Norwegian utility Statkraft has taken full control of Brazilian subsidiary Statkraft Energias Renováveis by buying the 18.69% stake it does not currently own.
Statkraft has bought the stake from Brazilian pension fund manager Fundação dos Economiários Federais. Statkraft Energias Renováveis owns 14 hydropower plants and four wind farms with total capacity of 450MW.
Bernard Looney has stepped down as chief executive of BP over allegations related to personal relationships with colleagues.
Looney became chief executive of BP in February 2020 and set out plans for the company to achieve net zero emissions by 2050, including investing in offshore wind and power-to-X. He has been replaced by Murray Auchincloss, the company's chief financial officer, as chief executive on an interim basis.
Japanese trading house Itochu has entered into a partnership with Australian battery storage operator Akaysha Energy with a view to developing up to 20 large-scale batteries, predominately in Japan, by 2030.
Warren Buffett-backed Itochu expects the business to achieve a value of up to 100 billion yen ($678 million) by the end of the decade. The target is to develop 1 GWh of battery storage, with the aim of capturing a 10-20 per cent share of the domestic energy storage market.
Akaysha, a subsidiary of US asset management company BlackRock, is currently constructing an energy storage facility with a capacity of over 1,680 MWh in Australia, which is scheduled to begin operations in 2025.
The development of a 50 MWh battery costs roughly 5 billion yen ($34 million). It is understood that the Japanese government is planning to provide sizeable subsidies amounting to around half of Itochu's budget.
There is a real danger public opposition to energy storage could grow significantly as a result of fire risk fears, threatening critical battery deployment and, as a result, net zero goals, according to a new report from Firetrace International, a supplier of fire suppression technology to the renewable energy industry.
Nations across the world are ramping up renewable energy supplies in order to meet the requirements of the Paris Agreement, and a corresponding rise in energy storage deployment is vital due to the intermittent nature of wind and solar power, the report says.
However, it adds that concern for energy storage fire risk is rising, and incidents that do occur tend to attract a significant amount of negative publicity. As a result, projects in the US and Canada are being postponed and politicians in the UK are calling for battery storage systems to be subject to checks by fire services.
The report also states that high-profile fire incidents in battery storage have also had an impact on the insurance market. It says the appetite to cover energy storage projects has declined, with some insurers even exiting the market. This has resulted in increased premiums, higher excesses, and difficulties in securing 100 per cent cover. Addressing the fire risk of battery storage has thus become a focal point for owners, contractors, and operators.
The report says regulation can play a big role in mitigating battery storage fire risk but, at present in the US, fire regulations vary from state to state, resulting in an array of different regulations informing design and installation. It adds that, while manufacturers in some states consult fire suppression specialists, others do not. The report suggests that states should adopt the International Fire Code (IFC) in place in New York and California.
“There are fire suppression companies who claim their systems can suppress li-ion battery fires and prevent thermal runaway,” says Brian Cashion, engineering manager at Firetrace International. “We don’t believe the industry can make these claims yet because there is no publicly available test data proving these claims in real world test scenarios and doing so risks a second wave of public scrutiny.
Red Sea Power has switched on a 60MW onshore wind farm in Djibouti that has boosted electricity capacity in the East African country by 50%.
The $122m project, also called Red Sea Power, is the first utility-scale wind farm in Djibouti and is set to provide electricity to 38% of the country's population that currently does not have access to it. The development is located near Lake Goubet and was commissioned by President Ismail Omar Guelleh.
The development company Red Sea Power is backed by a consortium of investors, including the Africa Finance Corporation, Dutch bank FMO, Climate Fund Managers, and Great Horn Investment Holding.
Octopus Energy has acquired a stake in Norwegian developer Deep Wind Offshore as part of its plan to invest $20bn in offshore wind by 2030.
