State plans to shift more of its power supply to renewables reaches a key juncture
This lift boat, off the beach near Wainscott in 2022, was expected to be used in the construction of the South Fork Wind farm that will bore tunnels to bring electricity from the offshore wind farm. Credit: Bloomberg/Johnny Milano
ALBANY — When New York regulators said “no” to giving more subsidies to offshore wind-power developers, they followed an ongoing trend here and abroad.
But it also marked what might be a crucial moment in the state’s ongoing push to shift more of its power supply to renewable energy.
That's because there now are questions about the near-term future of previously approved wind projects off Long Island, a plan to expedite the next wave of projects, the realistic prospects of New York’s renewable energy goals, and officials’ willingness to pass costs on to consumers.
Gov. Kathy Hochul's administration and the state’s energy authority say they remain strongly committed to advancing and supporting renewable energy and will demonstrate so in the coming months. But they acknowledge those plans are at a key juncture.
“We see ourselves in a moment to recalibrate and that’s what I, and my team, are doing as we speak as quickly as possible,” said Doreen Harris, president and CEO of the New York State Energy Research and Development Authority, the agency tasked with leading a state transition to a carbon-free energy grid.
The questions have been building for months, but reached a critical point last week when the Public Service Commission, which regulates utilities, resoundingly rejected a request to renegotiate energy supply contracts for four projects off Long Island.
Equinor and Orsted, the Scandinavian wind companies behind the projects, argued that the rates were set in contracts awarded before the COVID-19 pandemic and now should be adjusted to account for inflation, rising interest rates and other costs. None of those projects are under construction yet.
The commission voted 7-0 against the idea.
Commissioners said the rate hikes requested — ranging from 27% to 66% across the projects — were too great. They also said it would be unfair to the losing bidders and set a bad precedent for contracts.
The vote shocked some environmental and labor activists, who want the state to move quickly on wind power. Almost up to the end, they expected the commission to ratchet down the rate requests but still approve some sort of small hike.
In rejecting the higher subsidies, New York followed decisions made by Massachusetts and Connecticut, which have triggered wind companies to cancel contracts as financially unfeasible.
It's unclear yet if Equinor and Orsted would do the same.
Hochul applauded the commission vote, saying it will “preserve the competitive process that ensures New York consumers are getting the best deal.”
NYSERDA previously solicited bids for what it calls its next round of contract awards. Harris said there will be an “announcement in the near future” of the winners.
At least two wind projects are expected to be awarded, maybe more. A key detail will be the per-megawatt charge for energy in each bid.
The Orsted and Equinor contracts rates range from about $110 per megawatt hour to $118. They asked for hikes from $140 to $190, which the PSC rejected.
No one expects the next round to include rates as low as first awarded to Orsted and Equinor. But there’s speculation the rates could be even higher than what the PSC rejected.
The other near-term issue is whether Orsted and Equinor cancel or continue their projects off Long Island. They’ve indicated a decision could come soon.
“They’re all at significant risk,” said Anne Reynolds, executive director of the Alliance for Clean Energy New York, which supported the proposed rate hike.
If the projects are canceled, Reynolds and other advocates fear the state won’t be able to meet its 2030 deadline for 70% of New York’s energy to come from renewables.
Offshore wind is a key element of that plan and, so far, just one project is under construction: Orsted’s South Fork Wind, located about 35 miles east of Montauk. It is expected to begin operations by the end of the year. South Fork Wind’s winning bid was selected in 2015 — which, some say, shows how long it takes to actually bring these into production.
Beyond the award bids, Harris noted, the state is expected to begin another round of bidding that could include onshore and offshore projects.
Reynolds said advocates hope the window opens in November and, under an expedited process that the Hochul administration has promised, awards will be announced in the spring.
“We’re hoping for a really accelerated process,” Reynolds said.
Harris said New York is “certainly aware of what’s happening in other markets and globally” in terms of rising costs and canceled contracts. She noted Hochul’s most recent budget included money to help build a supply chain for materials to help developers. The state also hopes to tap into federal tax credits to encourage bidders. Ultimately, the state wants to “rely on competition” and believes that’s the best path forward, she said.
“We are committed not only to refilling the [projects] pipeline but growing our pipeline,” Harris said. “And knowing, to some extent, the deck is getting reshuffled means the circumstances may now be different to the industry as to the available projects than the case even just a few months ago.”
