The U.S. offshore wind industry is anticipating a rebound in 2024, overcoming the challenges and setbacks it faced in the previous year. While 2023 witnessed stalled developments and significant financial writeoffs, industry players are optimistic about a resurgence in projects and advancements in the coming year.
Industry’s Crucial Role in Decarbonization
The offshore wind sector is poised to play a pivotal role in supporting various states and meeting the decarbonization targets set by President Joe Biden. The industry’s growth is crucial for achieving a cleaner power grid and combating climate change.
Challenges Faced in 2023
The year 2023 was marked by setbacks as offshore developers faced contract cancellations for power sales in Massachusetts, Connecticut, and New Jersey. Project costs surged due to factors such as inflation, interest rate hikes, and disruptions in the supply chain. European energy giants, including Orsted, Equinor, and BP, collectively incurred approximately $5 billion in writeoffs for U.S. offshore wind projects.
Reviving Projects in 2024
In the upcoming year, developers are optimistic about reviving projects that faced contract cancellations or threats. Bidding in upcoming solicitations in states like New York, New Jersey, Massachusetts, and Connecticut is expected to provide opportunities for project revival. Despite potential increases in auction clearing prices, states remain committed to their clean energy goals.
Current and Future Capacity
At the beginning of 2023, only two small offshore wind projects were operational in the U.S., with a total capacity of 41 megawatts (MW). However, the capacity is set to soar to almost 1,000 MW in 2024 as commercial-scale projects off New York and Massachusetts come online. This significant capacity increase is a positive indicator for the industry’s trajectory.
State Initiatives and Policies
State procurements and policies are expected to be key drivers of demand for offshore wind energy. Federal support will play a crucial role in facilitating job creation, investment in the supply chain, and domestic energy production.
Developments in Various States
New York: The state has recently launched a solicitation allowing companies to re-offer projects at higher prices, and winners will be announced in February. The expedited solicitation was accelerated in response to developers threatening to cancel contracts due to interest rate hikes.
New Jersey: Governor Phil Murphy has directed state utility regulators to launch an accelerated offshore wind solicitation in early 2024 after Orsted canceled its Ocean Wind projects. Other projects, including the Atlantic Shores wind farm, continue to progress.
Virginia: Dominion Energy’s Coastal Virginia Offshore Wind project remains on budget and on track, with offshore construction set to begin in May 2024. Completion is expected in late 2026.
Massachusetts: Vineyard Wind 1 project is on track to produce power soon, and Avangrid plans to re-bid its Commonwealth Wind and Park City projects in future solicitations.
Outlook for 2024
Industry experts anticipate a competitive landscape in 2024, with numerous bids leading to contracts that will drive project development. Despite challenges in the previous year, the offshore wind industry is expected to make significant strides, contributing to the growth of renewable energy in the U.S.
Source: theglobeandmail.com