Deep Wind Offshore was established in 2021 and has a 10GW portfolio of offshore wind projects that is planning to deliver by 2032, including 2GW in South Korea. Octopus Energy has bought an undisclosed stake and joins existing shareholders Haugaland Kraft, Knutsen OAS and Sunnhordland Kraftlag.
EDF Renewables UK has won planning approval for a 57MW grid-scale battery in Braintree, Essex.
The project is expected to begin construction in early 2024, with the aim of being operational in early 2025.
The Braintree battery storage site will be co-located with a solar farm, which will be submitted for planning approval “shortly”, according to an EDF statement.
Simone Sullivan, head of storage at EDF Renewables UK, said: “We are delighted that our plans to develop a battery storage facility near Braintree have been approved. There is no doubt that adding a greater amount of renewables into the UK’s electricity system will be central to our fight against climate change. Battery storage is an important part of enabling this, helping to future-proof the grid and cost-effectively integrate more renewable power.”
Grid-connected energy storage system provider LS Energy Solutions (LS-ES) is to supply 200 MW/400 MWh of energy storage for the 100MW / 400MWh Big Rock project - which is being developed by Gore Street Energy Storage Fund (GSF) in Imperial County, California.
The project will use a total of 137 AiON-ESS units in the “largest LS-ES installation yet”, according to a statement. The site will provide resource adequacy (RA) and ancillary services to the CAISO market.
The AiON-ESS units can store energy for two-hour duration and, like other AiON-ESS Energy Series installations, integrate DC and AC components inside each container and provide AC output ready to be fed into medium voltage transformers. Each unit has a power rating of 1.5 MW and can store 3.5 MWh. Along with lithium-ion batteries, the 137 containers include over 1,300 of LS-ES’s modular 140 kVA AiON-SIS string inverters.
“The Big Rock energy storage system is a major step forward for GSF and for LS Energy Solutions. GSF has amassed an impressive energy storage portfolio in the UK, mainland Europe and the US, with assets in Texas and California. We are thrilled to partner with the company on its first large scale system in the US,” said Steve Fludder, CEO and president of LS Energy Solutions.
Gore Street Energy Storage Fund acquired the Big Rock site in February 2023 from Avantus, which will continue to provide administrative and development services for the installation.
Alex O’Cinneide, CEO of Gore Street Capital, said: “The Big Rock project marks GSF’s most recent acquisition, and the company’s biggest to date. As the Investment Manager, we are thrilled to have the project in our portfolio under management and to work with LS Energy Solutions in bringing the project to fruition.
“As the Company’s first project in California, Big Rock will be an important addition to the CAISO grid, helping to deliver stability to a rapidly decarbonising energy system. Our in-house technical team is looking forward to working with LS-ES and its containerised units as construction at Big Rock progresses, and we’re excited to participate in the CAISO market.”
Canadian developer Boralex and nine indigenous Innu communities have closed the $608m financing of the 200MW Apuiat wind farm in Quebec, Canada.
The groups have secured the financing from a consortium led by the Desjardins Group, and including international financial institutions CaixaBank, DZ Bank and the Korea Development Bank. The funding includes a $465.3m construction loan, and short-term facilities of $142.7m including a bridging loan and letter of credit facility.
US utility Eversource Energy has completed the sale of a 175,000-acre site for offshore wind development off the coast of Massachusetts to Ørsted for $625m.
Eversource is set to use $545m from the sale to support its tax equity investment in the 132MW South Fork offshore wind project off the coast of Rhode Island, which it is developing with Ørsted. South Fork is due to be commissioned in late 2023.
German utility EWE has teamed up with hydrogen firm Jet H2 Energy to develop 200 public green hydrogen fuelling stations in northern Germany.
EWE is set to supply the green hydrogen for use in the fuel stations, while Jet H2 will focus on building and operating them. Jet H2 is a joint venture between British Phillips 66 and Swiss H2 Energy Europe.
German renewables operator Wpd has refinanced two onshore wind projects with combined headline capacity of 180MW in Taiwan.
