Inflation Begins to Chunk for Offshore Wind Builders






Nov 2, 2022 9:36 PM by

The Maritime Govt

Hovering inflation is not only an issue for shoppers. It seems to be taking among the wind out of the sails of the budding U.S. offshore wind business, regardless of a serious bundle of economic incentives simply handed by Congress.

Final week, Avangrid’s Commonwealth Wind venture – a 1,200 MW set up off the coast of Massachusetts – requested state regulators for a pause in its rate-approval proceedings as a result of building is “now not viable” with out revisions. Although Avangrid stays within the venture, the monetary construction will have to be up to date to account for the brand new actuality of inflation, the corporate mentioned. 

“World commodity worth will increase, partly attributable to ongoing conflict in Ukraine, sharp and sudden will increase in rates of interest, extended provide chain constraints, and chronic inflation have considerably elevated the anticipated price of establishing the venture,” warned the developer. “In consequence, the venture is now not viable and wouldn’t be capable of transfer ahead absent amendments to the [power purrchase agreements],” the contracts that assure long-term costs for the wind farm’s electrical energy output. 

In a supporting movement, the builders of a neighboring offshore wind venture – the Shell/EDP/Engie-backed Mayflower Wind – mentioned that they help Avangrid’s request “for a one-month suspension to permit all PPA events time to discover potential changes.” These changes may embrace price reductions, a rise in PPA pricing, and qualifying for the brand new tax incentives below the Inflation Discount Act. With out PPA changes, the “useful resource might now not be financial and financeable,” Mayflower Wind cautioned.

The state of Massachusetts chosen the Commonwealth and Mayflower Wind tasks as suppliers final 12 months in its third spherical of wind power solicitiations. On the time, the 2 tasks contracted to promote energy at $72 per MWh and $77 per MWh respectively; neither agency has talked about how giant any doable worth improve may need to be with a purpose to transfer ahead, however Avangrid advised that “modest” adjustments can be sufficient. 

This week, the New Jersey energy utility Public Service Enterprise Group (PSEG) mentioned that it would finish its participation in Ocean Wind 1, an 1,100 MW venture proposal off the state’s southern coast. PSEG holds a 25 % stake within the improvement, and  Danish offshore wind heavyweight Orsted owns the remaining 75 %. 

Uncertainties about future price of building and energy pricing are additionally dragging down turbine orders as builders push again their venture timelines, in accordance with turbine OEMs. Business affiliation WindEurope – which represents suppliers and venture builders – says that new turbine orders fell by about 36 % within the third quarter, reflecting the consequences of excessive inflation. 

The sample could also be intensifying, however it’s not strictly new. Inflation and provide points had been already a difficulty by the third quarter of 2021, at the very least for turbine maker Vestas, which diminished its best-case income steerage for the 12 months by about $500 million on considerations over inflation-driven challenges. 

Share this


12% Club: Invest or Borrow@12%

There are many ways to potentially double your money in one day, but it's important to understand that most of these methods involve a...

What’s the best hotel booking app

What app gives you the cheapest hotel rates? What's the best hotel booking app. Looking for the best hotel rates? You're in luck! Many popular...

What is the best hotel management software

What is Hotel Management Software? What is the best hotel management software. Hotel management software (HMS) is a computer program that helps hotel owners, operators,...

Recent articles

More like this