Breakups and buyouts: Offshore wind has a new look

By Benjamin Storrow | 02/16/2024 06:16 AM EST

Players in the fledgling industry are decoupling — and re-coupling — as they navigate a financial storm.

Turbine blades for South Fork Wind are stored at State Pier in New London, Connecticut.

Turbine blades for South Fork Wind are stored at State Pier in New London, Connecticut. Ted Shaffrey/AP

Welcome to “Extreme Makeover,” the offshore wind edition.

The year is not two months old, but the U.S. industry bears little resemblance to the one that finished 2023 with a thud. Breakups and reconsidered commitments caused by hard financial times are leading to a restructured offshore wind sector with shrunken ambitions.

The marriage of oil giants BP and Equinor? It’s over, reshuffling three proposed New York offshore wind projects.


The relationship between Ørsted and Eversource Energy? Done. The Danish wind titan and the New England utility teamed up on three projects in the Northeast.

Power contracts for two major New York wind projects? Canceled.

Plans for a large offshore wind farm in Maryland? Paused.

And don’t even ask about the two projects canceled in New Jersey. That was so 2023.

The moves underscore the fallout from inflation, supply chain bottlenecks and rising interest rates. Developers like BP and Ørsted have been forced to take billion-dollar write-downs and halt work on major projects while others, like Eversource, are getting out of the industry entirely.

Analysts say the setbacks jeopardize President Joe Biden’s goal of powering 10 million homes with ocean winds by the end of the decade. The silver lining for the industry is that the projects that have survived are better positioned to actually be built.

Construction of two projects in the waters between New England and New York is well underway, and a third is in its early stages. A Virginia utility has begun work on a massive offshore wind farm that will rank as the largest renewable energy project ever built in the United States. And two projects serving New York are ready to break ground if they win updated bids to sell power to the Empire State.

Together, those projects would increase the number of turbines installed in U.S. waters from seven to nearly 475, delivering a major boost to climate efforts in the Northeast, where utility scale renewable energy development has lagged.

“I think from an outside perspective these developments could seem ugly, but they are very much needed for the sustainability of the industry,” said Atin Jain, an analyst who tracks offshore wind at BloombergNEF, a consultancy. “The reality is the industry is going through a fundamental change. The euphoria of the market is subsiding and realism is coming in.”

Many of the original players in the U.S. are scaling back plans or exiting the industry altogether. Equinor canceled its power contract with New York for Empire Wind 2. BP canceled its Empire State power deal for Beacon Wind. And Ørsted axed two projects in New Jersey and paused a Maryland development as part of a cost-cutting effort. The Danish wind giant recently said it will layoff 800 people, suspend its dividend payments and reduce spending on new developments by $5 billion between now and 2026.

Eversource is calling it quits on offshore wind altogether. It’s selling its stake in a New York project to its former partner, Ørsted, for $625 million, while unloading its position in two other developments to Global Infrastructure Partners for $1.1 billion.

All the changes have created a void — and new developers are filling it.

A consortium led by the French oil giant TotalEnergies has won contracts to sell power for two developments, one in New Jersey and another in New York. The German utility RWE has become an increasingly active player in the U.S., winning one contract and bidding on another, both in New York. Dominion Energy, a Virginia-based utility, has broken ground on what will be a 2,600-megawatt project, the single-largest wind or solar project in the United States.

“The U.S. market is very dynamic. Developers see the big opportunity that exists,” Jain said, before adding a note of caution. “People are cautious with some of the developments that have happened with project cancellations.”

The most bullish development for the industry is that Northeastern states have not been put off by the rising electricity prices that accompany climbing construction costs, said Tim Fox, an analyst at ClearView Energy Partners.

Connecticut, Massachusetts and Rhode Island are working together to solicit joint bids later this spring. New Jersey recently issued new contracts for 3,700MW of offshore wind power. New York inked three new projects in the fall, then turned around and requested expedited bids for new offshore wind projects, giving developments that have been battered by inflation a chance to secure higher electricity prices to offset rising construction costs.

Equinor submitted a bid for Empire Wind 1 after its breakup with BP. Ørsted put in a bid for Sunrise Wind, which it will buy outright from Eversource if it’s rewarded a new contract from New York. Both projects are nearly permitted, meaning construction could begin later this year.

“We consider state policy the most significant and stable policy driving offshore wind today,” Fox said. “There doesn’t appear interest to revisit or otherwise soften their commitments. In fact, we’re seeing the opposite.”

Yet risks continue to lurk for developers.

Some companies are increasingly concerned about the presence of an unstable seabed mineral known as glauconite, which has been found at several project sites. It could make some projects more expensive to build or, worst case, prevent turbine installation altogether, according to industry experts.

Supply chain woes also continue to be a scourge. General Electric’s plans to scrap a larger turbine model is a setback for three projects in New York, which had planned on using the super-sized equipment.

Then there’s the prospect of former President Donald Trump winning reelection to the White House. He is an outspoken critic of wind power.

The upside and downside of offshore wind was evident in Eversource’s announcement that it would sell its 50 percent stake in South Fork Wind and Revolution Wind to Global Infrastructure Partners (GIP). Ørsted owns the remaining half.

The deal shows that offshore wind remains enticing to investors, especially if developers can mitigate permitting and contracting risks, analysts said. The two projects have secured federal permits and deals to sell their electricity. South Fork has installed 11 of the 12 turbines that will supply 132 MW of power to New York. Revolution Wind, a 704-MW project that will sell power to Connecticut and Rhode Island, is in the early phase of development.

Yet the deal also underscored lingering concerns. Under the terms of the sale, Eversource and GIP will split any cost overruns up to $240 million. Expenses exceeding that will be borne by Eversource.

Eversource executives expressed confidence that the potential for overruns had been reduced by efforts to secure a backup installation vessel for Revolution Wind — because the boat it plans to use, currently being built by Dominion at a shipyard in Texas, is facing delays.

“Those are the things that have caused the increases in offshore wind costs for everybody, not just us,” Eversource CEO Joe Nolan told financial analysts recently. “The lack of American vessels is certainly going to be a challenge for anyone in this business. But I will say we successfully executed.”

This story also appears in Energywire.