Wpd has refinanced the Chungwei and Luwei projects with a consortium of four mandated lead arrangers: two local banks and two international banks. The refinancing has improved the capital structure and provided additional working capital for each wind farm's project company.
The ample solar resources in the US west mean opportunities for solar arbitrage abound, with the result that storage investors can expect excellent returns on investment
The energy storage boom in the US is centred on the western part of the country. New data from S&P shows that in the second quarter of 2023, nearly 95 per cent of US battery storage capacity additions were in the US West, specifically the California Independent System Operatior (CAISO) region, which contributed 58.1 per cent of new capacity during the period, and the Western Electricity Coordinating Council (WECC) region, which was responsible for 36.7 per cent of the new capacity.
With regard to cumulative capacity, CAISO leads the way with just shy of 50 per cent (6.314GW) of total US capacity, second is ERCOT [Electric Reliability Council of Texas] with slightly over a quarter (25.9) per cent of US capacity, which amounts to 3.287GW. In third place is WECC, which accounts for slightly under 10 per cent of capacity, amounting to 1.255GW.
Indeed, the five largest storage projects completed in the second quarter of this year were all located in the US West, specifically California and New Mexico. They were:
1. Vistra's 350-MW Moss Landing Energy Storage 3 project in California
Phase three of the Moss Landing project was able to make rapid progress – at a time when US interconnection queues are growing – because it made use of an already-approved development permit, as well as its location on a Vistra-owned power plant site with existing interconnection and infrastructure. At its plant sites in California and elsewhere in the US, Vistra claims it is “leading the way in responsibly reclaiming and repurposing sites that have been historically used for fossil fuels, transforming them with renewables and battery storage, leading to economic activity and tax base for the communities”.
2. D.E Shaw Renewable Investments' 150-MW Arroyo Energy Storage project in New Mexico
The Arroyo project is co-located with 300 MWAC of solar. David Zwillinger, chief executive officer of D. E. Shaw Renewable Investments has said that incorporating battery storage in solar projects has the potential to “change the landscape of the renewable energy industry going forward." The project represented NORD/LB's first solar-plus-battery storage project financing in the US.
3. Clearway Energy Group's 149-MW Daggett Solar Power 3 in California
This represented the third phase of the Daggett project – the entire project encompasses 482 MW of solar power and 394 MW of energy storage capacity, making it the “largest solar and battery storage project currently built in California”, according to Clearway. The project involved repurposing land previously occupied by a fossil fuel plant. The Daggett project is seen as helping California solve one of the biggest obstacles to renewable energy, that is, by helping to correct the imbalance between solar oversupply when the sun is shining and undersupply at other times, thereby reducing the need to rely on California’s polluting gas-powered plants.
4. RWE Clean Energy's 137-MW Fifth Standard Solar PV project in California
The Fifth Standard project incorporates a 137MW/548MWh utility-scale battery energy storage system and a 150MW solar PV facility. “Projects like Fifth Standard, with its co-located battery storage system, will become increasingly important to help ensure that, as renewables form a bigger part of the energy mix, the electricity produced can be used when it is needed most,” said Mark Noyes, CEO of RWE Clean Energy.”
5. San Diego Gas & Electric's 131-MW CE Westside Canal Battery Storage project in California
The 131MW Westside Canal project located in Imperial Valley – which is home to a high concentration of solar, wind, and geothermal generation facilities – is the largest storage asset in San Diego Gas & Electric’s utility-owned energy storage portfolio.
The western part of the US is home to the best solar resources in the country. For example, of the ten sunniest cities in the US – all of which have sunshine more than 78 per cent of the time from sunrise to sunset – nine are located in the states of Arizona, California or Nevada, all of which are in the CAISO and WECC regions. Similarly, nine of the ten cities with the most ‘clear days’ in the US – that is the average number of days per year when clouds cover less than one-third of the sky – are also located in Arizona, California or Nevada.
