US Offshore Wind Has Shrunk to What Can Be Financed. The Rebid Contracts Are the Real Test

For most of the past five years, US offshore wind was described in terms of targets. States along the Atlantic coast set goals measured in gigawatts, and the federal government set a national ambition of 30 GW by 2030. The Energy Information Administration's latest look at the project pipeline describes something smaller and more concrete. Of the 7,200 megawatts of offshore capacity reported in its May generator inventory, projects totaling about 2,400 MW have been canceled since last December, and the remaining 4,800 MW is spread across projects at very different stages.

It is also, in our view, a healthier starting point than the targets it replaces. The largest single cancellation came in late 2023, when Orsted abandoned the 2,400 MW Ocean Wind 1 and 2 projects off New Jersey. The developer cited rising interest rates, high inflation and supply chain delays. The 130 MW South Fork Wind project, 12 turbines off Long Island, began generating in March and is awaiting commercial operation. Orsted and Eversource began installing monopiles this spring at the 704 MW Revolution Wind off Rhode Island, and in May Dominion Energy installed the first monopile at the 1,265 MW Coastal Virginia Offshore Wind Commercial Project.

New York conditionally awarded two projects on 29 February from its fourth solicitation, both of which had first won contracts in its 2019 round: the 924 MW Sunrise Wind, which Orsted and Eversource expect on line in 2026, and the 810 MW Empire Wind 1, which Equinor has not yet reported to the EIA as planned. It is being built by a regulated utility and recovered through the utility's rate base, rather than sold under a fixed-price contract by an independent developer.

Ratepayers carry the cost risk, and a utility building a large project has less incentive to keep costs down than a developer bidding against rivals. The key design question is how much risk to leave with the developer. What remains after the cancellations is an industry rebuilt around a small number of projects that have contracts, financing and construction schedules. If Vineyard Wind 1 and Coastal Virginia Offshore Wind are completed broadly as planned, they will do more for the industry's credibility than any target.