The three large offshore wind projects were out of New York State in the USA to demonstrate Equinor’s renewable ambitions and how the company had to implement the transition to a greener future. It has faced serious financial problems after massive cost increases.
– Not in the interest of customers
Earlier this year, Equinor and its partner, BP, sent an inquiry to state authorities in New York in which they demanded better framework conditions. The answer came on Thursday.
– The New York State Public Service Commission today rejected applications from a group of offshore wind companies and a renewable energy advocacy group seeking billions of dollars in additional funding for four proposed offshore wind projects and 86 onshore projects, the commission wrote.
The committee assessed the consequences of the proposals put forward and concluded that they were not in the “clients’ interests”. The proposals would have resulted in electricity bills rising by 6.7 percent for private sector customers and 10.7 percent for business customers.
The requested changes to the contracts would have required modifications outside the competitive bidding process. This type of mitigation is fundamentally inconsistent with the Committee’s long-standing policy. The Commission has repeatedly said that competition in the procurement process is necessary to protect customers and is the most logical approach to achieving important State objectives in a reliable and cost-effective manner. And that’s what we’re doing with today’s decision, says Committee Chairman Rory M. Christian, in his statement.
– He sits too far inside
Plan A still aims to develop the three offshore wind farms, Equinor’s Renewables Director, Pål Eitrheim, said in an interview with Dagens Næringsliv at the end of September. Eitrheim confirmed that the total termination amount in the contracts will amount to just under NOK 180 million for Equinor.
The book value of the Empire and Beacon projects is approximately $400 million, or 4.3 billion kroner at current exchange rates. This includes what Equinor has paid for the region outside Long Island and what the company has invested in projects to date.
-Book value as of today is relatively limited. This value will increase in line with investments in projects. The total values included are much higher, Etterheim said.
It is known, among others, that Equinor and BP have selected Vestas as turbine supplier, Maersk Supply Service as installation vessel and Nexans as cable supplier. For most contracts, no value is mentioned, and much less detail is given about the termination terms.
Our ambition is to realize these projects, and we hope that we, together with the authorities in New York, will be able to find good solutions. It is very unlikely for us and everyone else to go to the authorities and ask for better conditions. But this is necessary, Etterheim said at the end of September.
No inflation adjustment
DN previously wrote about the strong reactions from energy buyers in New York State to Equinor’s requirements. A broad coalition of these actors has calculated that Equinor and BP have in effect requested NOK 160 billion in additional income beyond the price guarantees they already have in place.
Etterheim did not confirm these numbers, but said he was aware that there were “significant amounts.”
Equinor cited rising inflation, rising interest rates, disruption to global supply chains and the Ukrainian war in state government documents.
“This has negatively impacted a wide range of industries, including the energy industry,” Equinor and BP wrote.
Empire Wind 2 and Beacon Wind 1 were not adjusted for inflation. Framework conditions were like that at the time, and the crisis that has hit the industry since then was impossible to predict, Etterheim said in an interview with DN.
The explosion in costs for Empire Wind 1 and 2 and Beacon Wind joins a worrying trend in the industry. Equinor abandoned its plans for the Trollvind offshore wind project on the Norwegian continental shelf for the same reason in May.
-We must have projects that we can defend. There needs to be a minimum level of profitability, but with the cost increases we have seen, that is not financially justified. “We cannot spend good money on projects that do not meet basic profitability requirements,” Equinor’s renewable energy director, Pål Eitrheim, told DN.
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