Consequently, it comes as no surprise to learn that Arizona and California and Nevada make up three of the top six US states for installed solar capacity. In fact, California is the top state for solar capacity by a considerable margin, with nearly 40GW installed, more than twice its nearest challenger, which is Texas, with slightly over 17GW.
The result is that the solar fleet in the western US offers potentially lucrative returns for battery storage projects in the form of solar arbitrage, that is, storing solar-produced energy when the price is low and selling when the price is high.
As S&P has highlighted, “most planned storage in the West is co-located with another generation source, specifically solar”. This assertion is borne out following an examination of relevant data. Figures from Berkeley Lab – a US Department of Energy Office of Science national laboratory managed by the University of California – show that, of planned US storage projects currently in interconnection queues, the majority (52 per cent, or 358GW) is in a hybrid configuration.
The attractiveness of solar-storage hybrid investments has been highlighted by S&P, which says that “arbitrage revenue and capacity revenue combined are forecast to be enough for battery storage projects to make a full equity return on investment throughout much of the West — particularly in California, Nevada, Arizona and Colorado”. Meanwhile, the appeal of this part of the US is also heightened by the fact that five states in the West — California, Nevada, New Mexico, Oregon and Washington — have 100 per cent clean energy targets in place.
It is for these reasons that the trend for energy storage deployment to be largely focussed on the western US is set to continue for the foreseeable future. In the third quarter of this year, it is forecast that a total of 3.555GW of storage capacity will be added to the US grid, with developers in the CAISO region expected to contribute more than 2GW, or 59.3 per cent, and developers in the WECC area set to add 843MW, or 23.7 per cent.
Amp Energy, a renewable energy and hydrogen developer backed by Carlyle, has executed a transmission network connection agreement (TCA) with South Australia’s high-voltage transmission network owner ElectraNet for its 150MW / 300 MWh Bungama battery energy storage system (BESS) in Bungama, South Australia.
The BESS is expected to energise by early 2025, as the first phase of a larger Bungama BESS and solar PV installation. Bungama BESS is the first TCA within Amp’s Renewable Energy Hub of South Australia, a A$2 billion portfolio of renewable generation and battery energy atorage Assets across three sites, Bungama, Robertstown and Whyalla, which were established in 2021.
The Bungama BESS project has entered into an Aboriginal Cultural Heritage Agreement with the Nukunu Wapma Thura Aboriginal Corporation. The project is expected to create up to 70 construction jobs for up to a year and 20 ongoing jobs during operations.
Dean Cooper, head of Amp Australia, said: “The Bungama BESS announcement emphasises our commitment to the state of South Australia, towards its goal of achieving net zero emissions and 100 per cent renewable energy generation by 2050.”
UK-based battery storage asset owner and operator Varco Energy and GE Vernova’s Solar & Storage Solutions business have formed a partnership for the development of a 57MW/138MWh transmission connected battery energy storage system (BESS) south of Liverpool.
The project, named Native River, could power the equivalent of 37,000 homes in the UK with clean, green power, “situated within an historically congested part of the UK electricity grid”, a Varco Energy statement said.
GE Vernova will supply the complete BESS for the project. It will be comprised of modular units of GE Vernova’s ‘FLEXInverter’, ‘FLEXReservoir’ and ‘FlexIQ’ systems. Additionally, the company has also entered a long-term service agreement. Construction commenced in Q3 2023 with connection to the grid expected in early 2024.
James Mills, director at Varco Energy, said: “BESS are critical infrastructure to help balance the intermittent nature of renewable energy generation and break the UK’s reliance on fossil fuels. We are therefore delighted to be partnering with GE on one of our first projects, the 57MW Native River project. At Varco we are committed to investing in assets that will accelerate renewable integration, sustain a resilient grid and drive consumer value in the UK. This project will be the first of many as Varco seeks to deliver on its ambitions.”
