As mentioned in my previous blog, New York State development agency NYSERDA’s third offshore wind solicitation round could become the largest offtake round in the history of US offshore wind, supporting up to 4.6 GW of new capacity. That blog focused on the supply chain challenges and opportunities of the solicitation round. In this blog I look at connection options and pricing.
Connection options
All bidders must make use of HVDC radial links to bring power to shore. Projects must also show that their transmission infrastructure is ‘meshed ready’ – capable of receiving power from multiple east coast projects linked up via an interconnector. This will potentially enable offshore substations to take power from multiple projects in a flexible way that provides more stable power to New York. The development of this interconnector between different projects, however, is still at an early stage, and so this requirement risks mandating that developers design and build over dimensioned platforms, which could add $40 million to the cost of a 1.2GW project.
Developers also need to demonstrate a very well-coordinated and thoughtful approach to both selecting and permitting onshore and nearshore infrastructure. There are strong environmental and physical constraints in densely populated areas of New York City, where cables may need to reach landfall via busy and narrow harbor channels. Feeding power into Long Island zone K may also be tricky. The first project to do so, Orsted and Eversource’s 132MW South Fork, recently brushed up against social constraints and strong local opposition. Projects with Zone K injection points are also limited to 1,330 MW. NYSERDA encourages bidders with NYC Zone J Delivery Points to consider Alternate Proposals that utilize the ConEd Hub – that is the Brooklyn Clean Energy Hub designed to be a “make ready” substation that eliminates the need for additional system upgrades to accommodate OSW interconnection with points of interconnection proposed by 2027.
Price signals
Cost represents 70% of the project scoring, as in the previous round. Last time out, Equinor and BP’s 1.2 GW Beacon Wind and 1.2 GW Empire wind 2 walked away with 25-year index OREC strike prices of $118/MWh and $107.50/MWh respectively. It is far from certain prices will be lower this round, especially with ‘meshed ready’ requirements pushing up transmission costs. Offer prices will certainly provide an interesting bellwether amid the current ‘storm’ of factors squeezing margins in the industry: rising energy costs, high commodity prices, high inflation and sky-high seabed lease sale prices.
Whatever the winners of the solicitation round offer, it promises to be an epoch-making for New York State, US and global offshore wind markets.
.
