In a recent development, BP Plc and Equinor ASA have announced the termination of their power agreement with New York state for the Empire Wind 2 project, a 1.3-gigawatt wind farm off the coast of New York. Citing changing economic circumstances that rendered the project unviable, the companies stated their intention to seek new offtake opportunities, as reported in a statement released on Wednesday.

This decision comes after a setback in October, when the developers, including BP and Equinor, requested higher rates to deliver power from offshore wind farms but were rebuffed by state regulators. The US offshore wind industry has been grappling with rising inflation, supply-chain issues, and other factors that have led to increased costs. Consequently, numerous projects are now facing uncertainty as developers are forced to reassess their original proposals due to current economic conditions.

Timothy Fox, an analyst at ClearView Energy Partners, commented on the situation, highlighting the challenge faced by these projects amidst macroeconomic events. He stated, "It appears that the economies of scale just aren't enough to help these projects amid these macroeconomic events. All those projects were on the bubble, so it's not surprising that Equinor and BP want to reduce some of the risk they're facing."

According to Fox, approximately 17.5 gigawatts of US offshore wind projects have secured state contracts, with more than half of those proposals currently in dispute or cancelled. This includes the Ocean Wind 1 and 2 developments in New Jersey with a combined capacity of over 2.2 gigawatts, which were halted by Orsted A/S in late 2021. The implications of these cancellations and disputes demonstrate the challenges faced by the US offshore wind industry.

New York, recognizing the obstacles faced by project developers, announced a new energy solicitation in November, specifically encouraging bids from those seeking financial relief, such as BP and Equinor. As part of terminating the power agreement, the companies will forfeit the $6.3 million contract security they had posted to New York, according to a representative for the project.

The termination of the Empire Wind 2 power agreement marks another setback for the US offshore wind industry, which continues to grapple with various obstacles impacting its growth. Despite this recent development, developers and industry stakeholders remain hopeful for the resolution of challenges, seeking new opportunities to move the industry forward.