Prakash Chandra, president & CEO, GE Vernova’s Solar & Storage Solutions business said: “Our FLEX portfolio being deployed here provides flexible, reliable and intelligent solutions that help solve complex renewable integration and grid challenges while maximising value for customers. We hope to advance our common mission of providing dispatchable and reliable clean energy that will benefit thousands of people, while contributing to the transition to a clean energy future in the UK.”
Spanish group Repsol has entered the US onshore wind market by acquiring renewables firm ConnectGen for $768m from Quantum Capital Group platform 547 Energy.
ConnectGen has a 20GW development pipeline of onshore wind, solar and storage projects in the US. The deal with help Repsol to achieve its goal of 20GW renewable energy generation capacity by 2030.
The UK Government has given backing to 3.7GW of onshore wind, solar, tidal and geothermal projects in its fifth Contract for Difference (CfD) auction round today.
Twenty-four onshore wind projects totalling 1.5GW have been awarded support. However, the tender failed to award support to any offshore wind projects, which the Government attributed to the impacts of inflation and supply chain difficulties.
Battery storage system provider Zenobē has today announced it has secured an investment of around £600 million from investment firm KKR.
In addition, a further investment of around £270 million has been made by existing shareholder Infracapital.
Upon completion of the transaction, which is subject to “customary closing conditions” and regulatory approvals, KKR and Infracapital will become joint majority shareholders in Zenobē. Jera and TEPCO Power Grid will remain as minority shareholders.
“The investment will fuel the expansion of the company’s fleet electrification and grid-scale battery storage business, accelerating the decarbonisation of fleet transportation and maximising the uptake of renewables,” a statement said.
Zenobē supports more than 1,000 electric buses, trucks and commercial vehicles worldwide, and has worked with operators to deploy vehicles in over 75 depots ranging from Glasgow and Coventry in the UK to Sydney and Melbourne in Australia.
Funding from the equity investment will significantly expand the number of electric vehicles and charging equipment supported by the company. By 2026, Zenobē aims to support 4,000 electric buses, trucks and commercial vehicles on the road.
This latest equity investment will enable the business to accelerate its offering with the design and construction of two additional battery storage sites across Scotland at Kilmarnock South and Eccles. It will also enable an extension of capacity at the company’s battery storage asset at Blackhillock. The site will support the integration of wind power resources into the grid and Zenobē’s target to commission around 1.2GW of storage in the UK by 2026. The investment will also support its target to develop an additional 2.5GW of battery energy storage assets in North America and Australia by 2030.
Nicholas Beatty, co-founder and director of Zenobē, said: “Batteries are the under-recognised crucial component of our future transport and energy systems, and they’re available now. We’re making huge strides in decarbonisation but it’s clear that too much renewable energy is being wasted and that transport decarbonisation must move faster. Batteries are critical to optimising the use of renewable electricity and making cheaper, greener and more secure power accessible. As fleet operators transition to electric, batteries offer a proven and available technology which, combined with software and data insights, can optimise the operators’ fleet while achieving zero emissions.”
Alberto Signori, Partner, European Infrastructure at KKR, said: “This is a rare opportunity to support a clear leader in transport decarbonisation and battery storage, two sectors which are critical in driving the transition to a net zero world. We believe Zenobē will continue to benefit from strong secular tail winds including stricter emission regulation in urban and regional areas, and the greater use of low carbon generation in the energy mix driving a need for grid balancing solutions. We see significant growth opportunities within Zenobē’s existing customer base, as well as huge potential in new markets globally.”
London Stock Exchange-listed alternative asset manager ICG’s infrastructure team (ICG Infra) has signed a definitive agreement with US renewable energy company Enfinity Global to make a €400 million equity investment to fund the development of Enfinity’s 17GW portfolio, including 7.3 GW of energy storage assets.
