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New York finalizes contracts for 2.5 GW of offshore wind power capacity

Highlights

Combined cost estimate of $80.40/MWh

Projects expected in 2027-2028

New York Governor Kathy Hochul's office said Jan. 14 that contracts have been finalized between a state agency and Empire Wind Offshore along with Beacon Wind for offshore wind power projects totaling nearly 2.5 GW of capacity for a total cost of $80.40/MWh.

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"By advancing these significant offshore wind projects, we can maintain our cadence for developing projects that will spur much-needed green job creation and investment," Hochul said in an emailed statement.

"No state has felt the impacts of climate change more than New York State, and now more than ever, we can continue to lead the way with our ambitious, nation-leading vision to transition to a renewable energy and a cleaner, greener future," she said.

New York's landmark climate law, the Climate Leadership and Community Protection Act, includes mandates to develop 9 GW of offshore wind power capacity by 2035, an emissions-free power grid by 2040, and numerous other power market related goals.

The 1,260-MW Empire Wind 2 and 1,230-MW Beacon Wind projects were provisionally awarded in January 2021 resulting from the New York State Energy Research and Development Authority 's second offshore wind competitive solicitation.

Each project is a 50-50 partnership between Norway's Equinor, and London-based BP. Empire Wind 2 is expected to commence commercial operations in 2027, followed by Beacon Wind in 2028.

In 2019, Equinor was selected to provide 816 MW from Empire Wind 1 and in 2021 the company was selected to provide an additional 1,260 MW from Empire Wind 2.

Empire Wind is located in federal waters 15 to 30 miles southeast of Long Island and spans 80,000 acres. Empire Wind in April 2021 submitted an updated construction and operations plan to the federal Bureau of Ocean Energy Management that calls for the construction of a two-phase project including up to 174 offshore wind turbines, as well as multiple substations, transmission routes and export cable landfall sites to connect to New York 's electrical grid.

Equinor and BP are also developing Beacon Wind in an area located more than 60 miles east of Montauk Point and 20 miles south of Nantucket that covers 128,000 acres.

"Today's announcement sets Equinor and BP on the path to provide over 3.3 GW of offshore wind power for New York," Siri Espedal Kindem, president of Equinor Wind US, said in a separate statement.

"It also offers a large-scale, tangible demonstration of the incredible economic activity and carbon reduction potential being driven by New York's green energy transition," Kindem said.

Contract details, costs

The average bill impact for electricity customers will be approximately 0.8%, or about $0.95/month, according to the governor's office.

Total project costs, "including an average all-in development cost of $80.40/MWh," are roughly 7% lower than the costs of NYSERDA's 2018 awards, which shows offshore wind is a "competitively priced renewable energy resource," according to the statement.

The monthly Offshore Wind Renewable Energy Certificate, or OREC, price will equal the index OREC strike price minus the reference energy price minus the reference capacity price, provided that in no case shall the monthly OREC price exceed the index OREC strike price, according to the details of both contracts.

For Beacon Wind, the index OREC strike price for each month in the respective contract years will be $118.00/MWh. For Empire Wind 2, the index OREC strike price will be $107.50/MWh.

NYSERDA will calculate the reference energy price for each month by using data published by the New York Independent System Operator for its day-ahead energy market. Specifically, NYSERDA will identify the location-based marginal power price for each hour of the month in the applicable zone and take the simple -- not load-weighted -- average of each hourly LBMP to determine the reference energy price.

The monthly reference capacity price will be calculated by using the NYISO's monthly spot market unforced capacity, or UCAP, prices. NYSERDA will find the UCAP price in $/kW-month in the applicable zone and use a formula to calculate the reference capacity price.

"New York State has been steadfast in its commitment to establish itself as the leading offshore wind market in the nation and a global wind energy manufacturing powerhouse," NYSERDA president and CEO Doreen Harris said.