ALBANY — When New York regulators said “no” to giving more subsidies to offshore wind-power developers, they followed an ongoing trend here and abroad.
But it also marked what might be a crucial moment in the state’s ongoing push to shift more of its power supply to renewable energy.
That's because there now are questions about the near-term future of previously approved wind projects off Long Island, a plan to expedite the next wave of projects, the realistic prospects of New York’s renewable energy goals, and officials’ willingness to pass costs on to consumers.
Gov. Kathy Hochul's administration and the state’s energy authority say they remain strongly committed to advancing and supporting renewable energy and will demonstrate so in the coming months. But they acknowledge those plans are at a key juncture.
“We see ourselves in a moment to recalibrate and that’s what I, and my team, are doing as we speak as quickly as possible,” said Doreen Harris, president and CEO of the New York State Energy Research and Development Authority, the agency tasked with leading a state transition to a carbon-free energy grid.
Wind contract renegotiation rejected
The questions have been building for months, but reached a critical point last week when the Public Service Commission, which regulates utilities, resoundingly rejected a request to renegotiate energy supply contracts for four projects off Long Island.
Equinor and Orsted, the Scandinavian wind companies behind the projects, argued that the rates were set in contracts awarded before the COVID-19 pandemic and now should be adjusted to account for inflation, rising interest rates and other costs. None of those projects are under construction yet.
The commission voted 7-0 against the idea.
Commissioners said the rate hikes requested — ranging from 27% to 66% across the projects — were too great. They also said it would be unfair to the losing bidders and set a bad precedent for contracts.
The vote shocked some environmental and labor activists, who want the state to move quickly on wind power. Almost up to the end, they expected the commission to ratchet down the rate requests but still approve some sort of small hike.
In rejecting the higher subsidies, New York followed decisions made by Massachusetts and Connecticut, which have triggered wind companies to cancel contracts as financially unfeasible.
It's unclear yet if Equinor and Orsted would do the same.
Hochul applauded the commission vote, saying it will “preserve the competitive process that ensures New York consumers are getting the best deal.”
What’s next for wind energy projects?
NYSERDA previously solicited bids for what it calls its next round of contract awards. Harris said there will be an “announcement in the near future” of the winners.
At least two wind projects are expected to be awarded, maybe more. A key detail will be the per-megawatt charge for energy in each bid.
The Orsted and Equinor contracts rates range from about $110 per megawatt hour to $118. They asked for hikes from $140 to $190, which the PSC rejected.
No one expects the next round to include rates as low as first awarded to Orsted and Equinor. But there’s speculation the rates could be even higher than what the PSC rejected.
The other near-term issue is whether Orsted and Equinor cancel or continue their projects off Long Island. They’ve indicated a decision could come soon.
“They’re all at significant risk,” said Anne Reynolds, executive director of the Alliance for Clean Energy New York, which supported the proposed rate hike.
If the projects are canceled, Reynolds and other advocates fear the state won’t be able to meet its 2030 deadline for 70% of New York’s energy to come from renewables.
Offshore wind is a key element of that plan and, so far, just one project is under construction: Orsted’s South Fork Wind, located about 35 miles east of Montauk. It is expected to begin operations by the end of the year. South Fork Wind’s winning bid was selected in 2015 — which, some say, shows how long it takes to actually bring these into production.
Beyond the award bids, Harris noted, the state is expected to begin another round of bidding that could include onshore and offshore projects.
Reynolds said advocates hope the window opens in November and, under an expedited process that the Hochul administration has promised, awards will be announced in the spring.
“We’re hoping for a really accelerated process,” Reynolds said.
Harris said New York is “certainly aware of what’s happening in other markets and globally” in terms of rising costs and canceled contracts. She noted Hochul’s most recent budget included money to help build a supply chain for materials to help developers. The state also hopes to tap into federal tax credits to encourage bidders. Ultimately, the state wants to “rely on competition” and believes that’s the best path forward, she said.
“We are committed not only to refilling the [projects] pipeline but growing our pipeline,” Harris said. “And knowing, to some extent, the deck is getting reshuffled means the circumstances may now be different to the industry as to the available projects than the case even just a few months ago.”
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