European energy giants Equinor and BP have terminated their contract to sell energy to the state of New York from their offshore wind power project, citing higher borrowing costs, increasing inflation and supply chain disruptions.  

“This 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,” Equinor said in its statement on Wednesday.  

The renewable solicitation process that began in November 2023 allows companies to exit their former contracts and re-offer projects with revised prices.  

New York’s Climate Leadership and Community Protection Act aims to obtain 70% of New York’s electricity from renewable sources by 2030 and develop 9GW of offshore wind by 2035. However, a combination of higher costs, tax credits and interest rates have prevented projects being realised, thwarting Joe Biden’s ambitious vision for clean energy technology.  

New York awarded Equinor and bp contracts in 2022 to develop the Empire Wind complex with 147 turbines to be spread across 80,000 acres of the sea. The two companies had agreed to sell energy credits from the 1.2GW Empire Wind 2 phase of the project at a strike price of $107.50 per megawatt-hour.  

“Commercial viability is fundamental for ambitious projects of this size and scale. The Empire Wind 2 decision provides the opportunity to reset and develop a stronger and more robust project going forward,” said Molly Morris, president of Equinor Renewables Americas. 

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Throughout 2023, offshore wind developers were forced to drop projects in Connecticut, New Jersey and Massachusetts owing to supply delays, lack of new tax credits and high interest rates. This also resulted in Denmark-based Ørsted, the world’s biggest offshore wind company, taking a 20% hit to its share price in August, its lowest level in four years.   

Together, Ørsted, Equinor and bp have faced $5bn in write downs on US offshore wind projects that were already in development because the sales contracts could not cover the cost of investment in building and running them.   

The New York State Energy Research and Development Authority (NYSERDA), the body that proposed renewable solicitations in November 2023, said on Wednesday that it “remains committed to advancing clean energy at the best value for New Yorkers, and we are encouraged that Equinor and BP continue to be committed to developing the offshore wind industry and New York’s green economy as they reset this project”. 

The power sale agreement for the 816MW Empire Wind 1 remains in place, an Equinor spokesperson told Reuters. New York’s first offshore wind farm, South Fork by Ørsted, is a 132MW project that provided its first power in December 2023.  

NYSERDA announced that final proposals for the solicitation are due by 25 January 2024, with awards expected in February.