New York State development agency NYSERDA has published the final terms of an offshore wind solicitation round could become the largest offtake round in the history of US offshore wind, supporting up to 4.6GW of new capacity.
The size of the round is the latest in a string of impressive numbers put up by the Empire State, which also boasts:
- Most capacity under offtake deals (Five projects totalling 4.3GW)
- Most procurement rounds opened (This is the third since 2018)
- Largest offshore wind deployment target ( 9GW by 2035)
Runners and riders
At the last solicitation in 2020 two projects off Massachusetts and Rhode Island threw their hats into the ring, but narrowly missed out. These were Orsted and Eversource’s proposed ‘Sunrise Wind 2’ and Avangrid/CIP’s ‘Liberty Wind’.
Liberty Wind lies within a 2.5 GW lease area that was transferred to CIP as part of the carve up of its joint-venture with Avangrid last year. Will this project be revived and in what form now that the Danish firm has sole ownership? Potential bids from the Orsted’s Garden State wind and EDF/Shell’s Atlantic Shores are also conceivable, with these lease areas lying within 200km of New York.
Orsted has recently lost out at seabed and offtake auctions in the UK, Denmark and the Netherlands as competition has become more fierce, so will no doubt be keen to add to its 4.5GW pipeline of projects with offtake deals in the US.
Can we expect a cheeky bid from any of the sites awarded at the 9 GW New York Bight lease auction earlier this year? In theory there is nothing preventing this, but the scoring of the round is weighted 10% towards project viability. Having recently supported successful seabed winners we think it doubtful these new sites have mature enough development, financing plans and grid connection plans to win over the judges. The industry’s ability to surprise is however, well documented.
Level of supply chain commitment
This ability of bidders to convince evaluators their projects have firm and credible plans to achieve lasting supply chain growth in New York State carries 20% of the overall marks, so this is a key factor for success.
NYSERDA has a massive war chest of $500 million that can support each developers supply chain development plans and ports are likley to be the biggest beneficiary. This funding is expected to be matched by private finance in a 3:1 ratio, triggering over $1.2bn in investment in the State’s ports. This is about double the amount of investment unleashed by the last auction, when BP and Equinor’s 2 projects (1.2 GW Empire Wind 2 and 1.2 GW Beacon Wind 1) anchored the development of a staging port at the South Brooklyn Marine Terminal and a tower and transition piece manufacturing facility in the port of Albany. Several ports have already pre-qualified as possible recipients of development funding, including a site with 96 acres of land on Staten Island in NYC.
It will be interesting to see what if any new primary manufacturing this round brings to New York. Major investments in other areas of the fabrication supply chain have been made in other states recently and New York officials are no doubt keen to grab a slice of the action. Plenty more manufacturing facilities are needed to build enough capacity in the US supply chain to redice the risk of critical bottlenecks later this decade, so there is still plenty to play for.
Whatever developers choose to commit to, it is important that they have solid plans for making good on their promises. The terms and conditions of the round expose developers to penalties if they fail to deliver the level of local spend promised within within three years of first power. Supply chain investments are risky and won’t always come off. Developers that over commit may find themselves scrambling for alternatives or on the receiving end of a reduction in their tariff.
What will the impact be on connection and prices – find our in my second blog on the NY auctions: New York’s Blockbuster wind auction: what to watch for II