The wind industry’s global race to make ever-bigger turbines stumbled to a sudden slowdown last week, jarring U.S. offshore wind projects.
When GE Vernova confirmed that it was canceling one of the largest wind turbines ever designed, it signaled a pause in an arms race that for years had led manufacturers to go higher, longer and wider when building towers, blades and other components. Now, that decision is reverberating across U.S. efforts to build wind projects in the Atlantic.
New York canceled power contracts for three offshore wind projects last week, citing GE Vernova’s decision to abandon its largest turbine model, a massive 18-megawatt machine. The timing could hardly be worse. Offshore wind is the keystone of New York’s plan to generate 70 percent of its power with renewable energy by the end of the decade.
The canceled projects pushed New York further adrift of meeting its goal. Today, a little more than a quarter of New York’s power comes from renewable sources, the vast majority of it hydropower. Offshore wind was supposed to help the state reach 70 percent, with New York officials targeting 9,000 megawatts of offshore wind capacity by 2035. Last week’s decision nixed almost half of it.
“It’s obviously a setback. I mean, there’s no way to sugarcoat it,” said Fred Zalcman, director of the New York Offshore Wind Alliance. “It was to be a big part of New York’s portfolio — and kind of the linchpin — in getting to nine gigawatts by 2035.”
The cancellations owe to a variety of factors. The offshore wind market is still adjusting to the effects of inflation and higher interest rates. It also reflects New York’s push to link offshore wind projects with manufacturing facilities onshore. And it came just as GE Vernova emerged as a stand-alone company from General Electric, with a struggling offshore wind division that reported a $1.1 billion loss last year.
But many analysts and industry officials cited the push for ever-bigger turbines as the leading issue for the projects’ failure. GE announced last year that it intended to develop a supersize 18-MW version of its Haliade X turbine, in what would have been one of the largest pieces of wind equipment ever built outside of China.
GE was a leader in the industry trend to build larger and larger turbines. In theory, a bigger turbine could help developers deliver more power at lower costs. It means they could install fewer foundations or string less cable to bring power ashore. But the reality is more complex. More port space is needed to assemble gargantuan turbines and larger boats with stronger cranes are required to haul and lift them. There’s also this: Bigger machines tend to break more, according to analysts.
A growing number of people in the industry had called for a halt in turbine race in hopes of allowing supply chains to catch up and enabling manufacturers to standardize their processes.
Morten Dyrholm, an executive at Vestas, one of GE’s chief competitors, told a Danish newspaper last fall that the industry needed “a break in the development of larger turbines.”
“We must not keep sending bigger and bigger turbines onto the market. There is a need to mass produce and standardize,” Dyrholm said.
Now, it seems that GE Vernova agrees. The company, based in Cambridge, Massachusetts, decided the 18 MW posed technological risks at a time when the industry was struggling with inflation and rising interest rates, said Vic Abate, CEO of GE Vernova’s wind division. It elected instead to offer developers a 15.5-16-MW edition of the Haliade X, saying it would provide more power while using the foundation of the company’s existing 14-MW turbine.
“The industry, as it was nascent and trying to justify itself, developers were drawing larger turbines, cheaper prices. And they were betting their future development book on that. I think that chapter is over,” Abate said.
GE Vernova will continue to upgrade its turbines and make them more efficient, but “we’re going to do that in a much more prudent way,” he said.
The decision comes at a moment of transition for GE Vernova, which was given independence by GE earlier this month to focus on renewable energy — and offshore wind has proven to be one its most challenging issues. The company was hit by Ørsted’s decision last year to cancel its 1,100-MW Ocean Wind 1 project in New Jersey. Ørsted had planned to use 98 GE turbines.
GE Vernova executives recently told financial analysts they had a $4 billion backlog of orders, with many contracts signed prior to the rapid rise in inflation. The company merged its offshore wind division with its profitable onshore wind business, and is hoping they will together turn a profit next year.
Yet the decision to walk away from the 18-MW turbine buffeted Attentive Wind, Community Offshore Wind and Excelsior Wind, the three New York projects that had planned on using the mega-machines. Developers had written their bids to New York on the premise that the giant turbines would save them money by producing more power, according to two people familiar with the bids who spoke on condition of anonymity to describe sensitive conversations.
Their decision to use the GE Vernova turbines came after the manufacturer announced three days before bids were due that it would build two new manufacturing plants if it received enough orders from companies participating in the solicitation. The two facilities, located at the Port of Coeymans on the Hudson River, would have employed 900 people.
Under New York’s rules, developers were required to submit plans for supply chain investments. New York provisionally awarded GE Vernova and LM Wind Power a $300 million grant to build the factories at the Port of Coeymans after the developers agreed to use their turbines.
The state’s strategy is not new. In an earlier round of bids, it sought to pair a proposed tower factory in the Port of Albany with a wind project being built by Equinor. The wind project is moving forward after it won a new contract last year that pays higher electricity prices to the company. But it will no longer receive towers from Albany. Plans to build that facility are paused.
One of the industry officials who was granted anonymity to discuss sensitive details said GE Vernova had little appetite to build a new manufacturing facility and a major new turbine so soon after going public.
“Their whole job is to show their shareholders that they can make money,” the person said. “They’re looking at the global market, and the 15 [MW] is their workhorse, meaning that they know exactly what they’re gonna get out of it. They know exactly what the costs are.”
Another person was more blunt, alluding to the financial fallout being shouldered by the nascent U.S. offshore wind industry following GE’s cancellation of its giant machine — and other factors.
“This is the offshore wind equivalent of, ‘Read my lips: no new taxes,’” the person said, referring to former president George H.W. Bush’s broken pledge on taxes.
A spokesperson for the New York State Energy and Research Development Authority said became aware of GE Vernova’s decision not to move ahead with the 18-MW turbine “in the months following provisional awards.”
“As with any growing sector, there will be challenges to overcome which require commitment from the federal and state government as well as the private sector to overcome,” NYSERDA spokesperson Theresa Smolen wrote in an email. “NYSERDA is continuing to take proactive measures to respond to and address these issues head-on with next steps to be announced in the near future.”
Long before being canceled last week, the three offshore wind projects spent record amounts of money to win federal leases in the New York Bight. The lucrative waters off the coast of New York and New Jersey drove a record $4.4 billion offshore wind lease sale in 2022, a tally that included a host of companies vying to build projects in the Atlantic. The previous record, spent on lease areas off the coast of Massachusetts in 2018, was $405 million.
Attentive Wind paid $795 million for its lease, Community Offshore Wind paid $1.1 billion, and Excelsior Wind spent $285 million.
But GE Vernova’s decision to cancel its behemoth turbine changed the economics of the projects, said Atin Jain, an analyst who tracks the industry at BloombergNEF.
“Using the lower-capacity turbines means that each developer would need to buy 12 to 13 additional turbines to build a project of the same capacity,” Jain said. “That also means more foundations, cables, days hiring expensive installation vessels and so on, significantly raising total project cost assumptions.”
This story also appears in Energywire.