The investment further underpins ICG Infra’s strategy of investing in “market-leading businesses within the renewable energy sector in Europe and the US which have an active role in supporting the transition to net zero,” and ICG Infra statement said.
ICG Infra will work with Enfinity’s management team to build and operate the existing projects.
Guillaume d’ Engremont, head of infra at ICG, said: “The investment underpins our approach of supporting entrepreneurial and visionary founders who are committed to making meaningful contributions to a more sustainable economy.”
Carlos Domenech, CEO of Enfinity Global, added: “ICG’s strong track record in enabling companies to scale, and their vision for the future of the industry, makes them the perfect partner for Enfinity.”
Ingka Investments (the investment arm of Ingka Group, the largest IKEA retailer) and Apex Clean Energy today announced the company’s first-ever battery storage project, Cameron Storage in Texas.
The 16.4MW standalone lithium-ion battery, which will begin operations in the coming weeks, is co-located with Ingka Investments’ Cameron Wind farm, a 55-turbine, 165 MW project that has been operational since 2015.
Cameron Storage, located in Texas’ Cameron County, forms part of Ingka Group’s strategy to help achieve IKEA’s commitment to becoming climate positive by 2030.* As the largest IKEA franchisee, Ingka Group has an important part to play in achieving these commitments, for example by switching to renewable energy and transitioning to zero-emission home deliveries.
Peter van der Poel, managing director at Ingka Investments, said: “This is an important step in our journey towards becoming climate positive. Going forward we aim to invest in a mix of wind, solar, and energy storage.”
Ken Young, Apex Clean Energy CEO, said: “For more than a decade, IKEA has charted the course for the corporate sector in investing in clean energy solutions, and today, Cameron Storage builds on that record of leadership. Utility-scale energy storage unlocks the full potential of clean power to decarbonise our economy while providing increased reliability and certainty for our electric grid.”
Powin is serving as the equipment vendor, and Worley is providing engineering, procurement, and construction services for the project.
Greencoat Renewables is set to spend more than €1bn by 2030 to acquire 500MW of onshore wind projects delivered by FutureEnergy Ireland.
The companies today announced a partnership related to FuturEnergy Ireland's 1GW onshore wind development portfolio. FuturEnergy Ireland is a joint venture between Coillte and ESB.
German utility RWE has won approval from the permitting authority in German city Oldenburg for its 200MW GET H2 Nukleus green hydrogen project.
The project is set to be made up of two 100MW electrolysers and is located on the site of RWE's gas-fired power plant in Lingen. It is due to produce up to 35,000 tonnes of green hydrogen annually.
Swedish firm H2 Green Steel has raised €1.5bn equity for a large green steel production plant in Sweden with Europe's first gigascale green hydrogen electrolyser.
The equity has come from an investor group led by Altor, GIC, Hy24 and Just Climate; and includes new investors including Andra AP-fonden and Temasek. Existing investors AMF, Cristina Stenbeck, Hitachi Energy, IMAS Foundation, Kinnevik, Schaeffler, Vargas and Wallenberg Investments holding company FAM have provided additional equity funding.
H2 Green Steel started building the plant in Boden, Sweden, in summer 2022; and is due to commission it by the end of 2025.
Ørsted has announced $2.3bn potential impairments at its US offshore wind projects, while RWE won an underwhelming seabed leasing auction in the Gulf of Mexico. We look at the current challenges facing developers in the US offshore market.
The US Department of the Interior last month announced it was approving Ørsted and Eversource Energy’s 704MW Revolution Wind project off Rhode Island.
This is the fourth commercial-scale offshore wind farm approved by the DOI, which said the decision was important as the Biden administration seeks to deploy 30GW of offshore wind in US waters by 2030. It follows the 800MW Vineyard Wind 1 by Avangrid and Copenhagen Offshore Partners; Ørsted’s 132MW South Fork Wind; and the 1.1GW Ocean Wind 1, also by Ørsted.
