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European energy giants Equinor and BP have scrapped a deal to sell power to the state of New York from the Empire Wind 2 offshore wind farm in the Atlantic Ocean, saying the project is no longer commercially feasible.
Citing higher inflation and borrowing costs, along with various supply chain issues, Equinor and BP said they would exit the agreement with the state of New York and would instead look for better offtake deals after the state’s regulators in October had rejected a request from BP and Equinor to seek higher rates for delivering offshore wind power, Bloomberg reports.
In a statement on Wednesday, Equinor said the agreement “reflects changed economic circumstances on an industry-wide scale and repositions an already mature project to continue development in anticipation of new offtake opportunities.”
The 1,260-megawatt Empire Wind 2 offshore wind project has seen progress stutter recently as power offtake contracts have been canceled in a number of states due to soaring project costs that developers say do not reflect the reality.
"Empire Wind 2 has been 'at risk' since the project developers made clear in their June 2023 petition that they would not move forward under the current contract," Timothy Fox, managing director at ClearView Energy Partners, told Reuters on Wednesday.
Bloomberg also quoted Fox as saying that “the economies of scale just aren’t enough to help these projects amid these macroeconomic events,” adding that “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”.
In total, state contracts have been awarded to 17.5 gigawatts of U.S. offshore wind projects, according to Fox, via Bloomberg. More than half of those are currently being disputed or already canceled, including the massive 2.2 gigawatts of capacity from Orsted’s Ocean Wind 1 and 2 projects in New Jersey.
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com