New York Public Service Commission rejected petitions to increase contract prices

October 16, 2023
John Dalton

Last week the New York Public Service Commission rejected the petitions by Empire Wind, Beacon Wind (both are Equinor & BP affiliates) and Sunrise Wind (Orsted & Eversource) to increase their contract prices to offset the impacts of inflation, supply chain constraints and higher interest rates. The offshore wind developers now need to assess if they can make the economics of these projects work without increases in their contract prices. Given Commonwealth Wind’s, Park City Wind’s and Southcoast Wind’s experience, where the developers elected to pay security deposits and terminate the projects, it seems very unlikely that the developers will proceed with these projects under their existing contracts. This will have significant impacts on the pace of development of the US offshore wind sector. The emerging offshore wind supply chain faces a major setback, with the pace of project development noticeably slowed. This is likely to result in increased supply chain bottlenecks with the development and construction schedules for projects overlapping at a time of significant supply chain constraints including in particular limited port facilities, vessels and labor force. Nimbly, #NYSERDA issued a “10-Point Action Plan for Large Scale Renewables” shortly after the Commission issued its decision indicating how it would respond. First, NYSERDA will announce “historic awards” (i.e., one of the largest ever) of offshore and onshore renewable energy projects. This suggests that NYSERDA will go deep into the competitive bids for its 2022 offshore wind RFP, going beyond the two project awards that characterized its previous two offshore wind procurements. NYSERDA also indicated that the announcement will be accompanied by major supply chain announcements enabled by the RFP's provisions for Supply Chain Investment Plans. This will be welcome good news for the US offshore wind supply chain. Second, NYSERDA indicated that it will announce an accelerated offshore wind and onshore renewable procurement schedule including simplifying bid requirements and create an opportunity for the previously contracted projects to rebid. This can create interesting competitive dynamics as these more mature projects seek to capitalize on their anticipated higher project viability scoring (typically 10% of points for NYSERDA offshore wind RFPs).  In addition, these projects should be able to utilize the offshore wind supply chain enabled by the 2022 RFP. A second possible benefit is that this procurement can reflect progress that New York has made on coordinated transmission development, e.g., the New York City Public Policy Transmission Need. However, the transmission interconnection strategies for the first two tranches of NYSERDA offshore wind projects are well developed, limiting the ability for these projects to benefit from these developments.  #offshorewind