The U.S. offshore wind sector is poised for a resurgence in 2024, with multiple projects anticipated to commence construction after a challenging year marked by stalled developments and substantial financial write-offs.
In 2023, the offshore wind industry encountered setbacks as developers scrapped power contracts in several states, including Massachusetts, Connecticut, and New Jersey. Issues such as surging inflation, interest rate hikes, and supply chain disruptions escalated project costs, leading European energy giants Orsted, Equinor, and BP to collectively incur approximately $5 billion in write-offs for their U.S. offshore wind projects.
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The offshore wind industry plays a crucial role in helping various states and President Joe Biden achieve ambitious goals to decarbonize the power grid and combat climate change.
In an effort to revive projects affected by canceled or threatened power contracts, developers are gearing up to participate in upcoming solicitations in states like New York, New Jersey, Massachusetts, and Connecticut. Analysts suggest that auction clearing prices may see an increase, but states remain committed to their clean energy objectives.
At the start of 2023, the U.S. had only two small operational offshore wind projects, with a total capacity of 41 megawatts (MW) in Rhode Island and Virginia. However, 2024 is expected to witness a substantial leap, with capacity reaching nearly 1,000 MW as commercial-scale projects off New York and Massachusetts become operational.
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This increase in capacity holds the potential to power around 500,000 U.S. homes, contributing significantly to the nation's renewable energy landscape.
Despite challenges faced in 2023, state support and policies are expected to drive demand for offshore wind energy. New York, for instance, recently accelerated its solicitation process, allowing companies to re-offer projects at higher prices, with winners set to be announced in February.
In New Jersey, an expedited offshore wind solicitation is planned for early 2024 after Orsted canceled its Ocean Wind projects. Meanwhile, projects in Virginia, Massachusetts, and Connecticut are progressing, with Avangrid and Copenhagen Infrastructure Partners' Vineyard Wind 1 expected to produce power soon.
As the industry looks to rebound in 2024, competitive bidding is anticipated to lead to contracts that enable the advancement of offshore wind projects. Orsted, for example, plans to commence offshore construction in the spring of 2024 for its Revolution Wind project, supplying 704 MW to consumers in Rhode Island and Connecticut at an estimated cost of approximately $4 billion.
