The first US commercial-scale offshore wind farm is live, but the industry faces strong headwinds

The first week of 2024 has already been a rollercoaster of good and bad news for President Joe Biden’s offshore wind ambitions.

The nation’s first large-scale wind farm just started producing power for the New England power grid. The bad news is that another major project on the East Coast threw in the towel, the latest casualty of skyrocketing costs that are pushing Biden’s offshore wind dreams out of reach.

The plan, according to the Biden administration, was for the US to get 30,000MW of energy from offshore wind by 2030. The US lags far behind Europe and China in offshore wind development, which it will need a lot more of to hit clean energy goals tied to the Paris climate accord. Since stepping into office, Biden has rolled out the red carpet for offshore wind, crafting policy incentives and opening up vast swaths of the US shoreline to development. Despite the tax credits and lease auctions, the industry is still struggling to overcome mounting obstacles.

The US actually has more potential to generate power from offshore wind than most other countries. It just has yet to live up to that potential. By 2050, offshore wind could generate up to a quarter of the nation’s electricity. But until recently, it only had the capacity to generate 42 megawatts of electricity from two small offshore wind farms — equivalent to about 0.0014 percent of Biden’s 2030 goal.

Those numbers got a teeny bit better this week thanks to the Vineyard Wind 1 project some 15 miles off the coast of Martha’s Vineyard. On Tuesday at 11:52PM local time, it delivered power for the first time to the New England power grid. It came from just one turbine as part of the project’s initial commissioning process, providing just 5MW of power. At least five turbines are expected to start operating at full capacity by “early in 2024,” according to a press release yesterday. There are 62 turbines in total at Vineyard, capable of lighting up 400,000 homes and businesses in Massachusetts by the time the project is complete. The project alone can push the US’s offshore wind capacity to around 850MW.

“This is a historic moment for the American offshore wind industry,” Massachusetts Governor Maura Healey said in the press release. “As we look ahead, Massachusetts is on a path toward energy independence thanks to our nation-leading work to stand up the offshore wind industry.”

Further down the Eastern Seaboard in New York, the outlook for offshore wind dimmed this week. Developers Equinor and BP canceled their offtake agreement with New York State for the planned 1,260MW Empire Wind 2 project. The companies cited “changed economic circumstances on an industry-wide scale” as the reason. Inflation, high interest rates, and supply chain disruptions apparently made the deal financially unfeasible.

“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,” Molly Morris, president of Equinor Renewables Americas, said in a statement yesterday.

In other words, the companies are likely looking to sign new offtake agreements, ostensibly at higher rates to reflect soaring development costs. Developers struck offtake agreements for a slew of new offshore wind projects in the US before the Federal Reserve started raising interest rates in response to inflation. Higher costs for building materials like steel and resin also started to threaten projects. As a result, BP, Equinor, and other offshore wind developers filed petitions last year asking to charge customers higher rates for electricity. New York regulators denied their request last October.

BP and Equinor aren’t the first developers to drop projects in recent months. Wind energy giant Ørsted canceled two major projects off the coast of New Jersey last October that together would have generated 2,248MW of clean power. While that was a big blow, another 130MW Ørsted-backed project called South Fork Wind started delivering power to Long Island from its first operational turbine in December.