Tidal Changes in U.S. Offshore Wind Development

 

 

[By Peter Knight, Jessica Bardi and Eden Yerby]

Offshore wind (OSW) deployment is a key component of the Biden administration's renewable energy goals, including the installation of 30 GW of offshore wind capacity by 2030 and 110 GW by 2050.  For perspective, the administration estimates that 30 GW would power over 10 million homes.  The Northeast, with its favorable coastal shelf and prevailing wind conditions, has been at the forefront of offshore wind development in the United States.  While federal and state permitting efforts have advanced on several projects and turbines have started to leave coastal ports for their offshore destinations, other planned installations have stalled recently due to changing economic conditions. 

Recent Regional Developments with a Spotlight on Connecticut

While economic headwinds have rattled project developers, the Northeast and other coastal states continue to back offshore by employing partnerships and streamlining permitting to support and facilitate the development of coastal wind energy.  They are also looking to the federal government for support.  In a September 13, 2023 letter, six coastal states (Connecticut, Rhode Island, Massachusetts, Maryland, New Jersey, and New York) urged President Biden to deploy additional federal resources to support the OSW industry.  The American Clean Power Association (ACP) intends to work with the Biden administration to address bottlenecking in the federal permitting process.  The ACP also indicated its support for the Reinvesting in Shoreline Economies and Ecosystem (RISEE) Act, which would provide hundreds of millions of dollars to states adjacent to OSW leases.

In Connecticut, the Department of Economic and Community Development (DECD) recently released its Offshore Wind Strategic Roadmap, outlining the state’s plans, initiatives, and steps to further OSW development. To achieve its lofty goal of 100 percent zero-carbon electricity by 2040, Connecticut outlined four key pillars:

1. Infrastructure/Real Estate. Build off the progress made with projects like the State Pier Terminal in New London and the Ports of New Haven and Bridgeport. These deep-water ports are crucial to expanding marshaling, operations and maintenance, and other supporting capabilities for OSW development.   
2. Supply Chain. Increase regional capabilities and coordination across the OSW supply chain. The state will rely on its demonstrated expertise in composite materials and metal fabrication capabilities developed through its long history of government contract work.
3. Workforce. To achieve zero-carbon electricity, the DECD acknowledges that it must provide a local labor force to prepare for and connect with OSW-related jobs. To do this, Connecticut has partnered with other New England states to determine how to incorporate early education and workforce development initiatives to secure skilled personnel. 
4. Research and Development. To encourage further research and development. Connecticut has partnered with UCONN, Yale, and investment institutions to promote research activities related to OSW.

To implement its Strategic Roadmap, Connecticut has established the Connecticut Wind Collaborative (CWC), comprised of OSW leaders from academia and across the government, private and public sectors.

On October 3, 2023, Connecticut, Massachusetts and Rhode Island entered into a Memorandum of Understanding (MOU, pledging regional collaboration in OSW development through the solicitation of public bids that are competitive, commercially reasonable, cost-effective and beneficial to ratepayers.  The MOU’s primary objective is to encourage collaboration between the states in hopes of leveraging buying power and making the development of OSW projects more cost-effective. While the MOU does not require any one state to work with the others on new proposals, it does ensure that each state will benefit equally from multi-state bids for any OSW project proposal,  and requires each state to consider whether a bid can result in a multi-state project. Massachusetts Governor Maura Healey said the MOU will “amplify the many benefits of offshore wind for all three states, including regional economic development opportunities, healthier communities, lower energy bills and advantages to environmental justice populations and low-income taxpayers.” 

The MOU’s objectives are already being implemented. On October 27, Connecticut put out a request for proposal (RFP ) that includes a provision allowing bidders to submit pricing at a rate indexed to the price of “listed macroeconomic factors and commodities” that will be fixed at some date in the future. The indexed pricing approach allows bidders to account for changes that may occur after the bid due date, but before the project reaches final close, by adjusting their proposed price up or down by no more than 15 percent.  This flexibility is intended to ease the financial hardships many OSW developers are currently facing.   

On November 30, 2023, New York opened its fourth solicitation for offshore wind projects as a means of accelerating its efforts in the OSW industry.  The solicitation seeks three offshore wind projects and twenty-two land-based renewable energy projects totaling 6.4 GW of clean energy, enough to power 2.6 million homes in the state, making up 12 percent of the state’s electricity needs.

