BP’s renewables boss said on Wednesday the U.S. offshore wind industry is “fundamentally broken” as BP BP-N and its partner Equinor EQNR-N study options to develop huge projects off the coast of New York after writing down $840-million of their value.
The offshore wind industry, one of the fastest growing energy sectors, has recently suffered a string of major setbacks due to equipment reliability issues, supply chain problems and sharp cost increases.
Orsted, the world’s largest offshore wind developer, on Wednesday flagged writedowns of up to $5.6-billion after halting the development of U.S. offshore wind projects.
Anja-Isabel Dotzenrath, BP’s head of gas and low carbon, said that problems in the United States included permitting, the time lag between signing power purchase agreements and projects being built and a lack of inflationary adjustment mechanisms.
“Ultimately, offshore wind in the U.S. is fundamentally broken,” Dotzenrath told an FT Energy Transition conference in London.
“There is a fundamental reset needed in the speed of permitting, security of permitting, etc …”
She added that BP and Equinor are studying a new 10-point proposal by U.S. regulators that would allow the companies to re-bid for projects in an “accelerated” process.
“There is a path forward but it’s challenging,” Dotzenrath told reporters on the sidelines of the conference.
“I believe all these projects will be built.”
The new plan comes after the state of New York rejected the companies’ request to revise upwards the payment received by developers under power supply contracts for the giant projects.
Over the past week, BP wrote down $540-million and Equinor took a $300-million impairment on their Empire and Beacon offshore wind projects, which have a combined capacity of 3.3 gigawatts, capable of powering 2 million homes.
BP paid Equinor $1.1-billion in 2020 for a 50 per cent stake in the venture.
Claudio Descalzi, CEO of Italian energy company Eni told the conference that costs to develop new offshore wind projects have doubled recently.
“To do new offshore wind projects is very hard,” Descalzi said.