But we can see this good news story as a slice of optimism in an otherwise tough month for the US offshore wind sector. The challenges for developers are growing.
We started 2023 by writing about rows related to the power purchase agreements (PPAs) at Avangrid’s 1.2GW Commonwealth Wind project and the 1.2GW Mayflower by Ocean Winds and Shell. In March, we looked at whale death conspiracy theories that developers are having to rebut; and, in May, we covered concerns from the US military about the impact of offshore wind projects on military manoeuvres.
And, in recent weeks, we have heard concerns related to potential financial returns at projects; the level of developer interest in emerging US markets; and the stability of PPAs that developers thought were locked in. We are still positive about offshore wind in the US, but we cannot ignore the huge challenges still to be overcome.
Danish utility Ørsted spelled out some of the challenges facing US offshore wind companies in an announcement on 29th August, where it said it expected to make impairments of $2.3bn on its US offshore wind projects. It named three reasons.
First, it said Ocean Wind 1, Revolution Wind and Sunrise Wind are being hit by supply delays, which Ørsted said could affect its ability to complete them on time.
Second, it said its negotiations with federal government about more investment tax credit (ITC) support for Ocean Wind 1 and Sunrise Wind were not progressing as it expected. Ørsted is seeking credits in addition to their existing 30% ITC support.
And third, it said interest rate rises were harming offshore projects, as well as some of its onshore projects. Rates have risen from 0% in March 2022 to 5.5% now, which increases development costs and reduces projects’ profit margins. Ørsted still plans to take final investment decisions on Ocean Wind 1, Revolution Wind and Sunrise Wind in late 2023 or early 2024, but it has not ruled out cancelling projects.
This is a threat worth taking seriously given that there are no quick fixes for most of its challenges, although Ørsted still sees a strong future for offshore wind in the US.
Ørsted has not been immune from PPA problems either. Utility Rhode Island Energy last month said it could not proceed with a PPA at Ørsted and Eversource Energy’s 884MW Revolution Wind 2 project off the coast of Rhode Island and Connecticut as the cost of electricity was too high. This will make it tougher to develop the project.
We can also see the challenges for US offshore wind in the seabed leasing tender that the Bureau of Ocean Energy Management held last Tuesday for three sites in the Gulf of Mexico. We are used to these tenders being long, drawn out affairs.
However, this tender ended soon after it started as only two of the 15 pre-qualified bidders submitted bids, for only one of the sites. RWE has agreed to pay $5.6m for the rights to develop the Lake Charles site off the coast of Louisiana, which it said had potential for up to 2GW of offshore wind capacity.
This is an exciting addition to RWE’s portfolio. But it also cannot disguise that there were no bids for two of the three sites; and that the $5.6m raised by BOEM is well below the $4.4bn in the New York Bight tender, $757m in the California floating wind tender, and $315m in the Carolina Long Bay tender, all of which concluded last year.
The low returns in this tender are not wholly unexpected. The Gulf of Mexico is far behind the northeast and west coast in its readiness for offshore wind, which makes it difficult for winning developers to take projects to completion. Offshore wind also faces challenges including low power prices, competition with the large amounts of onshore renewables in Texas, and slower wind speeds than in those other regions.
Rival developers did not even see that it was worth submitting low bids for the sites so they could flip them to other companies later. We have become accustomed to long bidding wars for seabed rights, so this lack of interest gives pause for thought. We cannot ignore the economic headwinds facing US offshore wind companies.
The tender may also be a victim of the Inflation Reduction Act’s (IRA) success. The sheer volume of opportunities in the IRA may have shown firms that there are more cost-effective ways to develop renewables on land, without going into new areas.
That’s just a theory. What is certain is that offshore wind developers in the US are finding it tougher to develop profitable projects, even with the Biden administration’s support for the sector. The challenges for developers will not be easy to overcome.
We will discuss US offshore wind at our Financing Wind Offshore conference in Boston on 16th November. Click here for further details