The U.S. offshore wind sector is encountering significant hurdles, leading to concerns among major players in the energy industry. BP's Head of Gas and Low Carbon, Anja-Isabel Dotzenrath, expressed her view that the industry is “fundamentally broken.” This statement comes as BP and its partner, Equinor, assess their options for developing substantial offshore wind projects off the coast of New York, following an $840 million write-down.
While the offshore wind industry has been one of the fastest-growing energy segments, it has faced a series of setbacks recently, including issues related to equipment reliability, supply chain disruptions, and sharp cost escalations. Orsted, the world's largest offshore wind developer, recently announced potential write-downs of up to $5.6 billion after suspending the development of U.S. offshore wind projects.
Dotzenrath pointed out specific challenges in the United States, including permitting delays, the time gap between signing power purchase agreements and project construction, and the absence of inflationary adjustment mechanisms. She stressed the need for a fundamental reset in the industry, particularly in terms of permitting speed and security.
BP and Equinor are currently examining a new 10-point proposal by U.S. regulators, which could facilitate an “accelerated” bidding process for the projects. Dotzenrath acknowledged the complexity of the path forward but remained optimistic, stating, “I believe all these projects will be built.”
This development comes in the wake of New York's rejection of the companies' request to revise upward the payments received by developers through power supply contracts for their extensive projects. BP recently recorded a $540 million write-down, while Equinor reported a $300 million impairment on their joint Empire and Beacon offshore wind projects, boasting a combined capacity of 3.3 gigawatts, capable of powering 2 million homes. In 2020, BP acquired a 50% stake in the venture from Equinor for $1.1 billion.
Claudio Descalzi, the CEO of Italian energy company Eni, also weighed in on the challenges faced by the offshore wind sector, highlighting the doubling of costs for new offshore wind projects. “To do new offshore wind projects is very hard,” Descalzi noted, underscoring the difficulties in the current landscape of the industry.