Eversource Energy executives updated investors Feb. 17 on the company's three US offshore wind power projects, saying they have locked in 80% of the costs for 1,760 MW under contract and expect to invest $900 million to $1 billion in 2022 on the projects.
Receive daily email alerts, subscriber notes & personalize your experience.Register Now
"Last week, New York Governor Kath Hochul joined in breaking ground on South Fork Wind, the first offshore wind project we are building under our 50/50 joint venture partnership with Ørsted," Joe Nolan, Eversource's president and CEO, said during company's fourth quarter earnings conference call.
Land-based construction has begun on Long Island, New York, on the 130-MW 12-turbine project that is expected to begin service late-2023, Nolan said.
2021 was also a "pivotal year" for Eversource's two larger offshore wind projects, the 704-MW Revolution Wind farm that will supply Rhode Island and Connecticut, and the 924-MW Sunrise Wind farm that will supply New York, Nolan said.
"We are well into the federal and state siting process for both projects," he said, adding that the federal Bureau of Ocean Energy Management in 2021 set permitting schedules for both projects and Eversource expects to receive final siting approvals for them in the second half of 2023.
If those schedules are met, both projects are expected to enter service in 2025, with Revolution Wind likely entering service first.
"We have 80% of the cost of the portfolio locked in," Nolan said. Many of those contracts are with domestic manufacturers and service providers located in states where Eversource is contracting for its offshore wind projects, he said.
Eversource, over the past few months, has seen higher than planned costs for offshore wind foundations, certain installation vessels, logistics and offshore electrical substations.
The pandemic and global growth in offshore wind power have "rapidly tightened the market and supply chains," Nolan said, but the company had procured the largest scopes of work prior to the "inflationary pressure", including a turbine supply agreement with Siemens and an offshore wind installation vessel charter agreement with Dominion Energy.
One key contract is for the Connecticut State Pier in New London where Eversource, the state, and Ørsted are funding a $200 million project to create a staging area for offshore wind construction that can service the South Fork, Sunrise and Revolution projects, Nolan said.
The project is about 60 miles from the nearest turbine location and "quite close" to Eversource's 550 square mile area where the company and Ørsted plan to build projects with at least 4 GW of capacity over the coming years.
Massachusetts has proposed legislation that could "amend certain restrictive pricing language", which contributed to the state receiving only two bids in its last offshore wind solicitation, Nolan said. The bill is currently in the House and expected to move into the Senate during the current session ending mid-July.
Eversource and Ørsted, comfortable with their current uncommitted acreage, did not seek pre-qualification in the federal lease auction taking place Feb. 23 in the New York Bight region located between New York and New Jersey.
Eversource expects New York to "move swiftly" to its next offshore wind solicitation after the auction, Nolan said.
Transmission investments in New England are expected in the future as part of Eversource's regulated utility business, Phil Lembo, the company's CFO, said. Massachusetts, Connecticut, and Rhode Island are targeting 9 GW of offshore wind capacity that will require transmission and distribution upgrades to reliably connect, according to Lembo.
The joint venture with Ørsted has contracts signed totaling 1,760 MW of offshore wind capacity, with Eversource's investment of about $1.2 billion in the JV, Lembo said.
"In 2022 we expect to invest an additional $900 million to $1 billion in the three projects," he said. Over the remaining years of the company's investment forecast, Eversource expects to further invest $3 billion to $3.6 billion to bring all three projects into service.
Even without federal tax code changes currently being discussed in Congress, Eversource expects its offshore wind equity returns to be in the 11%-13% range, which is typically higher than returns on equity from the regulated businesses, Lembo said.
Eversource reported full-year 2021 earnings of $1,220.5 million, or $3.54/share, compared with earnings of $1,205.2 million, or $3.55/share, for full-year 2020. Eversource also reported fourth quarter 2021 earnings of $306.7 million, or $0.89/share, compared with fourth quarter 2020 earnings of $271.9 million, or $0.79/share.