Constraints Faced by the OSW Industry - Financial Hardships and Port Infrastructure

While coastal New England states continue to  support OSW development, several developers have run into commercial roadblocks that have substantially reshaped the economic analysis. Global events such as COVID-19 and the war in Ukraine have resulted in a shortage of building materials and costs of those materials to skyrocket. According to Building a National Network of Offshore Wind Ports, a publication released by The Business Network for Offshore Wind, there is now an estimated $22.5-$27.2 billion discrepancy between available financing and the financing required to construct the OSW facilities needed to achieve the administration’s OSW goals.  There is also a serious need for the development of port infrastructure to support the OSW industry.  Port infrastructure development is also feeling the effects of financial hardship due to construction cost escalation which has increased between 30 percent and 40 percent over the past three years.  As noted by the Business Network for Offshore Wind, “[w]ithout additional government funding and policy supports that incentivize private investment into U.S. offshore wind port infrastructure, port capacity will continue to be a major offshore wind deployment constraint across the country.”

Other pressures driving development costs include the surge in demand for OSW globally, rapid increases in turbine sizes over the last decade, expansion of offshore wind into deeper waters requiring more costly technological solutions, historically high-interest rates and commodity input prices, and competition for construction materials in and outside of the OSW industry.

A Look into Regional OSW Projects

Changing market conditions have had at least some impact on almost every OSW project currently under development.  In a constantly changing landscape, the current status of OSW projects in the Northeast continues to evolve:

 

 

Project Name	State	MW	Developer	Project Status	Permitting Status
Vineyard Wind	MA	800	Avangrid	Under Construction	Received BOEM Record Decision
Beacon Wind	MA	1200	Equinor	Permitting stage	EIS review
Revolution Wind	RI	704	Orsted/ Eversource	Under Construction	Received Final Approval for DOI Construction
Park City Wind	CT	800	Avangrid	Stalled	Stalled
South Fork Wind	NY	132	Orsted	Under Construction	Received BOEM Record Decision
Sunrise Wind	NY	924	Orsted	Obtaining permits	EIS review
Empire Wind 1	NY	816	Equinor	Permitting stage	BOEM released final EIS
Empire Wind 2	NY	1200	Equinor	Permitting stage	BOEM released final EIS
Ocean Wind 1	NJ	1100	Orsted	Canceled	Canceled
Ocean Wind 2	NJ	1150	Orsted	Canceled	Canceled
Skipjack Wind	MD	966	Orsted	Conducting Surveys	EIS review
Coastal Virginia Wind	VA	2590	Dominion Energy	Obtaining construction permits	Received BOEM Record Decision

 

Revolution Wind, set for construction south of Block Island, is one project proceeding intact and is estimated to deliver 400 MW of power to Rhode Island and 304 MW of power to Connecticut. Orsted and its then-partner Eversource locked in project costs prior to the current market instability and recently announced a final investment decision confirming that construction is expected to be completed by 2025. Eversource, however, is withdrawing from the wind sector, announcing in September that it would be selling its fifty percent interest in its three jointly owned contracted OSW projects with Orsted: Revolution Wind, Sunrise Wind, and South Fork Wind. Currently, workers at the New London State Pier continue to assemble parts for the South Fork Wind turbines. With installation underway, these turbines can now be seen off the coast of Montauk Point as the nation’s first commercial-scale OSW farm takes shape. December 6, 2023 marked a milestone for South Fork Wind – the first two turbines have been installed, with one operational and delivering power to consumers. At present, Revolution Wind and Sunrise Wind are also proceeding as planned.

The offshore wind market has changed, however, and other projects have stalled or been canceled. Orsted recently ceased development of the Ocean Wind I and II projects in New Jersey and will announce final plans to terminate, postpone, or continue other OSW projects in the United States in the new year. Also, citing unanticipated economic factors, Avangrid has terminated its power-purchase agreement for Park City Wind, which was expected to supply roughly 14 percent of Connecticut’s electricity. The project is expected to be rebid.  

Despite these setbacks, state governments continue to explore OSW development and ways to alleviate some of the economic and logistical hurdles standing in the way of progress. As highlighted by efforts made in the northeast, OSW development is still moving forward, but its progress must be matched with funding to support port infrastructure development and alleviate building costs that currently hinder the OSW industry.

Peter Knight is co-chair of Robinson+Cole’s Coastal + Offshore Resources Industry Team, where he focuses on litigation, defense of agency enforcement actions, and regulatory matters. He represents a variety of coastal and maritime interests in connection with large vessel casualties, oil spills and emergency response, criminal enforcement, and counseling on U.S. Coast Guard regulatory matters.

Jessica Bardi is a member of Robinson+Cole’s Coastal + Offshore Resources Team where she regularly tracks developments in the law and has co-authored legal updates on topics such as coastal management and Massachusetts zoning. She focuses on representing clients with coastal development matters, land use matters and related litigation.

Eden Yerby is a member of Robinson+Cole’s Real Estate + Development Group. Prior to joining the firm, Eden was a Sea Grant law fellow at the Marine Affairs Institute in Bristol, Rhode Island.