses, less than $1 billion in state and federal aid is likely to be available to help schools cover the cost. Read More

Renewable Solar Comes with Recurring Waste Costs

Within 25 years New York will find itself trying to manage the disposal of five million or more waste solar panels every year. Read More

First Annual CLCPA Report Indicates High Costs, Low Benefits

A major deception on emissions reductions lies at the heart of the New York Department of Public Service’s first annual report on implementation of the Climate Leadership and Community Protection Act. Read More

Micron vs. New York Energy Policy 

Computer chip manufacturer Micron has revealed that by the 2040s its Onondaga County factories are going to be sucking up enough electricity to power New Hampshire and Vermont combined. Read More

Offshore Wind Lulls Threaten NY Energy Reliability 

The volatility of wind off the Atlantic coast will challenge New York's ability to keep the lights on according to a recent analysis from the New York State Reliability Corporation. Read More