Empire Wind 2 Cancels Rock Installation and Substation Contracts
Joint venture partners BP and Equinor are continuing to take steps to back away from the planned Empire Wind 2 offshore wind farm by canceling multiple contracts. This comes after announcing that they had agreed with New York state regulators to terminate the power purchase agreement for the second phase of the planned 2 GW wind farm. Empire Wind did not take similar steps for the first phase and by all indications is still moving forward with the 800 MW portion of the project known as Empire Wind 1.
Citing the rise in interest rates and inflation as well as supply chain challenges, the joint venture called the cancelation of the power agreement a “reset” for the project. They said they were looking to new offtake opportunities for Empire Wind 2 which calls for a 1.2 GW wind farm to be located between 15 and 30 miles southeast of Long Island.
The joint venture however has also moved to cancel several of the supply contracts for the Empire Wind 2 project. In the latest development, Great Lakes Dredge & Dock Corporation reported yesterday, January 4, that it had been notified that the joint venture was canceling a portion of its rock installation contract. That follows an announcement earlier in the week from Seatrium that the joint venture canceled the contract for an offshore substation platform for Empire Wind 2.
Great Lakes Dredge & Dock highlighted the contract which was awarded in May 2022 as the first rock installation contract awarded to a U.S. company for offshore wind. Great Lakes is building a Jones Act-compliant subsea rock installation vessel for projects such as Empire Wind. The rock installation contract was won in coordination with Van Oord, which was to use the flexible fallpipe vessel Stornes to install rock before the installation of the monopile foundations. A total of 138 turbines were scheduled between the two phases of the wind farm. Great Lakes was to install rocks to protect and stabilize the monopile foundations, electrical substructures, and export cables.
The first phase of the rock installation for Empire Wind 1 will proceed in 2025, however, the second phase scheduled for 2026 for Empire Wind 2 was canceled. Great Lakes reports the termination initiates a contractually obligated termination fee payable to the consortium with Van Oord that is intended to cover lost earnings potential related to Empire Wind 2.
Great Lakes intends to bid on future projects for its rock installation vessel. They said they will continue to pursue additional opportunities including projects internationally for 2026 and beyond.
Singapore-based engineering firm Seatrium also reported that Empire Wind has canceled the contract for the 1,250 MW offshore substation platform planned for Empire Wind 2. The order was valued at US$188 million and was due to start in June 2024. Seatrium notes that the contract had progressive payment milestones and that payment for the work performed to date has been received. In addition, they said work on the offshore substation platform for Empire Wind 1 was continuing. Work on that portion of the project started in the fourth quarter of 2023.
Equinor and BP said they would be seeking new offtake opportunities for Empire Wind 2. New York State is currently conducting a new solicitation for renewable energy and it provided the opportunity for companies to rebid existing projects. They however are required to cancel the existing power agreements if they want to proceed to rebid the project. New York has indicated it is accelerating the process, closing the solicitation at the end of January 2024, and expects to announce results by April. The goal for the wind projects is to execute contracts by the second quarter of 2024.
Equinor, BP Cancel Offtake Deal with New York for Giant Empire Wind 2
European energy giants Equinor and BP have scrapped a deal to sell power to the state of New York from the Empire Wind 2 offshore wind farm in the Atlantic Ocean, saying the project is no longer commercially feasible.
Citing higher inflation and borrowing costs, along with various supply chain issues, Equinor and BP said they would exit the agreement with the state of New York and would instead look for better offtake deals after the state’s regulators in October had rejected a request from BP and Equinor to seek higher rates for delivering offshore wind power, Bloomberg reports.
In a statement on Wednesday, Equinor said the agreement “reflects changed economic circumstances on an industry-wide scale and repositions an already mature project to continue development in anticipation of new offtake opportunities.”
The 1,260-megawatt Empire Wind 2 offshore wind project has seen progress stutter recently as power offtake contracts have been canceled in a number of states due to soaring project costs that developers say do not reflect the reality.
"Empire Wind 2 has been 'at risk' since the project developers made clear in their June 2023 petition that they would not move forward under the current contract," Timothy Fox, managing director at ClearView Energy Partners, told Reuters on Wednesday.
Bloomberg also quoted Fox as saying that “the economies of scale just aren’t enough to help these projects amid these macroeconomic events,” adding that “all those projects were on the bubble, so it’s not surprising that Equinor and BP want to reduce some of the risk they’re facing”.
In total, state contracts have been awarded to 17.5 gigawatts of U.S. offshore wind projects, according to Fox, via Bloomberg. More than half of those are currently being disputed or already canceled, including the massive 2.2 gigawatts of capacity from Orsted’s Ocean Wind 1 and 2 projects in New Jersey.
By Charles Kennedy for Oilprice.com
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